Routing the subsidy through manufacturers and keeping the selling price of fertilisers artificially low, makes diversion of subsidised fertilisers profitable for dubious players The availability of fertilisers at an ‘artificially’ low price is very tempting to all stakeholders in the supply chain. (File image) About 41 percent of fertiliser subsidy is diverted to non-agricultural uses including smuggling to neighbouring countries, 24 percent is consumed by larger farmers and another 24 percent is spent on inefficient producers, the Economic Survey 2015-16 noted. That essentially means that just about 11 percent of the subsidy goes to small and medium farmers. The Union government subsidises fertiliser sales to keep input costs low for farmers. Diversion to purposes other than farming is a misuse...
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Category: Distribution controls
Nano fertiliser move can be a game changer
Nano fertilisers not just promise to cut down subsidy burden but also improve the income of farmers Inaugurating function of the two-day “Kisan Samman Sammelan” at the Indian Agricultural Research Institute (IARI) on October 17, Prime Minister Narendra Modi announced two major policy initiatives — “One Nation, One Fertiliser” scheme under which all fertiliser manufacturing and market companies will sell all subsidized fertilisers under a single brand Bharat; and promote use of liquid nano fertilisers. While the government intends to use “One Nation, One Fertiliser” scheme to reduce the criss-cross movement of fertilizers that will eventually help reduce freight subsidy bills and make quality fertilizer available at lower cost, adoption of liquid nano urea is meant to help attain self-sufficiency...
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Urea imbroglio – deal with policy flaw
For decades, successive governments have grappled with large-scale diversion, hoarding and black marketing of urea – a widely used fertilizer that constitutes nearly half of India’s total fertilizer consumption. According to an estimate, the scale of diversion and black marketing could be as high as 30%. Taking annual subsidy on urea to be about Rs 45,000 – 50,000 crore, this would mean that Rs 13,500 – 15,000 crore of tax payers’ money is being guzzled by dubious operators in the urea supply chain. For long, this problem was swept under the carpet until such time, prime minister Narendra Modi brought it to the centre-stage within an year of his assuming office in May 2014. During the last 5 years or so, his...
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Deregulate pricing: How not to curb urea blackmarketing
Instead of ending urea price control and the fertiliser subsidy—replacing it with DBT for farmers—the govt continues to choose zero-impact administrative measures The government must recognise this flaw in the existing policy, decontrol urea and introduce DBT. In a bid to tackle diversion, hoarding and blackmarketing of urea (a widely used fertiliser that constitutes nearly half of India’s total fertiliser consumption), the Union government has decided to restrict its purchase to 100 bags from 999 bags per transaction by one purchaser. In a letter dated August 27, addressed to state chief secretaries, the secretary, ministry of chemicals and fertilisers, Chhabilendra Roul, has sought their opinions on ‘how many such transactions should be allowed per month to each purchaser’. He has...
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Urea black marketing – how not to curb
In a bid to tackle diversion, hoarding and black marketing of urea (a widely used fertilizer that constitutes nearly half of India’s total fertilizer consumption), the Union government has decided to restrict its purchase to 100 bags from 999 bags per transaction by one purchaser. In a letter dated August 27, 2020, addressed to state chief secretaries, the ministry of chemicals and fertilizers, Chhabilendra Roul has sought their opinions on ‘how many such transactions should be allowed per month to each purchaser’. He has also asked states ‘to identify top 20 urea purchasers in each of their respective districts’. States have also been asked to collect details from buyers which include quantity of urea purchased, dates of purchase, point of sale such as retailers, agricultural land owned...
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A subsidy policy hamstrung by a desire to contain it
The government has approved transportation of fertilisers through coastal shipping and inland waterways. This is a welcome move as it offers the possibility of significant reduction in freight cost, besides lesser time in reaching the material to consumption points and being environment friendly as well. It has also approved freight subsidy to manufacturers on the cost incurred on movement of fertilisers via this mode. In case of single mode or multi-modal transportation, which includes coastal shipping, ‘the freight subsidy will be restricted to railway charges or the actual freight incurred, whichever is less’. Further, ‘only movement of subsidised indigenous fertilisers, viz., urea and phosphate and potash fertilisers – through coastal shipping/inland waterways will be eligible for payment of freight subsidy...
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Fertilizers movement via waterways – policy hurdle
The government has approved transportation of fertilizers through coastal shipping and inland waterways. This is a welcome move as it offers the possibility of significant reduction in freight cost besides taking less time in reaching the material to consumption points and being environment friendly as well. It has also approved freight subsidy on the cost incurred on movement of fertilizers through this mode. In case of single mode or multi-modal transportation which includes coastal shipping, ‘the freight subsidy will be restricted to railway charges or the actual freight incurred, whichever is less’. Further, ‘only movement of subsidized indigenous fertilizers viz. urea and phosphate and potash fertilizers – through coastal shipping/inland waterways will be eligible for payment of freight subsidy at...
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Urea crisis – owes it to excessive controls
A major achievement of his government repeatedly cited by prime minister, N Modi is complete disappearance of the shortage and black-marketing of urea – the fertilizer that provides an overwhelming share of nitrogen or ‘N’ to the crops. Under the previous dispensations, farmers holding demonstrations to register their protest and lathi-charged by the police used to be an order of the day. The gruesome situation arose primarily due the diversion of substantial quantity over 30% to chemical industries. Modi made ‘neem coating’ of urea mandatory thereby rendering it unusable in chemical industries. This has helped in reining in diversion. The claim of the prime minister is borne out by facts on ground zero. During the last over 4.5 years, there...
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APATHETIC ATTITUDE RUINING BUSINESS
The fertiliser industry, in India is slumping due to the burden on investors to sell at low price and delayed payment of subsidy dues by the Government Last year, Tata Chemicals Limited (TCL) sold its urea business viz plant in Babrala, Uttar Pradesh to Yara Fertilisers India Private Limited [YFIL] — Indian arm of Norway’s Yara lnternational ASA — for a sum of Rs 2,670 crore. This was a distress sale. Then, it had also alluded to selling its complex fertiliser business (including Haldia unit). Now, the TCL are in advanced negotiations with India-born Indonesian billionaire Prakash Lohia of Indorama Corporation to sell Haldia unit — on a slump sale basis for Rs 600-800 crore. The sale will include the plant and other fixed assets and...
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Will DBT work?
The version of DBT being tried in pilot districts is flawed. It will provide no proper assessment of the scheme’s effectiveness. Alluding to the direct benefit transfer (DBT) of fertiliser subsidy, in budget speech for 2016-17, Finance Minister Arun Jaitley had stated: “We have already introduced DBT in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis for fertiliser in a few districts in the country with a view to improving quality of service delivery to the farmers.” The focus on the DBT has its link to a revelation made in Economic Survey (2015-16). It stated that “24% of the fertiliser subsidy is spent on inefficient producers, 41% is diverted to non-agricultural uses and 24%...
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