Working of Fertilizer Subsidy and New Proposals

Context

The Centre is working on a plan to restrict the number of fertiliser bags that individual farmers can buy during any cropping season.

About Fertilizer Subsidy

  1. Farmers buy fertilisers at MRPs (maximum retail price) below their normal supply-and-demand-based market rates or what it costs to produce/import them.
  2. The MRP of neem-coated urea, for instance, is fixed by the government at Rs 5,922.22 per tonne, whereas its average cost-plus price payable to domestic manufacturers and importers comes to around Rs 17,000 and Rs 23,000 per tonne, respectively. The difference, which varies according to plant-wise production cost and import price, is footed by the Centre as subsidy.
  3. The MRPs of non-urea fertilisers are decontrolled or fixed by the companies. The Centre, however, pays a flat per-tonne subsidy on these nutrients to ensure they are priced at “reasonable levels”. The per-tonne subsidy is currently Rs 10,231 for di-ammonium phosphate (DAP), Rs 6,070 for muriate of potash (MOP) and Rs 8,380 for the popular ‘10:26:26’ complex fertiliser, with their corresponding average MRPs at Rs 24,000, Rs 17,500 and Rs 23,500 per tonne, respectively.
  4. Decontrolled fertilisers, thus, retail way above urea, while they also attract lower subsidy.

How it works?

  1. The subsidy goes to fertiliser companies, although its ultimate beneficiary is the farmer who pays MRPs less than the market-determined rates. Companies, until recently, were paid after their bagged material had been dispatched and received at a district’s railhead point or approved godown.
  2. From March 2018, a new so-called direct benefit transfer (DBT) system was introduced, wherein subsidy payment to the companies would happen only after actual sales to farmers by retailers. Each retailer — there are over 2.3 lakh of them across India — now has a point-of-sale (PoS) machine linked to the Department of Fertilisers’ e-Urvarak DBT portal.
  3. Anybody buying subsidised fertilisers is required to furnish his/ her  Aadhaar unique identity or Kisan Credit Card number. The quantities of the individual fertilisers purchased, along with the buyer’s name and biometric authentication, have to be captured on the PoS device.
  4. Only upon the sale getting registered on the e-Urvarak platform can a company claim subsidy, with these being processed on a weekly basis and payments remitted electronically to its bank account.

New Proposals

  1. At present, the Centre is following a “no denial” policy. Anybody, non-farmers included, can purchase any quantity of fertilisers through the PoS machines.
  2. That obviously allows for bulk buying by unintended beneficiaries, who are not genuine or deserving farmers. While there is a limit of 100 bags that an individual can purchase at one time, it does not stop anyone from buying any number of times.
  3. One plan under discussion is to cap the total number of subsidised fertiliser bags that any person can buy during an entire kharif or rabi cropping season. This, it is expected, would end even retail-level diversion and purchases by large buyers masquerading as farmers.

Source

  1. The Indian Express

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