The government will roll out a modified direct benefit transfer (DBT) scheme of fertilisers in seven districts across as many states on a pilot basis. Under the new plan, sales of subsidised fertilisers to farmers will be capped, taking into consideration their land holdings.
The government has, however, abandoned a plan to make farmers pay for the nutrients at market rates, before they receive the subsidies in their bank accounts.
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According to Arun Singhal, secretary, department of fertilisers, based on the land records of the farmers, the quota of highly subsidised fertilisers to be sold to them will be fixed. The idea is to promote rational use of soil nutrients. “Any volume above the fixed quota, farmers have to buy the fertiliser at the market rate,” Singhal told FE.
States need to have digital land records, crops surveys, coverage of soil health cards and provisions for formal and informal tenancy in landing holdings before rolling out the pilot projects.
Seven states including Karnataka, Assam, Uttar Pradesh, Delhi and Maharashtra have come forward for pilots in one district each.
Among the three explicit subsidies funded out of the Budget, that on oil has almost been got rid of, while food subsidy is statutory, given the National Food Securities Act.
Fertiliser subsidy is prone to wild fluctuations, given a substantial part of the nutrients and feedstock (natural gas) are imported. Because of higher global prices caused by the Ukraine war, the fertiliser subsidy in 2022-23 has surged to a recordRs 2.53 trillion.
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Regulating subsidy on fertilisers is key to the plan to rein in revenue expenditure and find more resources for capital investments.
Based on information provided by farmers on land holdings, the quantum of subsidised fertiliser to be sold will be updated on an integrated fertiliser management system operated by the department of fertilisers.
The data on farmers’ quota will be transferred to respective point of sale (PoS) machines installed at the fertiliser retail outlets.
The idea of direct cash transfer was objected to, as under that model, the farmers would have to pay a substantial amount upfront for buying fertilisers prior to the actual subsidy amount being transferred to their bank accounts.
“Subsidy component of the fertiliser sold is quite high while the farmers’ ability to buy fertilisers at actual market rate is limited,” Singhal said. Based on the response of the pilots, the modified DBT will be implemented across the country.
Sale of all subsidised fertiliser to farmers or buyers is currently made through 0.26 million point of sale (PoS) devices installed at outlets since March 2018. Beneficiaries are identified through Aadhaar number, Kisan Credit Card and other documents.
Fertiliser subsidies have been released to companies on the basis of sales made by the retailers to the farmers.
In case of urea, farmers pay a fixed priceRs 242 per bag (45 kg) against the cost of production of aroundRs 2,650 per bag. The balance is provided by the government as a subsidy to fertiliser units.
The retail prices of phosphatic and potassic (P&K) fertiliser, including diammonium phosphate
(DAP) were ‘decontrolled’ in 2020 with the introduction of a ‘fixed-subsidy’ regime as part of Nutrient Based Subsidy mechanism announced by the government twice in a year.
Because of higher global prices, the fertiliser subsidy in 2022-23 is seen at a recordRs 2.53 trillion.
It would be the third year in a row that the annual Budget spending in the current fiscal on fertiliser would be aboveRs 1-trillion mark, against a lower range ofRs 70,000 – 80,000 crore in the past few years.
In terms of volume, imports account for a third of domestic soil nutrients consumption of around 65 million tonne annually.
The country imports about half of its requirement of DAP and around 25% of urea requirements are met through imports. The domestic muriate of potash (MoP) demand is met solely through imports (from Belarus, Canada and Jordan, etc).