Considering the crucial role played by fertilizers in increasing food production and the overarching need to make it affordable to farmers, the union government has followed a policy of controlling their maximum retail price [MRP] at a low level unrelated to their cost of production and distribution which is higher. To ensure that production is viable at this price, it gives subsidy to the manufacturer to reimburse the difference between the two. The amount of reimbursement is known as subsidy. In case of urea, the subsidy varies from unit to unit and is administered under the New Pricing Scheme [NPS] whereas for decontrolled complex fertilizers, a ‘uniform’ subsidy fixed on per nutrient basis is given to all manufacturers under the...
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Category: New Pricing Scheme (NPS) for Urea
Pruning subsidies – sustainable solutions needed
The union government seems to have made a good beginning in regard to achieving its fiscal consolidation goals for the current year. During the first quarter ending June 30, 2018, the fiscal deficit [excess of total receipts over total expenditure] is Rs 429,033 crore which is 68.5% of the annual target set in the budget. The corresponding figure for the first quarter of last year was 81%. This is commendable when seen in conjunction with a substantial jump in capital expenditure to about Rs 87,000 crore during the quarter ending June 30, 2018, an increase of 27% over the corresponding quarter of last year. This is 29% of the full year target. A key feature of the emerging trend is...
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Fertilizer subsidy arrears – shun band-aid solutions
The Cabinet Committee on Economic Affairs (CCEA) has accorded the ex-post facto approval for special banking arrangement [SBA] for Rs 10,000 crore for payment of outstanding claims on account of fertilizer subsidy in the year 2016-17. It also approved that, in future, Department of Fertilizers [DoF] would avail the SBA with concurrence of Department of Expenditure [DoE]. Faced with fertilizer subsidy arrears of around Rs 35,000 crore by end of financial year 2016-17, the union minister for chemicals and fertilizers Ananth Kumar had in January, 2017 written to the finance minister asking for SBA for Rs 20,000 crore to provide loan to cash starved fertilizer companies at reasonable rates. Against this, Department of Fertilizers [DoF] was allowed to raise a...
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Fertilizers and food – reforms put in deep freezer
In the medium-term expenditure framework statement [MTEFS] – a statutory requirement under the Fiscal Responsibility and Budget Management Act [FRBM] [2003] – presented by Modi –government, the spend on fertilizer subsidy during 2018-19 and 2019-20 has been kept unchanged at Rs 70,000 crores being the provision in the budget for current year 2017-18. The allocation for food subsidy has been increased from Rs 145,000 crores during 2017-18 to Rs 175,000 crores during 2018-19 and further to Rs 200,000 crores in 2019-20. These numbers are completely out of sync and in contradiction with the government’s commitment to ‘rationalize’ and ‘target’ both fertilizer and food subsidy [i.e. give these to the poor/deserving only] – made in successive budgets as well as the...
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DBT for fertilizers – shun flawed mechanism
Alluding to direct benefit transfer [DBT] of fertilizer subsidy, in budget speech for 2016-17, finance minister, Arun Jaitely had stated :- “We have already introduced DBT in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis for fertilizer in few districts in the country with a view to improving quality of service delivery to the farmers.” As a follow up, DBT of fertilizer subsidy is now in operation on a pilot basis in 11 districts viz. West Godavari, Krishna and Rangareddi [Andhra Pradesh]; Una [Himachal Pradesh]; Hoshangabad [Madhya Pradesh], Pali [Rajasthan], Krishnaganj [Bihar], Karnal and Kurukshetra [Haryana]; Nashik and Raigarh [Maharashtra] From the next kharif season beginning April, 2017, the scheme will be launched in...
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Fertilizer DBT ‘pilots’ – old wine in new bottle
Even as Modi – government has taken plenty of action on reforming a variety of subsidy schemes viz., LPG, food, kerosene etc during the last 30 months of its stint, fertilizer subsidy has received scant attention. In his budget speech for 2016-17, finance minister, Arun Jaitely stated :- “We have already introduced a direct benefit transfer (DBT) in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis for fertilizer in few districts in the country with a view to improving quality of service delivery to the farmers.” The focus on DBT links up with a startling revelation made in the Economic Survey [2015-16]. It stated that “24% of the fertilizer subsidy is spent on inefficient...
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Revival of sick fertilizer PSUs – a mirage
The revival of sick plants of two central public sector undertakings [PSUs] viz., Fertilizer Corporation of India Limited [FCIL] and Hindustan Fertilizer Corporation Limited [HFCL] is once again in the news. Last year, the Union Cabinet had approved a plan to revive the Barauni [Bihar] of [HFCL], Gorakhpur [UP] and Sindri [Jharkhand] of FCIL through auctions. Having failed to get a good response through this route, the central government had asked cash-rich PSUs viz., Oil and Natural Gas Corporation Limited [ONGC], National Thermal Power Corporation limited [NTPC] and Coal India Limited [CIL] to adopt one closed urea plant each for revival. Accordingly, CIL and NTPC have signed an agreement to form a joint venture [JV] to revive Sindri and Gorakhpur...
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Tackling urea shortage – neem coating won’t help
Addressing an election rally in Tamil Nadu, prime minister listed the major achievements of his government which, he exhorted, is exclusively for the poor and the oppressed and is sorting out issues faced by them one by one. One of these achievements is “helping the poor farmers surmount the urea shortage which has been haunting them for years”. Modi said immediately after swearing in as PM, he received letters from Chief Ministers of States and farmers about the severe shortage of urea. “Urea was being sold in the black market and farmers had to bribe officials to get their quota of urea. My government put an end to the practice of corruption in the sale of urea. We have started...
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DBT for fertilisers is a hoax
Prime Minister Narendra Modi is perceived to be a crusader when it comes to plugging leakages from the subsidy distribution pipeline. Prime Minister Narendra Modi is perceived to be a crusader when it comes to plugging leakages from the subsidy distribution pipeline. He has amply demonstrated this in the case of LPG (liquefied petroleum gas), wherein the government implemented direct benefit transfer (DBT) and saved about R15,000 crore annually. However, when it comes to fertilisers, similar initiatives are conspicuous by their absence. During 2015-16, out of an allocation of R73,000 crore on fertiliser subsidy, as much as R50,300 crore was on urea. The subsidy is administered through manufacturers who are directed to sell urea at a fixed uniform maximum retail...
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DBT for fertilizers – a hoax
Prime minister, Modi is perceived to be a crusader when it comes to plugging leakages from the subsidy distribution pipeline. He has amply demonstrated this in case of LPG [liquefied petroleum gas] wherein, the government implemented direct benefit transfer [DBT] and saved about Rs 15,000 crores annually. But, when it comes to fertilizers, similar initiatives are conspicuous by absence. During 2015-16, out of an allocation of Rs 73,000 crores on fertilizer subsidy, Rs 50,300 crores was on urea. The subsidy is administered through manufacturers who are directed to sell urea at fixed uniform maximum retail price [MRP] and get reimbursement for excess of their unit- specific production cost over MRP under new pricing scheme [NPS]. Imported urea too is subsidized...
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