It looks impossible to contain fertiliser subsidy if the same policycontinues. For example, the DAP price is maintained at Rs 8,300/tonne forthe last three years. The cost has gone up and, therefore, the subsidy hasgone up for indigenous DAP by Rs 1,600/tonne in three years. This itself hasincreased the subsidy burden by Rs 640 crore.

Therefore, small increases in market prices of 8 to 10 per cent are notgoing to help in containing subsidy. A radical attitude and approach,however unpopular, is now necessary to effect a substantial saving in thesubsidy.

Let us assume that by February-end 2000, when all use for rabi crops isover, we increase the urea market price from Rs 4,000/tonne to Rs5,000/tonne, the DAP price from Rs 8,300 to Rs 10,000/tonne, the SSP pricefrom Rs 2,800 to Rs 3,300/tonne, the price of MOP from Rs 3,700 to Rs5,000/tonne, and prices of various complexes by Rs 800 to Rs 1,500/tonne.Let us also assume that the cost increase is Rs 200-400/tonne in 2000-2001for various fertilisers and, therefore, net savings in subsidy will be thatmuch less.

Let us also assume we use same quantities in 2000-2001 as in the currentyear.

So, net savings in urea subsidy will be Rs 1,950 crore. The total subsidywill be about Rs 8,800 crore, instead of Rs 12,500 crore in 1999-2000.There would be resistance in the market due to the steep price increase.

This can be countered to a great extent by giving subsidy to farmersdirectly for use of fertilisers in upland rainfed paddy, rainfed wheat,course cereals, rainfed pulses, and oilseeds. An increase in the productionof these crops is a national goal, and fertiliser use in currently limitedin these crops.

Let us say we give Rs 50/bag (Rs 1,000/tonne) subsidy for urea for 0.25million tonnes, which will be Rs 250 crore. For one hectare, two bags ofurea can be given, which will cover 2.5 million hectares to be distributedin various states as per the current urea use. The maximum benefit perfarmer should be for two hectares. Similarly, for one bag of DAP, Rs 75 (Rs1,500/tonne) can be given for 1 lakh tonnes, involving Rs 150 crore. One bagof DAP per hectare should be allowed to cover 2 million hectares.

For SSP, the subsidy could Rs 25 per bag (Rs 500/tonne), covering 50,000tonnes and involving Rs 25 crore for pulses and oilseeds with four bags perhectare to cover 2.5 lakh hectares. The same scheme can be run for complexesand MOP. The farmers should be asked to purchase fertiliser at the fullprice. They should maintain records and a diary to show that fertiliser isused for the crop. The diary can be countersigned by one or two competentGovernment officers of the concerned area.

This will ensure use of fertilisers for specific crops, help in increasingfood and oil output, and make fertiliser use more broad based. The totaloutgo will be in the region of Rs 500 crore, but will pave way for a furtherprice increase in February 2001 by the same quantum as in February 2000. Thescheme can continue for three years. Each year, a new set of farmers shouldbe covered. The manufacturer's dependence on subsidy will greatly minimise,and the Government can control fertiliser use for specific crops.

The general belief is that giving subsidy directly to farmers is cumbersome.However, the Maharashtra government has meaningfully disbursed Rs 600 crorein the last nine years directly to farmers for fruit cultivation. Thisprogramme is successful. Small farmers, perticularly belonging to thebackward class, have immensely benefited.

Good groundwork and administrative effort is necessary before implementingthe suggested scheme at the national level. But we have five to six monthsto plan and implement the scheme, say from May 2000. Dependence ofmanufacturers on subsidy will greatly reduce. Products like complexes, SSP,and MOP can be free from subsidy in three years, and subsidy will reduce toRs 3,500-4,000 crore in three years. This merits serious consideraetion.

(The author is director, Rama Phosphates Ltd, Mumbai)