A major achievement of his government repeatedly cited by prime minister, N Modi is complete disappearance of the shortage and black-marketing of urea – the fertilizer that provides an overwhelming share of nitrogen or ‘N’ to the crops.
Under the previous dispensations, farmers holding demonstrations to register their protest and lathi-charged by the police used to be an order of the day. The gruesome situation arose primarily due the diversion of substantial quantity over 30% to chemical industries. Modi made ‘neem coating’ of urea mandatory thereby rendering it unusable in chemical industries. This has helped in reining in diversion.
The claim of the prime minister is borne out by facts on ground zero. During the last over 4.5 years, there was no shortage of urea in any part of the country. Besides, farmers were able to buy their requirement at the notified maximum retail price [MRP] unlike in the past when they were forced to pay huge premium.
The importance of what Modi has delivered was not fully understood until Madhya Pradesh [MP] and Rajasthan – the states which returned Congress to the driver’s seat in the just concluded elections – threw up contrasting trends. In the midst of Rabi season [October 2018 – March 2019] when the demand for urea is at its peak, farmers in these states are facing an acute shortage and there is rampant black-marketing.
In MP, against requirement of 1.3 million ton during the season, the state has so far received about 800,000 ton of which 150,000 ton is in godowns. Further, against the MRP of Rs 250 per bag [45 kg], the farmers are forced pay Rs 450 per bag or 80% more.
A major reason for the surge in price is the decision of the newly elected government to channel 50% of the supplies through the private trade up from subsisting 20%. The remaining 50% is sold through institutions such as cooperative marketing federations and agro-industries corporations which was 80% earlier.
Reportedly, private traders who contributed funds to election campaign of the party now in power are charging high prices. Under the Fertilizer Control Order [FCO], a trader charging higher than the MRP is liable to be jailed. But, when you have a pliable administration working hand-in-glove, there is nothing to fear. If, it happens in MP and Rajasthan, the possibility of the menace engulfing other states ruled by the grand old party can’t be ruled out.
Next year, if Modi fails to get a majority on its own and Congress gets to lead a coalition government at the center [as during 2004-2014], the misuse of the control regime in fertilizers could assume gigantic proportions. Then, the latter could even withdraw the order for neem coating of urea leading to resurrection of pilferage/diversion and resultant shortage on a much bigger scale.
Almost every aspect of the urea sector viz. capacity creation, production, import, movement, distribution and pricing is under excessive regulation. This scuttles initiatives to improve efficiency, cut cost and innovate to bring new products to meet farmers dynamic needs for increasing yield and enhancing crop quality. Even worse, this gives lot of discretion to bureaucrats/politicians who could abet things which may not be in national interest.
For instance, under Narasimha Rao regime in the early 90s, the government allowed ‘gold plating’ [a euphemism for under-declaring capacity] of certain new projects resulting in inflated retention price and hence, higher subsidy outgo. Further, on umpteen occasions, high cost import were resorted to when the domestic manufacturers could have delivered more output at lower cost.
In several cases, efficiency improvements made by concerned units were mopped up in determining the subsidy entitlement whereas others operating at low efficiency level continue to get higher subsidy.The manufacturers are also treated differentially when it comes to release of subsidy payments. For instance, someone enjoying better clout with bureaucracy can get away with timely payments whereas others not so well connected face delay.
Who sells how much and where? This is decided under a supply plan worked out by central government in consultation with states and manufacturers during the tripartite zonal conference held before the commencement of the relevant season viz. Kharif [April-September] and Rabi [October-March]. In such determination, the bureaucrats wield enormous power to swing allocation in favor of a particular manufacturer at the cost of another.
In short, there are numerous ways in which the bureaucrats/politicians can exercise discretion giving rise to corruption and nepotism. Even Modi who has zero tolerance for corruption may not be able to prevent misuse of the system. Imagine what would happen if he is replaced by a dispensation whose deep rooted involvement and abetment of corruption is demonstrated by a tsunami of scams that surfaced especially during 2004-2014.
There is an urgent need for dispensing with controls. The controls made sense in the 80s/90s when the industry was in a nascent stage, supply and distribution systems were not well developed and fertilizer use needed to be promoted. Currently, none of these considerations are relevant. Yet, successive governments have continued with these out of sheer inertia or have a vested interest.
The direct benefit transfer [DBT] of fertilizer subsidy which started from April 2018 does nothing to do away with controls which remain in tact. The subsidy continues to be routed through manufacturers although for this to be meaningful, it should be given directly to farmers/beneficiaries [as in case of LPG].
The retention of controls may not be so damaging as long as Modi [apart from being absolutely honest and clean himself, he does not let anyone else in the system ignore these values] remains at the helm. But, in a democratic set-up wherein, we have elections once every 5 years, in an event of a change in political dispensation to govern the nation, this could be catastrophic.
Hence, we need to get out of controls on fertilizers lock, stock and barrel even as farmers could be helped by directly transferring subsidy into their account.