Direct Action Needed for Direct Benefits

by Jemma Barsby Content Writer

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 before the new Government for approval. To begin with, this scheme will be run on a trial basis in select districts to cover small and marginal farmers only. However, full-scale implementation will be possible only after two to three years.

This is not a new idea and has been on the Modi Government's radar for quite some time now. In fact, it was also considered by the erstwhile UPA dispensation. It was during the 2012-13 Budget that the then UPA Government had announced its intention to link subsidy payments to manufacturers to the sale of fertilisers to farmers by retailers.

Pilot projects in 10 districts spread over nine States were to be run. After successful implementation, Direct Benefit Transfer (DBT) to farmers was to be launched in these districts from April 1, 2013. Pan-India launch was contemplated from April 2014. But the plan did not move beyond the drawing board.

It was in 2016-17 that the Modi Government launched pilot projects to link subsidy payment to manufacturers to sale of fertilisers to farmers by retailers in 18 districts spread over 12 States. From April 2018, it was launched all across the country and covered 31 States and Union Territories.

Under the said scheme, manufacturers receive 100 per cent subsidy after fertiliser is delivered to the farmers and his identity viz, the Aadhaar, is captured on electronic Point of Sale (PoS) machine at the dealer's shop. Termed as DBT, the nomenclature is misleading as subsidy continues to be routed through the manufacturers.

The producers sell urea at Maximum Retail Price (MRP) controlled by the Centre at a low level and get subsidy reimbursement on unit-specific basis under the New Pricing Scheme (NPS). Manufacturers of non-urea fertilisers are given "uniform" subsidy (on per nutrient basis) under the Nutrient Based Scheme (NBS). However, since payments are adjusted to actual cost data, effectively, even subsidy to them is not uniform. The system protects inefficient and high cost units even as efficient and low cost units get no incentive to improve efficiency and reduce cost.

Besides, since every farmer rich or poor, small or large has access to fertilisers at low price, all of them are beneficiaries of the subsidy. Furthermore, the subsidy on urea being higher than on non-urea fertilisers, this leads to excessive urea use, thereby creating an imbalance in the use of fertiliser.

The subsisting architecture has been in place for several decades now even as the change from April 2018 is only with regard to the manner of disbursing subsidy to manufacturers i.e. after sale to farmers from earlier receipt of fertilisers in the district. All this will undergo a metaphorical change when real DBT, involving transfer of subsidy to farmers, is introduced.

Direct action needed for direct benefits - the most important requirement for the scheme to take off and run successfully thereafter is the political will. For more information visit: https://www.dailypioneer.com/