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  1. Margins of urea dealers to double

Margins of urea dealers to double

Having rolled out direct benefit transfer for fertiliser subsidy across the country on March 1, the government has now chalked out a scheme to double dealers’ margin to Rs 400 per tonne for urea.

By: | New Delhi | Published: April 1, 2018 4:14 AM
urea, agriculture, agriculture sector, agriculture industry An official said doubling the dealers’ margins could ensure that subsidised fertiliser is indeed sold to the intended beneficiaries. (Reuters)

Having rolled out direct benefit transfer (DBT) for fertiliser subsidy across the country on March 1, the government has now chalked out a scheme to double dealers’ margin to Rs 400 per tonne for urea. Although the scheme will cost the exchequer an additional Rs 600 crore annually, the move is expected to encourage dealers to be in the business. A section of traders have reportedly been reluctant to renew their licences following the introduction of Aadhaar-linked urea sales, which disallowed black-marketing (selling at huge premiums over the subsidised maximum retail price).

An official said doubling the dealers’ margins could ensure that subsidised fertiliser is indeed sold to the intended beneficiaries. With savings of Rs 20,000 crore expected from Aadhaar-linked DBT, on a net basis, the measure won’t burden the exchequer.

The subsidy on urea is calculated on the basis of each plant’s cost of production and the government pays the fertiliser companies the difference between delivered cost at retail point and the maximum retail price. On average, the Centre pays about `500 per 50-kg bag to make urea cheaper to the farmer. The maximum retail price of urea fixed by the Centre at present is Rs 268 per 50-kg bag (excluding taxes levied by states).

In case of other fertilisers such as DAP and MoP, the government pays a fixed subsidy (based on international price) to all companies, which fix their own retail prices. The dealers’ margin in case of DAP, MoP and complex fertilisers are decided by companies.
Prime Minister Narendra Modi on March 18 had appealed to farmers to cut use of urea by 50% in the next five years, as overuse of the fertiliser has spoiled the soil’s nutrient quality in many parts of the country. Addressing farmers at a conference, he had said “the government cannot do this nor does it want to do it, but farmers can certainly make it possible”.

As per a report by Micro Save, which last year conducted an evaluation of DBT on behalf of Niti Aayog, about 300 fertiliser retailers in six districts in different states did not renew their licences post DBT implementation.
Similarly, after the neem coating, the requirement of the soil nutrient for the soil becomes lower compared to normal urea due to better nitrogen use efficiency. One of the primary benefits of neem coating is the slow release of urea in the soil. The government made 100% neem-coated urea mandatory for both domestic and imported fertiliser from December 2015.

Among other reforms that are considered are capping fertiliser sales to farmers based on their requirement as per land record, sources said. The fertiliser ministry is waiting for the Niti Aayog’s decision to define the definition of farmer, sources said. Once there is a clarity on tenant farmer and land owner, fertiliser can be sold accordingly, said the official quoted earlier.

Total production of urea has been 244.75 lakh tonne in 2015-16 and 242.01 lakh tonne during 2016-17. The annual requirement of urea ranges around 300 lakh tonne, depending upon the monsoon season. The urea sales between April and December this fiscal were at 227.67 lakh tonne. The gap between the demand and supply is met through imports.

By Prabhudatta Mishra and Prasanta Sahu 

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