* Lower potash price costs province C$1.3 bln
* Spending cuts, reserves to maintain surplus target
* Province won't pay down C$4.2 billion debt
(In U.S. dollars unless noted)
WINNIPEG, Manitoba, Aug 14 The plunging price
of potash has put a C$1.3 billion ($1.2 billion) hole in the
budget of the Western Canadian province of Saskatchewan, but
its government announced measures on Friday to keep it on pace
for a surplus.
The province is home to fertilizer giant Potash Corp of
Saskatchewan (POT.TO) and much of the world's reserves of
potash, and collects revenues based on the production and price
of the crop nutrient.
It budgeted in March for a potash price of $556 per tonne,
however the price dipped in July to $460, with Russian and
Canadian sales to India [ID:nBNG368711], said government
spokesman Randy Burton.
Saskatchewan was expecting C$1.9 billion in potash revenue,
but now projects C$637 million, Burton said.
Potash prices have tumbled as the recession cut into world
grain prices and farmers put off applications of the crop
The decline in potash revenue was offset partly by higher
than expected oil, tax and other revenues totaling C$668.1
The provincial government said it would also defer some
capital projects, leave vacant positions unfilled and and take
a C$185 million dividend from the earlier sale of its stake in
a fertilizer producer.
It also said it will tap into its reserves to show a
year-end surplus of C$424.5 million, as budgeted. The
province's fiscal year runs April 1 to March 31.
Saskatchewan is one of only a few Canadian provinces
running a surplus this year. However, because of the smaller
surplus, it will not pay down its C$4.2 billion debt, as it
(Reporting by Rod Nickel, editing by Rob Wilson)