CCEA approves Special Banking Arrangement for payment of outstanding subsidy to fertilizer

The Cabinet Committee on Economic Affairs (CCEA) approved implementation of Special Banking Arrangement (SBA) for Rs. 10,000 crore for payment of outstanding claims on account of fertilizer subsidy in year 2016-17. CCEA chaired by Prime Minster Narendra Modi also approved that in future, Department of Fertilizers will avail SBA with concurrence of Department of Expenditure, Ministry of Finance.

Key Facts

Government is making available fertilizers, namely 21 grades of P&K fertilizers and Urea to farmers at subsidized prices through fertilizer manufacturers and importers. For making funds available to fertilizer companies against their subsidy claims, Union Ministry of Finance had approved SBA for amount of Rs. 10,000 crore with Government interest liability limited to G-Sec rate.
Accordingly, SBA was worked out with State Bank of India (SBI) for an amount of Rs. 10,000 crore to meet outstanding subsidy claims of fertilizer companies. The loan together with Government interest thereon has been repaid from BE 2017-18 within the sanctioned budget.

Background

Under the SBA, total loan of Rs. 9,969 crore was raised by Government for settlement of outstanding subsidy bills with SBI. The loan amount along with interest liability on part of Government amounting to Rs. 80.90 crore were paid to SBI. SBA for amount of Rs. 10,000 crore for year 2016-17 already has been implemented and operationalised to overcome liquidity problems of fertilizer companies.

Month: Current Affairs - November, 2017