Amidst the ongoing farmer protests and the pandemic situation, the government is relied upon to proceed with its focus on the advancement of the agriculture economy. Although the objective of multiplying farmer's pay by 2022 looks slippery, ICRA anticipates that the centre should zero in on guaranteeing high yield realizations for the country's farmers.
Although the Government has recently passed the three Farm Bills at the end of year, 2020, the improvement of agri infrastructure will be of utmost importance to enhance marketing reforms.
Budgetary allotment is forecasted by ICRA towards the whole agrarian value chain in order to promote the production of crops and decrease post-reap losses, while guaranteeing satisfactory acknowledgment for the farmers.
Necessary allotment of budget towards insurance of crops and water system framework schemes is expected to remain constant. Other than that advancing soil health and accessibility to credit by farmers is relied upon to proceed. Following these steps will definitely have positive results with regards to fertilizer offtake. FY22 Union Budget is expected to be decisive with regards to the fertilizer business industry.
ICRA expects lucidity on the arrival of the extra allotment of Rs 65,000 crore reported under the Atma Nirbhar Bharat 3 scheme and declaration of additional changes like a guide on the rollout of the genuine type of Direct Benefit Transfer (DBT) for the fertilizer industry. Ideal arrival of the extra allotment for the fertilizer industry will empower clearance of the backlog with respect to the subsidies, which has been adversely affecting the performance of the sector for almost 10 years now.
For FY22, ICRA forecasts the subsidy requirement to be around Rs 85,000 to 90,000 crore, impelled by growth in volume. The Urea sector is expected to gather more allocation of subsidy because of the recent commissioning of four new urea plants. Due to the same, the sector will now demand a YoY subsidy increment of 11 percent.
Although usage of the genuine form of DBT would be a positive add-on, ICRA considers that the usage of the same will happen because of the continuous farmer disputes in relation to the recent Farm Bills.
Bringing down the import duties on crude materials like phosphoric acid along with ammonia in order to improve intensity of competition of the domestic manufacturers of phosphatic fertiliser has been an industry demand for a long time. Any improvement on this front will uphold the productivity of the domestic makers.
While ICRA doesn't expect any definite strategy declarations identified with the fertilizer area in the following Union Budget, aside from the allocation of budget with regards to subsidy, the stakeholder will be paying special attention for a guide regarding future changes.
