Fertilisers more likely to hike subsidy invoice, however tax mop-up could preserve deficit in examine

The ongoing Russia-Ukraine battle is more likely to throw the federal government’s fiscal math off-track with respect to agri-commodities comparable to fertilisers, with the subsidy invoice for it anticipated to go up by Rs 10,000-15,000 crore this fiscal.

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The fertiliser subsidy invoice for subsequent fiscal, which has been pegged at Rs 1.05 lakh crore, is anticipated to be greater than estimates, a senior Finance Ministry official stated.

Higher tax revenues will, nevertheless, assist preserve fiscal deficit near the estimated 6.9 per cent stage, the official added. The Finance Ministry expects oil costs to chill off within the subsequent 2-3 months because the impression of the geopolitical tensions could get eased by greater manufacturing from the United States and the OPEC member nations.

“We are not too far from Budget Estimates (BE). Fertiliser subsidies are the only thing which will throw us off. It will be more than Rs 1.05 lakh crore (next fiscal); the Revised Estimates this year may go up by Rs 10,000-15,000 crore. We will still be closer to bottomline numbers partly due to better tax collections,” the official stated.

The Revised Estimates had pegged the fertiliser subsidy at over Rs 1.40 lakh crore in FY22, whereas the BE for subsequent fiscal is estimated at over Rs 1.05 lakh crore.

Since farmers are stocking up fertilisers earlier than the start of the sowing season, the impression is speedy and so they can’t anticipate the provision state of affairs to ease as key elements in fertiliser manufacturing comparable to potash are imported. Further, an increase in pure fuel costs — a key uncooked materials for the manufacturing of urea and comprising practically 70 per cent of the overall price of manufacturing urea — within the international market would result in rise in home costs of urea.

“They want to make sure there’s enough stock for this year. Some may get offset next year. For now they are ensuring that stocks are adequate,” the official stated.

Russia and Belarus are the world’s no. 2 and no. 3 producers of muriate of potash (MOP) fertiliser, at 13.8 million tonnes (MT) and 12.2 MT in 2020, respectively. India’s dependence on imported fertilisers is sort of excessive and MOP is a nutrient that’s totally imported. Out of the overall 5.09 MT that was imported in India in 2020-21, practically a 3rd got here from Belarus (0.92 MT) and Russia (0.71 MT).

International costs of different fertilisers (urea, di-ammonium phosphate and complexes) and their uncooked supplies/intermediates (ammonia, phosphoric acid, sulphur and rock phosphate) have additionally gone up sharply in current weeks. A better nominal GDP on account of upper inflation may even assist in conserving the headline fiscal deficit quantity in examine.

“India’s fiscal deficit would be close to 6.9 per cent as given in the Revised Estimates as higher tax revenues will offset the gap in the non-tax revenues and higher fertiliser subsidy outgo. As of now, we will remain close to the numbers given in the RE for this year and in the Budget estimates for next fiscal,” the official added.

In the RE for the present fiscal ending March 31, the fiscal deficit has been revised a tad greater at 6.9 per cent of GDP, from 6.8 per cent estimated earlier. The deficit is projected to come back down to six.4 per cent of GDP within the subsequent fiscal.

International crude oil costs shot as much as 14-year excessive of $140 per barrel early final week earlier than retracting near $112 on Friday. High gas costs can have a bearing on the Budget because the Economic Survey 2021-22 had projected costs in vary of $70-75 per barrel for the following 12 months. Crude oil imports are practically 20 per cent of the nation’s import invoice.

“… India’s GDP is projected to grow in real terms by 8.0-8.5 per cent in 2022-23. This projection is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be broadly orderly, oil prices will be in the range of US$70-$75/bbl…,” the Survey stated.