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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Category: Pricing policies & subsidies
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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Perception vs reality
BAD SUBSIDIES : The only way to remove fertiliser subsidy is through direct benefit transfer in place of routing subsidy through the industry. Addressing a global business summit recently, Prime Minister Narendra Modi for the first time, shared at length his thinking on subsidies. He said, “We have to eliminate bad subsidies, whether or not they are called subsidies. But, some subsidies may be necessary to protect the poor and the needy and give them a fair chance to succeed. Hence, my aim is not to eliminate subsidies but to rationalise and target them.” He continued: “I am referring to cooking gas, fertiliser and kerosene subsidies. I must confess that I am surprised by the way words are used by...
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Bad subsidies – perception vs reality
Addressing the ET Global Business Summit, prime minister, Modi for the first time ever, shared at length his thinking on subsidies. The relevant excerpts are reproduced below:- “We have to eliminate bad subsidies, whether or not they are called subsidies. But, some subsidies may be necessary to protect the poor and the needy and give them a fair chance to succeed. Hence, my aim is not to eliminate subsidies but to rationalize and target them. I have been referring to cooking gas, fertilizer and kerosene subsidies. I must confess that I am surprised by the way words are used by experts on this matter. When a benefit is given to farmers or to the poor, experts and government officers normally...
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Direct transfer of fertilizer subsidy – 12 commandments
Direct benefit transfer [DBT] of fertilizer subsidy offers huge benefits viz., rational allocation of resources, reduction of imbalance in NPK use, prevention of pilferage/black-marketing and saving in subsidy. Even as Modi – government is committed to introduce DBT, it would do well to seriously consider following 12 commandments:- (i) It must be made abundantly clear to all stakeholders that the day DBT is introduced, the present system of routing subsidy through fertilizer manufacturers will go. The new pricing scheme [NPS] for urea under which they are paid subsidy will be dismantled. Likewise, the nutrient based scheme [NBS] under which manufacturers of P&K fertilizers are paid subsidy will have to go. (ii) All manufacturers of urea and P&K fertilizers will sell...
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Fertilizer Industry in India – on the brink
Emboldened by the success of direct benefit transfer [DBT] in LPG and having announced DBT for kerosene subsidy in 26 districts to begin with from April 1, 2016, the government is currently examining various possibilities for taking similar initiatives in fertilizers [besides food]. Subsidy syndrome While, these efforts are welcome, it needs to take stock of the present state of fertilizer industry in India as its health is a pre-requisite for ensuring un-interrupted supply of fertilizers to farmers at affordable price. In a pre-budget meeting with finance minister, Arun Jaitely, the Fertiliser Association of India [FAI] told him that at present, manufacturers have outstanding subsidy dues of Rs 45,000 crores. It urged the government to clear these in three installments....
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It’s wrong to deny gas to the fertiliser sector
And worse still, to favour urea producers over decontrolled fertiliser units in gas allocation, exacerbating the nutrient imbalance The manner in which gas is allocated within the fertiliser sector smacks of arbitrariness. The Centre gives a uniform subsidy to all manufacturers, including those of decontrolled complex fertilisers, under the Nutrient Based Scheme (NBS) . Why, then, does it use a different yardstick for allocation of gas to manufacturers of urea on the one hand and decontrolled fertiliser on the other? A two-judge bench of the Delhi High Court has ordered the government to resume supply of natural gas to Deepak Fertiliser and Petrochemicals Corporation (DFPCL), a manufacturer of decontrolled phosphatic fertilisers, which was arbitrarily suspended last year. The bench has...
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The unabated food and fertiliser worries
With reforms in fertilisers and food stuck in a groove, it is but natural that the government is shirking from paying subsidy arrears Hamstrung by its inability to achieve target for divestment proceeds from public sector undertakings (PSUs) and lower-than-expected collection from direct tax revenues, the government has resorted to hard posturing with regard to release of subsidy payments under major heads—fertilisers and food. As far as fertilisers are concerned, against a budget allocation of R73,000 crore for the current year, the requirement is expected to be around R80,000 crore. Even as the ministry of finance is likely to provide for additional R7,000 crore, it is in no mood to release arrears of about R30,000 crore from previous year. The...
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Fertilizer and food subsidy haunt budget – sans reform
Hamstrung by its inability to achieve target for divestment proceeds from public sector undertakings [PSUs] and lower than expected collection from direct tax revenue, government has resorted to hard posturing in regard to release of subsidy payments under major heads viz., fertilizers and food. In regard to fertilizers, against budget allocation of Rs 73,000 crores for current year, requirement is expected to be around Rs 80,000 crores. Even as ministry of finance [MOF] is likely to provide for additional Rs 7000 crores, it is in no mood to release arrears of about Rs 30,000 crores from previous year. MOF has also rejected a request from department of fertilizers [DOF] for a special banking arrangement [SBA] for short-term loan of Rs...
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