In a bid to tackle diversion, hoarding and black marketing of urea (a widely used fertilizer that constitutes nearly half of India’s total fertilizer consumption), the Union government has decided to restrict its purchase to 100 bags from 999 bags per transaction by one purchaser. In a letter dated August 27, 2020, addressed to state chief secretaries, the ministry of chemicals and fertilizers, Chhabilendra Roul has sought their opinions on ‘how many such transactions should be allowed per month to each purchaser’. He has also asked states ‘to identify top 20 urea purchasers in each of their respective districts’. States have also been asked to collect details from buyers which include quantity of urea purchased, dates of purchase, point of sale such as retailers, agricultural land owned...
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Category: Alternative policy scenario
Hoping for a coronavirus-induced fertilizer reforms
Even as Prime Minister Narendra Modi has declared his intent to use Covid–19 as an opportunity to implement big bang reforms, the government is silent on fertilizers – a sector that has been crying for reforms for far too long. To put things in perspective, let us take a look at some basic facts on existing policies. Prior to the 1990s, both urea –main source of nitrogen (N)–and phosphate (P) and potash (K) fertilizers such as di-ammonium phosphate (DAP) and a whole range of complex fertilizers containing N, P&K in different proportion etc, fell under pricing and distribution controls. The maximum retail price (MRP) of each fertilizer was controlled at a low level and excess of cost of production and...
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Fertilizer reforms – Corona connection
Amidst all the bad news on the economic front under a prolonged lockdown, the meteorological department has come out with some good news for fertilizers – the most crucial agricultural input that help in increasing crop yield. The department has predicted normal monsoon with the country as a whole receiving 100 per cent of the long period average (LPA) of 88 centimetre rainfall. This together with substantial increase in cash in the hands of farmers [record procurement of wheat by government agencies viz. Food Corporation of India et al at the minimum support price (MSP) alone has given them about Rs 40,000 crore; direct income support of Rs 2000/- each to about 9 crore farmers under PM KISAN yielding Rs 18,000 crore...
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Amidst Corona worries – golden chance to reform
In the early stage of the Covid – 19 crisis and much before it had assumed monstrous dimensions, the international crude oil market was already oversupplied. Then, OPEC [Organization of Petroleum Exporting Countries] – a cartel of oil suppliers in the middle-east led by Saudi Arabia the lead exporter – and non-OPEC suppliers led by Russia sat together to hammer out an agreement to cut production with a view to bring about a semblance of demand-supply balance. But, the agreement eluded them as Russia refused to back even a moderate cut [it would have only served to help US shale-oil companies to run at full capacity – which it didn’t want]. In sync with the past happenings whenever OPEC didn’t...
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Why half-baked fertilizer reforms won’t deliver
If the government wants to restrict subsidised supply only to small and marginal farmers having landholding size <2 hectares, this will require two streams of supplies in the distribution channels viz. The Union government controls the maximum retail price (MRP) of urea at a low level, unrelated to the cost of production and distribution, which is much higher. —————————————————————————————————— Reportedly, the government is likely to fix nutrient-based subsidy (NBS) rate for urea before rolling out the direct cash transfer (DCT) of urea subsidy to farmers’ accounts. The subsidy, expressed as rupees per hectare, will be based on soil health, and size of landholding. The idea of NBS for urea is not new. It was recommended, in 2012, by a...
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Fertilizer – half-baked reforms won’t deliver
According to report in a leading economic daily [citing an official involved in policy making], “the government is likely to fix nutrient-based subsidy [NBS] rate for urea before rolling out the direct cash transfer [DCT] of urea subsidy to farmers’ accounts. The subsidy – fixed on per hectare – will not be universal for farmers across the country and will be based on soil health and size of the landholding. Tenant farmers would also be eligible to get the subsidy on production of valid tenancy documents. To assess the implications, let us first take a look at the existing dispensation of subsidy on urea and non-urea or phosphate [P] and potash [K] fertilizers and how the two differ. How will...
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Mounting fertilizer subsidy arrears – struggling industry
At the beginning of 2019-20, the amount owed by the Government of India [GOI] to fertilizer manufacturers as subsidy arrears was Rs 39,000 crore. According to the Director General, The Fertiliser Association of India [FAI] – an umbrella organization of fertilizer industry- as on November 1, 2019, this was Rs 33,691 crore to [including Rs 20,853 crore under Direct Benefit Transfer (DBT) scheme and balance Rs 12,838 crore other than DBT]. The FAI expects the arrears to touch Rs 60,000 crore by March, 2020. The persistence of fertilizer subsidy arrears is not an unusual phenomenon. It has been there for decades with the only difference that the amount involved has escalated over the years. During the 80s and early 90s,...
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India’s fertiliser policy flawed, policymakers still stuck to the 1970s/80s
These anomalies have cropped up because our policymakers are still stuck to the 1970s/80s thinking, geared towards increasing fertiliser usage The huge arbitrage opportunity thereby created makes the temptation to divert too strong to resist and this can’t be reined in merely by neem coating; no administration, howsoever alert, can monitor a mammoth 600 million bags of urea. The Modi government is in its sixth year, but a coherent policy continues to elude the fertiliser sector. To get a sense of how the central government is approaching the sector, and where the sector is headed, let us look at some crucial pronouncements by the prime minister. First, in the 38th edition of his “Mann ki Baat” radio address to the...
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Fertilizers – disjointed policies, contrary signals
Modi – government is running in its sixth year [five years of the first term and first of Modi 2.0]; we are yet to see a coherent announcement on reforms in the fertilizer sector forget giving a ‘stable’ and ‘predictable’ policy badly needed to give a clear-cut signal to various stakeholders for taking decisions with regard to investment, innovation, imports, logistics and use etc. All that we see is exhortation from the Prime Minister himself made in bits and pieces from the public platform. Let us pick up some of most crucial ones. First, in the 38th edition of “Mann ki Baat” delivered on November 26, 2017, Modi exhorted farmers to take a pledge for reducing consumption of urea [the...
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Why DBT of fertiliser subsidy won’t happen anytime soon
A panel under Niti Aayog member Ramesh Chand has recommended direct benefit transfer [DBT] of fertilizer subsidy with the stated objective to “dis-incentivize farmers from excessive use, ensure delivery to the end-user and reduce outgo on subsidy.” The intent is to launch the scheme in three-four months DBT for fertilizer has been on the radar of policymakers for three decades. In July 1991, vowing to eliminate fertilizer subsidy in three years — under pressure from the International Monetary Fund and World Bank — the government had increased prices of all fertilizers by 40%. However, fearing political backlash, the hike was restricted to 30%, with a proviso that small and marginal farmers will be exempt from it. The Centre gave money...
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