Direct benefit transfer of subsidies (DBT)has been successful in fixing leakages in the past one year. A total of ₹14,672 crore was saved in subsidies on LPG by fixing leakages and repairing systemic problems. The petroleum ministry will soon start DBT for public distribution of kerosene, which is expected to save around ₹5,000 crore to the exchequer.
This is indeed very encouraging and we are eager to make it a success in fertilisers too, which will benefit the economy, farmers, manufactures and help in sustainable agriculture.
The fertiliser industry has been instrumental in making India self-sufficient in food and agricultural produce. While the sector plays a vital role, it continues to struggle with limited investments. Also, it is frequently criticised for straining the country’s fiscal deficit with rising subsidy bills. With no significant increase in agriculture productivity, rising subsidy indicates that inefficiencies in the mechanism are impacting farmers, fertiliser manufacturers, as well as taxpayers and consumers.
Further, the delay in payment of subsidy bills creates a liquidity crunch for the industry. The Fertiliser Association of India has estimated that pending dues to the industry are likely to touch ₹45,000 crore by the end of this financial year. Urea is provided to farmers at a subsidised price of ₹5,360 per tonne. The difference between the cost of production and the retail price is provided as subsidy to manufacturers.
Currently, the Centre routes fertiliser subsidy through manufacturers, although the government intends to directly pass on the subsidy to farmers through DBT. But the implementation of DBT for fertiliser subsidy is getting delayed and a major challenge highlighted is identification of beneficiaries since land records are neither accurate nor updated in many States.
Considering that fertiliser subsidy is the second-biggest subsidy after food, urgency to implement the action plan is critical for the fiscal health of the economy and equally important for the soil health of the country.
A pilot project While the government has the intent to begin this initiative and has been working on the same, it is essential that the government should come to a consensus and agree for a pilot project. Till The commentary has been that the programme, even at the pilot stage, might not lead to the desired result unless the end user is identified properly. We This is indeed a challenge, but the government has successfully rolled out schemes such as the Jan Dhan Yojna, which is targeting a much larger group of beneficiaries. If a pilot project is given a go ahead, it will bring in a lot of clarity, and all stakeholders can together deliberate on the way ahead.
It is important to understand this delay is creating pressure on the economy and tax payer’s money. The government needs to admit that such an initiative will bring in a lot of benefits, especially to improve the soil health that will enable higher productivity.
A fertiliser monitoring system (FMS) has been operational since 2007. This web-based platform monitors dispatches of material to over 600 districts via 750-odd railway rake points. Since 2012, the system’s coverage has been extended to nearly 1.6 lakh fertiliser retailers. In 2014-15 alone, 38 lakh-odd invoices involving sale of 54 million tonne of fertiliser up to the retail point were posted on the now mobile-enabled FMS and all this information is available on a daily, real-time basis.
The next step would be to build a platform that can monitor transactions from retail level to farmer, and to effectively enable that we will need to develop a farmer database, which can be connected to this platform.
This will be a huge task, but the benefits it will bring to the exchequer are quite huge.
Several gains By removing product subsidy and transferring the money directly to farmers, diversion of subsidies can be fully prevented. The current systemgives rise to black marketing and use of fertilisers in sectors apart from farming as well.
Direct cash transfer will also give farmers more purchasing power and the opportunity to choose fertilisers they consider best for their soil and crop. This will help in government’s agenda for effective implementation of soil health cards and vision of increasing productivity thus enabling sustainable agriculture.
Further, since more than 60 per cent of total fertilisers are imported, the global market sentiments are likely to be impacted positively in favour of buyers. Global suppliers will have to invest heavily to promote and educate farmers about their products. This is not happening today as demands are driven by the subsidy element.
More importantly, DBT is likely to provide the much-needed trigger for the introduction of more efficient products, which eluded farmers in India due to product subsidy. Slow release fertilisers, 100 per cent water-soluble fertilisers and customised fertilisers used in developed countries will be available in India. This will not only increase the crop productivity but also arrest soil degradation.
Quality of fertilisers in general will also improve as farmers will have more products that are not bound by the subsidy factor.
All for the farmer Finally, DBT will help farmers make informed decisions on farming, which will not remain confined to fertiliser use but also be extended to all decisions related to his farm — right from deciding on the crop to grow, seed and variety to use, among others.
The DBT scheme cannot be termed a panacea for all the challenges but it is certainly a significant step in the right direction — to transfer benefits to intended beneficiaries and contain subsidy burden.
Now, the government should gather courage to try out DBT in fertilisers. Yes, putting IT and financial infrastructure in place is a big challenge, but the bigger challenge is to bring a political consensus and overcome resistance from vested interests.
Any delay can only make the situation worse for the sector. This is an opportunity to truly bring reform for this sector. Deregulation of fertiliser industry will encourage the ‘Make in India’ mission. It will attract fresh investment into the sector besides enhancing the ease of doing business. Above all, the government may not need such a large fertilisers ministry to disburse subsidies, cost of which is prohibitive.
The writer is MD, Tata Chemicals