The government has dropped its plan to give fertiliser subsidy directly to the farmer announced in this year?s Union budget to replace the current practice of releasing subsidy to manufacturers based on their audited sales figures.
Instead, the government will introduce smart cards, which farmers would swipe while purchasing fertiliser at government-fixed price from a retailer. Initially, the new system would be implemented in 50 blocks (roughly a tenth of a district) in five states soon.
Giving subsidy directly to the farmer would have allowed the 26 fertiliser producers and importers to realise the full price from the farmer right at the time of sale. It also would have protected producers from the hardship of delayed subsidy payment.
Fertiliser majors such as Coromandel Fertilisers Ltd, Hind Lever Chemicals, Indo Gulf Fertilizers & Chemicals Corporation, Paradeep Phosphates, Indian Potash and Chambal Fertilisers and Chemicals are among the recipients of fertiliser subsidy, estimated at Rs 50,000 crore this fiscal.
In the smart card system, the purchase details including the retailer?s location would instantly reach a central server. A compilation of these details will used to verify the manufacturer?s claim regarding how much price-controlled fertiliser was sold as well as the corresponding subsidy entitlement, a person familiar with the plan told FE.
In the existing system, the government solely relies on the producer?s audited sales figures to calculate the subsidy entitlement.
The ministry of chemicals and fertilizers zeroed in on smart cards after considering two other options: giving subsidy to farmers and alternatively, to the retailers. It concluded that giving subsidy directly to the farmer may not necessarily lead to purchase of fertilisers and therefore, could adversely affect the country?s food security.
The ministry has found that identifying an eligible farmer and his actual fertiliser requirement is difficult. State-level land ownership records cannot be relied upon to identify farmers as many of them do not own land. The other option ? allowing producers to sell at full cost to retailers and giving subsidy to retailers ? would push up retailer?s costs. This would force them to borrow and charge the farmer an extra amount, creating a chain of indebtedness, explained the person.
?Besides, corporate fertiliser producers are financially better placed than retailers and farmers to cope with any unforeseen delay of a couple of months in subsidy payment,? the person said.