Union Budget 2022: Government Plans To Spend Nearly $19 Billion to Compensate Fertilizer Companies

Budget 2022: To compensate fertilizer companies, the government might spend approximately $19 billion on the union budget. According to individuals familiar with the situation, India is set to spend about $19 billion from the Union budget to compensate fertilizer companies for selling their products to producers at below-market prices. 

Companies that sell fertilizers at below-market prices, such as National Fertilizer Limited, Madras Fertilizer Limited, Rashtriya Chemical & Fertilizers Limited, and Chamabal Fertilisers & Chemicals Limited, receive financial assistance from the government. 

Global fertilizer costs have risen about 200 percent in the last year, owing to high increases in the prices of the two primary energy sources used to create crop nutrients – coal and natural gas – as well as new export restrictions on fertilizers. 

Owing to increase in raw material costs, the Ministry of Finance listed 1.4 trillion rupees ($18.8 billion) as fertilizer subsidy in the planned budget on February 1, up from 1.3 trillion rupees for the fiscal year ending March 31, according to the people, who asked not to be identified because the information is not public. The discussions are continuing, and no definitive decision has been taken. 

The increased spending comes ahead of important local government elections and as the governing Bhartiya Janata Party tries to win over farmers following major protests against new regulations that have since been scrapped. Almost 60% of India's 1.4 billion people rely on agriculture for a living, either directly or indirectly, and their support is critical for winning elections. 

A spokesman for the finance ministry was not immediately available for comment. Despite the protests, the government boosted fertilizer subsidies considerably in the current fiscal year after investing approximately 800 billion rupees in the February 2021 budget.