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Current Affairs

Working of fertiliser subsidy

Date: 21 October 2020 Tags: Agriculture

Issue

The Centre is working on a plan to restrict the number of fertiliser bags that individual farmers can buy during any cropping season.

 

Background

Farmers buy fertilisers at MRPs (maximum retail price) below their normal supply-and-demand-based market rates or what it costs to produce/import them.

 

Details

  • The MRP of neem-coated urea is fixed by the government at Rs 5,922.22 per tonne, whereas its average cost-plus price payable to domestic manufacturers and importers comes to around Rs 17,000 and Rs 23,000 per tonne, respectively.

  • The difference, which varies according to plant-wise production cost and import price, is footed by the Centre as subsidy.

  • The MRPs of non-urea fertilisers are decontrolled or fixed by the companies. The Centre, however, pays a flat per-tonne subsidy on these nutrients to ensure they are priced at “reasonable levels”.

  • The per-tonne subsidy is currently Rs 10,231 for di-ammonium phosphate (DAP), Rs 6,070 for muriate of potash (MOP) and Rs 8,380 for the popular ‘10:26:26’ complex fertiliser, with their corresponding average MRPs at Rs 24,000, Rs 17,500 and Rs 23,500 per tonne, respectively.

  • The subsidy goes to fertiliser companies, although its ultimate beneficiary is the farmer who pays MRPs less than the market-determined rates. 

  • Anybody buying subsidised fertilisers is required to furnish his/her Aadhaar unique identity or Kisan Credit Card number.

  • The quantities of the individual fertilisers purchased, along with the buyer’s name and biometric authentication, have to be captured on the PoS device.

  • Only upon the sale getting registered on the e-Urvarak platform can a company claim subsidy, with these being processed on a weekly basis and payments remitted electronically to its bank account.

  • Being super-subsidised, urea is always prone to diversion for non-agricultural use — as a binder by plywood/particle board makers, cheap protein source by animal feed manufacturers or adulterant by milk vendors — apart from being smuggled to Nepal and Bangladesh.

  • The scope for leakage was more in the earlier system, right from the point of dispatch till the retailer end. With DBT, pilferage happens only at the retailer level, as there is no subsidy payment till sales are made through POS machines and subject to the buyers’ biometric authentication.

  • At present, the Centre is following a “no denial” policy. Anybody, non-farmers included, can purchase any quantity of fertilisers through the PoS machines. That obviously allows for bulk buying by unintended beneficiaries, who are not genuine or deserving farmers. 

  • One plan under discussion is to cap the total number of subsidised fertiliser bags that any person can buy during an entire kharif or Rabi cropping season. This, it is expected, would end even retail-level diversion and purchases by large buyers masquerading as farmers.

  • The time has come to seriously consider paying farmers a flat per-acre cash subsidy that they can use to purchase any fertiliser. The amount could vary, depending on the number of crops grown and whether the land is irrigated or not.