Category: Targeting subsidies

Fertilizer subsidy arrears – shun band-aid solutions

The Cabinet Committee on Economic Affairs (CCEA) has accorded the ex-post facto approval for special banking arrangement [SBA] for Rs 10,000 crore for payment of outstanding claims on account of fertilizer subsidy in the year 2016-17. It also approved that, in future, Department of Fertilizers [DoF] would avail the SBA with concurrence of Department of Expenditure [DoE]. Faced with fertilizer subsidy arrears of around Rs 35,000 crore by end of financial year 2016-17, the union minister for chemicals and fertilizers  Ananth Kumar had in January, 2017 written to the finance minister asking for SBA for Rs 20,000 crore to provide loan to cash starved fertilizer companies at reasonable rates. Against this, Department of Fertilizers [DoF] was allowed to raise a...
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OVERCOMING THE REFORM CHALLENGE

If the Government is serious about making a dent on subsidy, it should dismantle controls and give subsidy directly to target beneficiaries (the poor) under direct benefit transfer. This will pave the way for many players, increase supply, offer more choices and foster competition In the Medium Term Expenditure Framework (MTEF) statement (a statutory requirement under the Fiscal Responsibility and Budget Management Act, 2003) presented by the Modi Government, expenditure on fertiliser subsidy during 2018-19 and 2019-20 was kept unchanged at Rs 70,000 crore. The provision was the same in this year’s budget. Allocation for food subsidy has been increased from Rs 145,000 crore  during 2017-18 to Rs 175,000 crore during 2018-19 and further to Rs 200,000 crore in 2019-20....
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Fertilizer reforms – time for big bang

An official from the department of fertilizers is reported to have said that by putting 45 kg of urea in a bag, it is possible to achieve 10% saving in consumption. His logic is that farmer calculates requirements on per acre basis. He needs 90 kg which can be met with 2 bags of 45 kg each against current practice of using two bags of 50 kg each. Are we to infer that until hitherto, 10% urea was going waste as he was forced to buy 100 kg – against need of 90 kg – and that loss will now be prevented with use of 45 kg bag? How come such an innovative idea did not strike policy makers earlier?...
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Self-sufficiency in fertilizers – building castles in the air

Union Minister for chemicals and fertilizers, Ananth Kumar has announced government’s decision to revive five closed plants of Fertilizer Corporation of India [FCIL] and Hindustan Fertilizer Corporation Limited [HFCL] viz. Talcher [Odisha], Ramagundum [Telengana], Sindri [Jharkhand], Barauni [Bihar] and Gorakhpur [Uttar Pradesh]. To be commissioned by 2020-21, their revival is expected to add 7.5 million tons [mt] of urea capacity. Kumar has also exuded confidence that the decision of the government to make neem coating of urea mandatory [2015] will result in 10% improvement in the efficiency of fertilizer use. Taking urea consumption of about 33 mt annually, this will result in saving of about 3.3 mt. The minister also referred to steps aimed at enticing manufacturers to increase utilization...
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DBT for fertilizers – shun flawed mechanism

Alluding to direct benefit transfer [DBT] of fertilizer subsidy, in budget speech for 2016-17, finance minister, Arun Jaitely had stated :- “We have already introduced DBT in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis for fertilizer in few districts in the country with a view to improving quality of service delivery to the farmers.” As a follow up, DBT of fertilizer subsidy is now in operation on a pilot basis in 11 districts viz. West Godavari, Krishna and Rangareddi [Andhra Pradesh]; Una [Himachal Pradesh]; Hoshangabad [Madhya Pradesh], Pali [Rajasthan], Krishnaganj [Bihar], Karnal and Kurukshetra [Haryana]; Nashik and Raigarh [Maharashtra] From the next kharif season beginning April, 2017, the scheme will be launched in...
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Will DBT work?

The version of DBT being tried in pilot districts is flawed. It will provide no proper assessment of the scheme’s effectiveness. Alluding to the direct benefit transfer (DBT) of fertiliser subsidy, in budget speech for 2016-17, Finance Minister Arun Jaitley had stated: “We have already introduced DBT in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis for fertiliser in a few districts in the country with a view to improving quality of service delivery to the farmers.” The focus on the DBT has its link to a revelation made in Economic Survey (2015-16). It stated that “24% of the fertiliser subsidy is spent on inefficient producers, 41% is diverted to non-agricultural uses and 24%...
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IDEA IS GRAND, BUT WILL IT WORK WELL?

Running a pilot project on DBT for fertiliser by itself does not ensure that the scheme will actually be launched. Moreover, the project is deeply flawed Alluding to direct benefit transfer (DBT) of fertiliser subsidy, in his Budget speech for 2016-17, Union Minister for Finance Arun Jaitley had stated: “We have already introduced DBT in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis, for fertiliser in a few districts in the country, with a view to improving quality of service delivery to the farmers.” The focus on DBT links with a revelation made in the Economic Survey (2015-16). It stated that “24 per cent of the fertiliser subsidy is spent on inefficient producers, 41...
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Fertilizer DBT ‘pilots’ – old wine in new bottle

Even as Modi – government has taken plenty of action on reforming a variety of subsidy schemes viz., LPG, food, kerosene etc during the last 30 months of its stint, fertilizer subsidy has received scant attention. In his budget speech for 2016-17, finance minister, Arun Jaitely stated :- “We have already introduced a direct benefit transfer (DBT) in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis for fertilizer in few districts in the country with a view to improving quality of service delivery to the farmers.” The focus on DBT links up with a startling revelation made in the Economic Survey [2015-16]. It stated that “24% of the fertilizer subsidy is spent on inefficient...
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MAKING DBT FERTILISER A REALITY

Considering the perceptible impact of DBT for fertiliser subsidies on stakeholders, it is imperative that the Government comes out with a roadmap so that the beneficiaries get adequate time to prepare for the transition Speaking at the inaugural session of the ninth Global Agriculture Leadership Summit on September 8, in New Delhi, Union Minister for Chemicals and Fertilisers, Ananth Kumar said that the Government was committed to implement direct benefit transfer (DBT) for fertiliser subsidy to farmers. But he failed to give a time-frame. Drawing a parallel with liquefied petroleum gas where DBT has already been successfully implemented, he opined that things are much more complex in the fertiliser case. He said the Government would take a call on this...
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DBT for fertilizers – where is the ‘road-map’?

Inaugurating the 9th Global Agriculture Leadership Summit on September 8, 2016 in New Delhi, the union minister for chemicals and fertilizers, Ananth Kumar said that the government is committed to implement direct benefit transfer [DBT] of subsidy on fertilizers but avoided giving a time frame. Drawing a parallel with LPG [liquefied petroleum gas] where DBT has already been successfully implemented, he opined that things are much more complex here and the government will take a call on this only after successful conduct of trial runs which are currently under way in certain districts of the country. All that is fine but every stakeholder viz., farmer, manufacturer, importer, distributor/dealer etc has a right to know as to how he/she will be...
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