According to a survey by NITI Aayog, nearly 2/3rd of the farmers don’t favor direct benefit transfer [DBT] of fertilizer subsidy. It is not clear whether this view is representative of the vast swathe of the farming community [there are over 145 million farm households] in India. If, it is indeed the case and this is also the current thinking of the policy makers then, this would leave one shell shocked as this would tantamount to complete reversal of the thought process. In Budget for 2012-13, the then government had announced linking subsidy payment to manufacturers to the sale of fertilizers to farmers by retailers. Pilot projects in 10 districts spread over nine states were to be run; after successful...
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Category: Fertilizers
Mounting fertilizer subsidy arrears – struggling industry
At the beginning of 2019-20, the amount owed by the Government of India [GOI] to fertilizer manufacturers as subsidy arrears was Rs 39,000 crore. According to the Director General, The Fertiliser Association of India [FAI] – an umbrella organization of fertilizer industry- as on November 1, 2019, this was Rs 33,691 crore to [including Rs 20,853 crore under Direct Benefit Transfer (DBT) scheme and balance Rs 12,838 crore other than DBT]. The FAI expects the arrears to touch Rs 60,000 crore by March, 2020. The persistence of fertilizer subsidy arrears is not an unusual phenomenon. It has been there for decades with the only difference that the amount involved has escalated over the years. During the 80s and early 90s,...
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India’s fertiliser policy flawed, policymakers still stuck to the 1970s/80s
These anomalies have cropped up because our policymakers are still stuck to the 1970s/80s thinking, geared towards increasing fertiliser usage The huge arbitrage opportunity thereby created makes the temptation to divert too strong to resist and this can’t be reined in merely by neem coating; no administration, howsoever alert, can monitor a mammoth 600 million bags of urea. The Modi government is in its sixth year, but a coherent policy continues to elude the fertiliser sector. To get a sense of how the central government is approaching the sector, and where the sector is headed, let us look at some crucial pronouncements by the prime minister. First, in the 38th edition of his “Mann ki Baat” radio address to the...
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Fertilizers – disjointed policies, contrary signals
Modi – government is running in its sixth year [five years of the first term and first of Modi 2.0]; we are yet to see a coherent announcement on reforms in the fertilizer sector forget giving a ‘stable’ and ‘predictable’ policy badly needed to give a clear-cut signal to various stakeholders for taking decisions with regard to investment, innovation, imports, logistics and use etc. All that we see is exhortation from the Prime Minister himself made in bits and pieces from the public platform. Let us pick up some of most crucial ones. First, in the 38th edition of “Mann ki Baat” delivered on November 26, 2017, Modi exhorted farmers to take a pledge for reducing consumption of urea [the...
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Why DBT of fertiliser subsidy won’t happen anytime soon
A panel under Niti Aayog member Ramesh Chand has recommended direct benefit transfer [DBT] of fertilizer subsidy with the stated objective to “dis-incentivize farmers from excessive use, ensure delivery to the end-user and reduce outgo on subsidy.” The intent is to launch the scheme in three-four months DBT for fertilizer has been on the radar of policymakers for three decades. In July 1991, vowing to eliminate fertilizer subsidy in three years — under pressure from the International Monetary Fund and World Bank — the government had increased prices of all fertilizers by 40%. However, fearing political backlash, the hike was restricted to 30%, with a proviso that small and marginal farmers will be exempt from it. The Centre gave money...
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DBT of fertilizer subsidy – a cruel joke
Early this year, the finance ministry and NITI Aayog mooted a road-map for direct benefit transfer [DBT] of fertilizer subsidy and alluded to club this with assistance @ Rs 6000/- per annum being given under PM-KISAN and give the total amount as quasi–universal basic income transfer. To begin with, this will be run on trial basis in select districts to cover small and marginal farmers only. However, full scale implementation pan-India will be possible in 2-3 years. The finance ministry/NITI Aayog were to put up the proposal to the new government for latter’s approval. But, there was no announcement in the budget for 2019-20 presented by the finance minister, Nirmala Sitharaman on July 5, 2019. Now, a panel under Niti...
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Opt for a reformist approach
The Government’s failure to bring a comprehensive set of reforms for the fertiliser sector is a missed opportunity. Glaring anomalies need to be fixed to harness long-term potential. Having returned to power for a second term with a thumping majority, it was expected of the Modi Government to kick off immediate reforms for the fertiliser sector. Being just the beginning of the five-year term, now is the golden opportunity for it to opt for big bang reforms as any adverse fall-out in the short-run (inevitable when harsh measures are implemented) won’t pose any threat to the Government. Alas, it missed the opportunity. Finance Minister Nirmala Sitharaman’s Budget, too, had no mention whatsoever of substantive issues pertaining to the fertiliser policy even as...
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Modi 2.0 fails to kick off fertilizer reforms
Having been returned to power, we were looking forward to Modi kick off reforms in the fertilizer sector which were ignored by successive governments in the past. The expectation was legitimate as any reform measure is bound to affect stakeholders in the immediate short-run but that is unlikely to pose any threat to the government which has a mandate to run for full five years and it does not have to face the electorate before this. So, now was the golden moment to go for the big bang. But, the union budget presented by finance minister, Nirmala Sitharaman on July 5, 2019 has belied the expectation. There is no reference to fertilizers even as the allocation for fertilizer subsidy at...
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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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