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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Category: Pricing policies & subsidies
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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Direct action needed for direct benefits
In its present form, the fertiliser DBT scheme has many loopholes. In the interest of the farmers, the policy needs an overhaul so that they can put subsidy to best use and enhance fertiliser-use efficiency. Will the new Government have the will to do so? The Ministry of Finance and NITI Aayog are working towards preparing a roadmap to directly transfer fertiliser subsidy to the farmers. The data being used to give Rs 6,000 per year to 120 million small and marginal farmers under the Pradhan Mantri Kisan Samman Nidhi will be used for this purpose. The subsidies on fertilisers along with PM Kisan deposits will serve to give a quasi-universal basic income transfer to the farmers. The proposal will be put...
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Fertilizer subsidy – DBT still a far cry
The ministry of finance and NITI Aayog are working on a road-map for direct benefit transfer [DBT] of fertilizer subsidy to farmers. The data base being used for giving Rs 6000/- per year to 120 million small and marginal farmers under PM Kisan Samman Nidhi – to be extended to cover all farmers [as promised in BJP election manifesto] – will be used for this purpose. DBT on fertilizers plus support under PM-KISAN will be given as quasi–universal basic income transfer. The proposal will be put up for consideration by the new government immediately after it takes charge. To begin with, this will be implemented on trial basis in select districts to cover small and marginal farmers only. However, full...
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Fertilizer reforms – Modi’s report card
The term of the Modi – government will come to an end in a little over two months from now. It is time to take stock of what it has done to the fertilizer sector which was suffering from several policy weaknesses at the time it took charge and there was great deal of expectation that it would kick off major reform. The four major areas which needed focused attention were (i) control on all critical aspects hampering initiatives by manufacturers to reduce cost, improve efficiency and innovate; (ii) imbalance in fertilizer use affecting crop yield, soil health, environment and sustainability of agriculture; (iii) shortfall in supply of gas, feedstock/fuel in production and high price; (iv) increasing subsidy and its...
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