THE fertiliser industry is not witnessing any structural change for the better despite the central government mulling a new investment policy and, more importantly, deciding to issue fertiliser bonds on the lines of oil bonds. Sources said the Centre is likely to issue the fertiliser bonds worth Rs 7,500 crore, announced two months ago, only by mid October. The bonds were mooted ostensibly to provide some relief to fertiliser units that are facing acute working capital crunch, and at the same time phasing out the burden on the exchequer of several hundred crores in dues as concessions/subsidy to the individual units. However, there are doubts within the industry on how much the bonds would really help in resolving their core problems. In fact, the fertiliser ministry has not even been consulted on the key contours of the bonds, including the term of the bonds and the coupon rate. It is also not clear, both to the Department of Fertiliser (DoF) and to the industry, whether the finance ministry is planning to make the bonds tradable across the board or leave the industry will no option but to pledge it with banks. It is construed that in either case, the fertiliser bonds are likely to help resolve their key problem only peripherally. In a meeting with the DoF officials post August, the industry had demanded that the bonds should meet these crucial conditions: they should be tradable across the board and not just selectively, to specific financial institutions (this could restrict the returns); the coupon rate should not be lower than the PLR for premier public sector bank State Bank of India (around 10-11%); the bonds should be statutory liquidity ratio (SLR)-enabled (this would fetch premium returns compared to non-SLR enabled bonds); there should be no restrictions whatsoever from the government on what quantum can be traded in a specific quarter. It is generally construed that the bonds may carry a much lower coupon rate of 8% and the industry will then have to foot the difference between the interest rate that banks will charge for the bond amount and the specified coupon rate. “If the coupon rate is on par with the SBI PLR, then the difference would be lower, otherwise the fertiliser bonds will only end up making matters worse for the industry,” said an industry official. “In either case, there are only few buyers for long-term central government security bonds while indications are that the bonds will be for a 20-year tenure. That means that the full worth can only be realised at the time of maturity, two decades later. It is imperative that the coupon rate is at least on par with the PLR for SBI or else the bonds will have to be sold at a significant discount,” he added. In fact, given the complications, the industry has requested the government to issue the second tranche of supplementaries to the industry in cash, and not in any other form. In view of the mounting subsidy bill (more than Rs 50,000 crore by industry estimates, including Rs 8,000 crore in dues carried over from last year), the government did some realistic accounting for the first time in the last four years — most dues in subsidies/concessions were being accounted for off-Budget in that period, generally showing up only as carryovers — and allocated Rs 22,000 (BE 2007-08) this year