Fertiliser Ministry has not paid the subsidy bills of about Rs25,000 crore for phosphatic and potassic fertilisers like muriate of potash and di-ammonium phosphate since July and for urea since August 2012
New Delhi: Faced with severe liquidity crunch, the Fertiliser Ministry has sought bank loans of up to Rs25,000 crore under a special banking arrangement to pay part of the mounting fertiliser subsidy bill, reports PTI.
With the fertiliser subsidy bill likely to shoot to Rs1.04 lakh crore this fiscal, the ministry has sent a proposal to Finance Ministry seeking a "special banking arrangement" to draw loan of Rs25,000 crore from banks for subsidy payments.
"The ministry is facing a shortage of funds to pay the industry's subsidy bills and has subsequently sent a proposal to Finance Ministry for a special banking arrangement so that it can draw a loan of Rs25,000 crore from public sector banks at low interest," a source in know of the development said.
Fertiliser Ministry has not paid the subsidy bills for phosphatic and potassic (P&K) fertilisers like muriate of poatsh (MoP) and di-ammonium phosphate (DAP) since July and for urea since August, the source revealed.
Another source, while confirming the ministry's move of sending a proposal to Finance Ministry, added that the subsidy bill crossing Rs1 lakh crore is not just the payments for the current fiscal.
"If Fertiliser Ministry is able to make all the payments, which total about Rs1,04,000 crore, it will have paid Rs21,000 crore inventory payment for previous years, payments for this fiscal as well as for the first quarter of 2013-14 fiscal," the source explained.
The source added that it has also been suggested in a meeting held in the Fertiliser Ministry that the ministry can ask the government to ask banks to provide loans to the industry and pay a part of the interest payments, or all of it, till the firm's subsidy payments are re-reimbursed.
"It may seem that fertiliser subsidy bill has crossed Rs1 lakh crore this fiscal, but if this is approved then the subsidy bill in 2013-14 fiscal will be much less," the source said.
A senior Fertiliser Ministry official, who refused to speak on the special banking arrangement, said that "In all probability ministry has exhausted its budgetary allocation of Rs61,256 crore and would require more funds to pay for the subsidy bills."
Meanwhile, industry-body Fertiliser Association of India (FAI) said the Indian fertiliser industry is passing through a severe liquidity problem in view of non-payment of pending subsidy bills.
"The 'on account' payment for subsidy on imported P&K fertilisers has been made up to June 2012 and for domestic P&K fertilisers, it has been paid till July 2012. The subsidy for domestic urea has been paid up to August, 2012" FAI director general Satish Chander told PTI.
In addition, there are other pending subsidy and freight bills which have not been paid for long time. Only for imported urea, which is on Government account, the payment is made up-front, he added.
"The budget allocation of Rs60,974 crore for fertiliser subsidy, as approved by Parliament, has already been exhausted.
An estimated amount of Rs19,000 crore subsidy payment is outstanding for the period till October 2012," he said.
In addition, for the remaining period of 2012-13 fiscal, that is beyond October, 2012, the estimated requirement of funds is Rs19,000 crore, Chander added.
"There is urgent need for arrangement for additional funds of about Rs38,000-40,000 crore to save the fertiliser industry from the current financial crisis and enable to continue operations and supply fertilisers to the farmers," he said.
Chander added that since the ministry has no funds for the payment of subsidy bills for this fiscal, the industry is forced to seek loans from banks.
"Under such a situation, the only hope left with the industry is to seek interim banking arrangement through which public sector banks can pay subsidy bills once they are approved by the Department of Fertilisers," he suggested.
When the subsidy amount is available with the Department, it can directly re-pay these subsidy payments made by the banks. In 2008-09 also similar arrangements were made which helped fertiliser companies to recover their subsidy under such arrangements, he said.
"The Industry is prepared to share the interest burden beyond 9%. This means the interest liability up to 9% be taken by the Government and balance by the industry," Chander added.
On an average, India consumes about 30 million tonnes of urea and around 25-26 million tonnes of DAP, MoP and complex fertilisers annually.
The move will provide additional time to some banks that need to enhance their capital base in line with the new norms for strengthening the resilience of the global banking system
Mumbai: The Reserve Bank of India (RBI) has extended the date for implementation of Basel III, the global capital norms for banks, by three months to 1 April 2012, reports PTI.
"The Reserve Bank of India has rescheduled the start date for implementation of Basel III to 1 April 2013 from 1 January 2013," the central bank said.
RBI, however, did not provide reasons behind the rescheduling.
The move, experts said, will provide additional time to some banks that need to enhance their capital base in line with the new norms for strengthening the resilience of the global banking system.
RBI further said that India will closely monitor the progress on Basel III implementation in other countries, particularly the major ones, who are the members of the Basel Committee.
RBI had issued guidelines on the implementation of Basel III capital regulation in India in May this year. These guidelines were to be implemented from 1 January 2013 in a phased manner and were to be fully implemented by March 2018.
As per the new global norms, banks will have to hold core capital of at least 7% of risk weighted assets by 2018.
In September, RBI Governor D Subbarao had said that Indian banks will require an additional capital of Rs5 lakh crore (Rs5 trillion) to meet the new global banking norms, Basel III, RBI Governor D Subbarao said.
Of the total Rs5 lakh crore, equity capital will be Rs1.75 lakh crore, while Rs3.25 lakh crore will have to come as the non-equity portion.
The government, which owns 70% of the banking system, alone will have to pump in Rs90,000 crore equity to retain its shareholding in the public sector banks (PSBs) at the current level to meet the norms.
The Basel Committee recently said that the 11 member jurisdictions including India, Australia, Canada, China and Japan, have published the final set of Basel III regulations effective from the start date of 1 January 2013.
Seven other jurisdictions including the European Union and the United States have issued draft regulations, and have indicated that they are working towards issuing final versions as quickly as possible.
While profit margins are important for sustaining banking operations, the cost of operational inefficiencies of banks should not be passed on to customers by way of higher service charges and fees said the RBI's deputy governor
Chennai: Cautioning banks charging high prices on products offered to customers, Reserve Bank of India (RBI)'s deputy governor KC Chakrabarty said a new set of guidelines would be announced during the coming Ombudsman Conference in Mumbai, reports PTI.
"I am telling you that if you believe that the pricing has become exploratory then we will intervene. We have intervened in the case of micro-finance institutions. What I am saying is that discriminatory pricing (on products offered to customers) should not be there. Pricing should be non-discriminatory," Chakrabarty told reporters.
During the Ombudsman Conference, to be chaired by RBI Governor D Subbarao, on 4th January, new guidelines would be announced. "Some new guidelines will come on how it (RBI) can be more stringent in pricing the products to customers of banks", he said.
"(Banks) you have to understand the customer needs and be reasonable to customers," he said, adding, "do not do lip service."
Observing that banks charge high interest rates for offering educational loans compared to home loans, he said "I am only raising a question why it cannot be reduced."
Earlier, after releasing a book 'Indian Banking Reforms and After', written by banker Dharmalingam Venugopal, also Indian Overseas Bank employee, Chakrabarty said banks need to ensure that they maintain high level of productivity and efficiency in their operations.
"While profit margins are important for sustaining banking operations, the cost of operational inefficiencies of banks should not be passed on to customers by way of higher service charges and fees," he warned.
On restructuring of loans by banks offered to individuals and enterprises, he said an element of discrimination was practiced by the banks in restructuring of loans.
"Analysis of available data indicates that the larger borrowers have invariably received benefit of restructuring of their loans, while the restructuring in case of SMEs has remained low. I believe with a timely intervention and support from the banks, this sector would have definitely shown much lower levels of impaired assets than it does", he said.
Stating that business operations of banks should be "customer-centric" in nature, Chakrabarty said, "this should be reflected in all aspects of banking operations including creation of customised products and services".
To a query on the Union Government's proposal to roll out cash-transfer scheme from 1 January 2013, he said, "we were asking (banks) to do it for more than two years. Now, it has encouraged the government to come out with this particular scheme".
"Now everybody has a bank account and if the money is credited into the account, it can stop the leakages. It will also make the financial inclusion more effective. I am telling them (banks) for the last three years as part of their normal business, but now they (banks) are forced to do." he said.