The Cabinet has approved direct benefit transfer [DBT] of fertilizer subsidy. However, the subsidy will continue to be routed through fertilizer manufacturers. They will receive 100% of the subsidy amount after fertilizer is delivered to the farmer and his identity viz. 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] controlled by 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 fertilizers viz. DAP/MOP/SSP/complexes theoretically are given ‘uniform’ subsidy [on per nutrient basis] under the nutrient based scheme [NBS]. However,...
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Category: Pricing policies & subsidies
Rejuvenating Indian soils – shun flawed policies
According to a 10 year study “The Indian Nitrogen Assessment” carried out by the Indian Nitrogen Group [ING] for Down To Earth [DTE] – a New Delhi-based environment and health magazine – Nitrogen-based fertilizers like urea, which have been instrumental in increasing crop yields in India, are now turning into potent destroyers by polluting land and water, affecting people’s health and leading to climate change. The study says that “agriculture is the main source of nitrogen pollution in India; further cereals like rice and wheat accounting for maximum cropped area pollute the most”. In the past five decades, every Indian farmer has, on an average, used up over 6,000 kg of urea or 120 kg annually. Only 33 per cent...
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Stopping fertilizer subsidy misuse – Aadhaar authentication alone won’t help
In the Union Budget for 2018-19, the finance minister, Arun Jaitely has made a provision of Rs 70,080 crore for fertilizer subsidy which is just about Rs 5000 crore higher than the revised estimate [RE] for 2017-18 at Rs 65,000 crore and almost the same as the budget estimate [BE] of Rs 70,000 crore for that year. The international price of crude oil during the ensuing year is projected to be 15-20% higher. Considering that the international prices of urea as also raw materials/feedstock [natural gas, phosphoric acid, ammonia, sulfur] also increase in tandem and India is heavily dependent on their imports, the requirement for subsidy would be higher. Add to this carry forward of over Rs 30,000 crore from...
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Urea subsidy – price for populism and greed
With pressure building on union budget, it is time to take a re-look at fertilizer subsidy which was allocated Rs 70,000 crores during 2017-18 and is a major factor contributing to high fiscal deficit. Here, we focus on urea – a major source of nitrogen – which accounts for over 70% of total subsidy. Subsidy on each ton of urea produced/imported and sold to farmers is the excess of cost of production/import and distribution over maximum retail price [MRP] controlled by government at a low level. Of the nearly 24 million tons of urea produced in India, over 80% is based on use of natural gas as feedstock/fuel. Of the total gas requirement, 2/3rd comes from domestic production and 1/3rd...
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Soil health: change NPK balance through incentives
Delivering the 38th edition of his ‘Mann ki Baat’, Prime Minister Narendra Modi said, “Can our farmers take a pledge to bring down urea use by half by 2022? If they use less urea in agriculture, the fertility of the land will increase. The lives of farmers will start improving.” Modi made the statement in the backdrop of ‘World Soil Day’ on December 5 and the deteriorating health of soil the world over, a key factor contributing to this being the excessive use of urea. The positive correlation between excessive use of urea and the erosion in soil health is an incontrovertible fact proven by several studies and finds repeated reference in official documents, including the Economic Survey that is...
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Correcting imbalance in fertilizer use – SHC alone won’t help
In 2015, prime minister, Modi had launched National Soil-Health-Card [NSHC] scheme with the objective of galvanizing farmers to replenish seriously degraded soils caused by excessive fertilizer use over several years. It seeks to promote a more judicious mix of fertilizers by testing soil samples of each farm household across the country on 12 parameters and prescribing recommendations on use. To test soil, the country’s cropped area is divided into grids of 10 hectares (ha) for rain-dependent farms and 2.5 ha for irrigated land. One soil sample from each grid is taken and test results are distributed to farmers whose lands fall under the relevant grid. These show which ingredients are depleted or are present in excess. Their soils need to...
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BAND-AID SOLUTIONS WON’T WORK
The cost of supplying fertilisers has increased due to a hike in cost of feedstock/raw materials, rupee depreciation, capital cost, transport and so on 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 fertiliser subsidy in the year 2016-17. It also approved that, in future, Department of Fertilisers (DoF) would avail the SBA with concurrence of Department of Expenditure (DoE). Faced with fertiliser subsidy arrears of around Rs 35,000 crore by end of financial year 2016-17, Union Minister for Chemicals and Fertilisers, Ananth Kumar had in January, 2017 sought from the Finance Ministry SBA for Rs 20,000 crore. Against this, DoF...
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Urea – Modi’s clarion call may lead to its under-use
Addressing the 38th edition of ‘Mann Ki Baat’, the prime minister said, “Can our farmers take a pledge to bring down urea use by half by 2022? If they promise to use less urea in agriculture, the fertility of the land will increase. The lives of farmers will start improving.” Modi made the statement in the backdrop of ‘World Soil Day’ on December 5 and deteriorating health of the soil world over, an overarching factor contributing to this is excessive use of urea. The positive correlation between excessive use of urea and erosion in soil health is an incontrovertible fact proven by several studies and also acknowledged in the Economic Survey and other official documents. This is a phenomenon that...
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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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OVERCOMING THE REFORM CHALLENGE
If the Government is serious about making a dent on subsidy, it should dismantle controls and give subsidy directly to target beneficiaries (the poor) under direct benefit transfer. This will pave the way for many players, increase supply, offer more choices and foster competition In the Medium Term Expenditure Framework (MTEF) statement (a statutory requirement under the Fiscal Responsibility and Budget Management Act, 2003) presented by the Modi Government, expenditure on fertiliser subsidy during 2018-19 and 2019-20 was kept unchanged at Rs 70,000 crore. The provision was the same in this year’s budget. Allocation for food subsidy has been increased from Rs 145,000 crore during 2017-18 to Rs 175,000 crore during 2018-19 and further to Rs 200,000 crore in 2019-20....
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