Direct cash transfer for fertiliser

The Union government is unlikely to roll out direct benefit transfer scheme for fertiliser subsidies this fiscal due to reluctance shown by states.

Sources told FE the idea of direct cash transfer was objected to, as under that model, the farmers would have to pay a substantial amount upfront for buying fertilisers prior to the actual subsidy amount being transferred to their bank accounts.

Also read: Wheat procurement up 30% on year

The farmers’ inability to pay for the soil nutrients at market rates upfront before subsidies are transferred to beneficiaries’ bank accounts is the main factor behind the state governments’ hesitation in approving the policy.

“Subsidy component of the fertiliser sold is quite high while the farmers’ ability to buy fertilisers at actual market rate is limited,” an official said. Out of 140 million farmers in the country, around 78% have small holding of less than two hectare.

Under the proposed pilot project for a modified scheme for direct benefits transfer to farmers where sale of subsidised fertilisers to farmers was to be capped, taking into consideration their land holdings, has not made much progress.

In case of urea, farmers pay a fixed price of Rs 266 per bag (45 kg) against the cost of production of around Rs 2,550 per bag. The balance is provided by the government as a subsidy to fertiliser units.

The retail prices of phosphatic and potassic (P&K) fertiliser, including Di-ammonium Phosphate (DAP) were ‘decontrolled’ in 2020 with the introduction of a ‘fixed-subsidy’ regime as part of Nutrient Based Subsidy mechanism announced by the government twice in a year.

Currently, sale of all subsidised fertilisers to farmers or buyers is made through 0.26 million point of sale (PoS) devices installed at outlets since March 2018. Beneficiaries are identified through Aadhaar number, Kisan Credit Card and other documents.

The government releases subsidies on various fertilisers to the companies on the basis of actual sales made by the retailers to the farmers.

Also read: Niti Aayog seeks consultant to review NHAI debt

The expenses on account of fertiliser subsidy touched the record level of Rs 2.52 trillion in FY23.

IT was the third year in a row that the annual Budget spending on fertiliser was above Rs 1-trillion mark, against a lower range of Rs 70,000– 80,000 crore in the past few years.

The government has budgeted Rs 1.79 trillion as fertiliser for the current fiscal.

In terms of volume, imports account for a third of domestic soil nutrients consumption of around 65 million tonne annually.