With the prime minister’s office (PMO) quite firm that sales of subsidised fertiliser have to be linked to Aadhaar numbers of farmers, chances are the fertiliser ministry will have to stick to the target even though it wants the January 1, 2018, deadline extended. Under the scheme, fertiliser companies will have to authenticate the Aadhaar ID of farmers as part of the Aadhaar-enabled Fertiliser Distribution System (AeFDS) and, once this is done, they will get paid the subsidy based on the amounts sold. The plan is to, as in the case of LPG, use Aadhaar to remove fake users and save considerable sums in annual subsidies. According to a Times of India report, the pilot project has already started showing results—a survey by consulting firm MicroSave done for NITI Aayog found that nearly 300 fertiliser retailers in six districts of Madhya Pradesh, Rajasthan, Telangana and Andhra Pradesh have not renewed their licences after the launch of AeFDS.
While that is good news, for AeFDS to be truly useful, several more layers will need to be added to it. Right now, all farmers overuse urea because it is sold at a fraction of its market value—AeFDS will not stop this since the urea will continue to be heavily subsidised. If, on the other hand, the government moved to a proper Direct Benefit Transfer (DBT) and gave farmers a fixed per unit subsidy—as is done in the case of LPG—and forced them to buy urea at the market price, farmers would automatically reduce their consumption. To the extent the government has already issued 8.7 crore soil health cards, it could even give farmers information on how much the extra use is either ruining the soil or how much less could be used without it lowering productivity—that will only work when farmers benefit from lower use of urea, and that won’t happen till they get the money in their hands.
A related problem is that of the bulk of the subsidy being cornered by rich farmers who have both larger land-holdings as well as those that are irrigated. Once again, unless a cap is put on the amount of fertiliser that will be made available to each farmer—irrespective of the size of the farm—richer farmers will continue to corner the benefit; in the case of LPG cylinders, since the same cap applies to all families, the rich don’t corner the bulk of subsidies. Once again, the DBT route scores over AeFDS. AeFDS can be modified to plug most of these gaps, but when the DBT option is available, why not use that?