The direct benefit transfer [DBT] scheme for fertilizer subsidy was launched at the beginning of Rabi 2017-18 crop season [October 2017 – March 2018] in certain parts of India and progressively extended to cover all the 31 states and union territories [UTs] – starting from April 1, 2018. Its stated objectives were: (i) ensure timely subsidy payments to the manufacturers; (ii) clearing the backlog and (iii) plugging pilferage and leakages in the system. Have these been achieved? To seek an answer to these questions, let us capture a few basics about fertilizer pricing and subsidy. To make fertilizers affordable to farmers, the union government follows a policy of controlling their maximum retail price [MRP] at a low level unrelated to the...
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Category: Pricing policies & subsidies
Urea dilemma – control versus decontrol
On the eve of its Annual Seminar [2018], the Fertiliser Association of India [FAI] – an umbrella organization of all fertilizer manufacturers/importers – has reiterated its demand for removing controls on the fertilizer industry. It has also asked the government to give subsidy directly to the farmers instead of routing it through the manufacturers as at present. In case however, the government continues with control and routing subsidy through the manufacturers then, it demands a fair deal in terms of admissibility of various elements of cost viz. fixed cost, feed/fuel and other costs under the New Pricing Scheme [NPS] for determining the subsidy amount to be reimbursed to them. Further, considering that the maximum retail price [MRP] of urea is...
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No relief in sight for fertiliser prices
India is overwhelmingly dependent on imports for meeting its requirements. That makes us vulnerable to the changing global demand-supply scenario. The Government, will, therefore, need to explore innovative ways to increase self-reliance Farm distress refuses to go away. This time around, the steep rise in prices of fertilisers — a key input used in crop production — during the current year has increased farmers’ miseries. During Kharif (April-September) 2018, the price of di-ammonium phosphate (DAP), a major source of phosphate or ‘P’ nutrient supply, increased by 30 per cent over Kharif (April-September) 2017. Likewise, the price of complexes and muriate of potash (MoP) — main source of ‘P’ and ‘potash’ or ‘K’ nutrient —increased by 15-60 per cent during Kharif 2018...
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Fertilizer tantrums, farmers’ woes
The woes of farmers refuse to go away. This time around, the steep increase in price of fertilizers – key input used in crop production – during the current year has increased their miseries. During Kharif [April-September] 2018, the price of di-ammonium phosphate [DAP] – a major source of ‘phosphate’ or ‘P’ nutrient supply – increased by 30% over Kharif [April-September] 2017. Likewise, the price of complexes and muriate of potash [MoP] – main source of ‘phosphate’ and ‘potash’ or ‘K’ nutrient – increased by 15-60% during Kharif 2018 over Kharif 2017. The escalating trend has continued during Rabi [October 2018-March 2019] season as well. The price of DAP has increased by a further 12-13% during Rabi [Oct 18-March 19]...
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Fertiliser subsidy:policy reforms needed, not tinkering
Considering the crucial role played by fertilisers 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 the cost of production and distribution. To ensure that production is viable at this price, it gives subsidy to the manufacturer to reimburse the difference between the two. In case of urea, the subsidy varies from unit to unit and is administered under the New Pricing Scheme (NPS) whereas for decontrolled complex fertilisers, a ‘uniform’ subsidy fixed on per nutrient basis is given to all manufacturers under the Nutrient Based Scheme (NBS). Since this is subject to submission of...
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Fertilizer subsidy payments assured within a week – a joke!
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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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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FLEDGLING FERTILISER REFORMS
Successive Governments have lamented an increase in fertiliser subsidy and its destabilising effect on the fiscal situation. Yet, they have failed to address the real issue The price of domestic gas has been increased from the existing $ 2.89 per million British thermal unit (mmBtu) on net calorific value basis to $3.06 per mmBtu for a six-month period beginning April 1. The hike, taking the price back to the level reached two years ago, has brought to the fore some niggling questions which successive ruling dispensations have dodged for several decades. First, who pays for the extra price that user industries — mainly fertilisers (besides power, CNG and PNG) — shell out? The urea industry alone requires over 45 million standard cubic...
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Rising gas price, fledgling fertilizer reform
The price of domestic gas is expected to go up from existing US$ 3.21 per million British thermal unit [mBtu] [on net calorific value basis] to US$ 3.40 per mBtu for six month period beginning April 1, 2018. The hike taking the price back to the level reached two years ago – has brought to the fore some niggling questions which successive ruling dispensations have dodged for several decades. First, who pays for the extra price that user industries – mainly fertilizers [besides power, CNG and PNG] – shell out? The urea industry alone requires over 45 million standard cubic meter [mmscmd] of gas as against total domestic supply of 90 mmscmd. The maximum retail price [MRP] of urea is...
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Govt’s fertiliser DBT neither direct nor full benefit
The Cabinet has approved direct benefit transfer (DBT) of fertiliser subsidy. However, the subsidy will continue to be routed through fertiliser manufacturers. They will receive 100% of the subsidy amount after fertiliser is delivered to the farmer and his identity, namely Aadhaar (and other details such as plot size, crop, nutrient use), is captured on the electronic point of sale (e-PoS) machine. At present, manufacturers sell urea at the maximum retail price (MRP), which is controlled by the Union government at a low level, and get subsidy reimbursement on unit-specific basis under the new pricing scheme (NPS). On the other hand, manufacturers of non-urea fertilisers are theoretically given ‘uniform’ subsidy (on per nutrient basis) under the nutrient-based scheme (NBS). However,...
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