Running a pilot project on DBT for fertiliser by itself does not ensure that the scheme will actually be launched. Moreover, the project is deeply flawed
Alluding to direct benefit transfer (DBT) of fertiliser subsidy, in his Budget speech for 2016-17, Union Minister for Finance Arun Jaitley had stated: “We have already introduced DBT in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis, for fertiliser in a few districts in the country, with a view to improving quality of service delivery to the farmers.”
The focus on DBT links with a revelation made in the Economic Survey (2015-16). It stated that “24 per cent of the fertiliser subsidy is spent on inefficient producers, 41 per cent, is diverted to non-agricultural uses and 24 per cent, is consumed by larger, presumably richer, farmers”. This leaves a meagre 11 per cent for poor/small and marginal farmers, who alone should be the sole beneficiary, as promised by Prime Minister Narendra Modi.
Indeed, the Survey had strongly advocated DBT of fertiliser subsidy to the bank accounts of beneficiaries using the JAM (Jan Dhan-Aadhaar-Mobile] platform.
Yet, all that we see is DBT on a pilot basis in 16 districts. Currently, it is in operation in two districts: Krishna and West Godavari in Andhra Pradesh. For the remaining 14 districts, the Centre plans to start work from this month. Since, by this time, much of Rabi sowing season is already over, effectively the pilots would begin from April 2017.
Even so, running a pilot project by itself does not ensure that the scheme will actually be launched. The proof of the pudding is in its eating. For instance, in 2012-13, the UPA Government had also announced a roadmap for an all-India launch of DBT in April 2014, preceded by trial runs. But the plan remained on paper. There is no guarantee that the Modi-dispensation will make it happen.
Ironically, even the pilot is wrongly conceived and is completely out of sync with the basics of DBT. To get an idea, let us first look at how the existing system works.
The manufacturers sell fertilisers at a low price and claim excess of cost of supply over it as subsidy from the Union Government. In the case of urea, the subsidy varies from unit to unit, whereas for decontrolled complex fertilisers, it is ‘uniform’ for all units. Ninety-five per cent of the subsidy to urea units (85 per cent to complex manufacturers) is released on the sale of material in each district. The balance five to 15 per cent is paid on confirmation of sales to farmers by the State Government.
Under DBT, the subsidy goes to the bank account of beneficiary/farmer. Therefore, it cannot be routed through producers who need to sell to farmer at full cost-based or market-based price. This is how LPG subsidy is disbursed under PAHAL (Pratyaksh Hastantrit Labh) scheme, in vogue since January 2015. But, under the pilot for fertilisers, this principle has been thrown to the winds. Under it, the Centre won’t credit the subsidy in the farmer’s bank account, and the farmer will continue to buy fertiliser at the subsidised rate. As soon as he purchases the fertiliser, he will have to identify himself — using his Aadhaar number or Kisan Credit Card (KCC) — through a point-of-sale (PoS) device placed with the retailer. Following this, a recommendation of his soil condition and fertiliser requirement will be generated, which he may or may not follow.
Thereafter, the difference between the market rate and the subsidised price will be credited into the bank account of the manufacturer. Initially, the subsidy will be paid weekly and then on a real-time basis as and when the system stabilises. The PoS devices will have to be purchased by the companies themselves. This sort of architecture is not DBT. Any scheme which does not involve crediting subsidy directly into a beneficiary’s account isn’t DBT. What is being done is the continuation of the existing system, with changes that will make life more miserable for manufacturers.
Clearly, the version of DBT being tried in pilot districts is flawed. It will provide no proper guidance in judging the effectiveness of the scheme. It will not be of any help in dealing with the maladies, as pointed out in the Economic Survey. A plausible reason as to why the Government does not want to embrace DBT in its ‘real’ form could be absence of data on farmers who do not own land but do farming.
But, lack of such data cannot be an excuse for trying a flawed experiment. It appears that the Government is not serious about embracing this revolutionary idea for delivering fertiliser subsidy.
(The writer is a public policy analyst)
http://www.dailypioneer.com/columnists/oped/idea-is-grand-but-will-it-work-well.html