The Cabinet Committee on Economic Affairs (CCEA) has recently approved subsidy for urea to be produced by Talcher Fertilizers (TFL) – a joint venture of 4 public sector undertakings (PSUs) viz. Coal India Limited (CIL), GAIL (India), Rashtriya Chemicals and Fertilizers (RCF) and Fertilizer Corporation of India (FCI). The TFL is setting up the urea plant with installed capacity of 1.27 million ton per annum at Talcher (Odisha) at an estimated investment of Rs 13,277 crore and is expected to be commissioned by September 2023. The project is based on use of coal gasification technology. According to the union commerce minister, Piyush Goal, the CCEA has given its approval for “a specific subsidy to promote this innovative technology for the...
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Category: Pricing policies & subsidies
Union Budget FY22 misses the chance to reform fertiliser subsidy
The fertiliser subsidy allocation for FY22 signals there will be no reform this fiscal; deficit targets show this is unlikely in the next five years too The subsidy can be restricted only to farmers having less than two hectares. Under the “Stimulus – III” unveiled on November 12, 2020, the Union finance minister, Nirmala Sitharaman, made an unprecedented announcement to release an additional Rs 65,000 crore towards fertilisers subsidy over and above Rs 71,000 crore allocated in the Budget for FY21. She has followed it up by providing a total of about Rs 134,000 crore in the revised estimate (RE). This should be enough to pay for all subsidy dues, including carry forward from FY20. For FY22, she has allocated...
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Fertiliser DBT an illusion
Despite tall claims made by the UPA and the NDA dispensations since 2012, a gradual transition to direct cash or benefit transfer of subsidy to the farmers has not been done The additional provision of Rs 65,000 crore towards fertiliser subsidy (over and above the Rs 71,000 crore allocated in the Budget for 2020-21), that was announced by the Finance Minister under “Stimulus- III” on November 12, will help in clearing all pending dues to the industry. This has led the latter to believe that this is a precursor to a gradual transition to direct cash or benefit transfer (DBT) of subsidy to the farmers. This is illusory, as despite tall claims made by the UPA and the NDA dispensations...
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Fertilizer DBT – miles away
Under the “Stimulus – III” unveiled on November 12, 2020, the union finance minister, Nirmala Sitharaman made an unprecedented announcement of releasing an additional Rs 65,000 crore towards fertilizers subsidy over and above Rs 71,000 crore allocated in the budget for 2020-21. For an industry used to not getting thousands of crores in subsidy dues year-after-year for several decades in the past, this has come as a big bonanza in as much as the amount will help in clearing almost all of their pending dues. But, the Fertilizer Association of India (FAI) – an umbrella organization of fertilizer manufacturers – is reading a lot more into this decision. It is seeing this as a precursor to structural reforms in this...
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Urea imbroglio: Govt must deal with policy flaw
For decades, successive governments have grappled with large-scale diversion, hoarding and black marketing of urea – a widely used fertilizer that constitutes nearly half of India’s total fertilizer consumption. The scale of diversion could be as high as 30%. Taking annual subsidy on urea to be about Rs 50,000–55,000 crore, this would mean that Rs 15,000–16,500 crore of taxpayers’ money is being guzzled by dubious operators. During the last five years or so, the Narendra Modi government has taken several steps to address it. Let us see how these have fared and assess what needs to be done to make a dent. At the outset, let us capture a few basics about the pricing and subsidy policy. To make urea...
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Urea imbroglio – deal with policy flaw
For decades, successive governments have grappled with large-scale diversion, hoarding and black marketing of urea – a widely used fertilizer that constitutes nearly half of India’s total fertilizer consumption. According to an estimate, the scale of diversion and black marketing could be as high as 30%. Taking annual subsidy on urea to be about Rs 45,000 – 50,000 crore, this would mean that Rs 13,500 – 15,000 crore of tax payers’ money is being guzzled by dubious operators in the urea supply chain. For long, this problem was swept under the carpet until such time, prime minister Narendra Modi brought it to the centre-stage within an year of his assuming office in May 2014. During the last 5 years or so, his...
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Fertile for Reform: Rational use of urea — Chasing a mirage?
The govt must free up urea pricing and opt for direct transfer of fertiliser subsidies to farmers; no other steps to curb urea misuse will work Second, the need for a comprehensive action plan to increase the MRP of urea was recognized by the Dr GVK Rao committee on Consumer Price of Fertilizers (1987). Over the last five years, the Narendra Modi-led government has made several efforts to tackle diversion, hoarding, black marketing and excessive use of urea—a widely-used fertiliser that accounts for nearly half of India’s total fertiliser consumption. These include (i) mandatorily requiring all manufacturers/ importers to do neem-coating of urea supplies (2015); (ii) making disbursal of subsidy to manufacturers conditional upon actual sales to farmers and sales getting...
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Curbing urea use by half
On December 5, 2017, in his Mann Ki Baat radio address, the Prime Minister said, “Can our farmers take a pledge to reduce urea use by half by 2022? If, they promise to use less urea in agriculture, the fertility of the land will increase and the lives of farmers will start improving.” For this, Modi had in mind a time frame of 5 years Currently, there is excessive use of urea — a dominant source of ‘N’ vis-à-vis complex fertilizers such as diammonium phosphate (DAP) the main source of ‘P’ and muriate of potash (MOP), the main source of ‘K’. This has led to an increasing imbalance in the NPK use ratio. On an all-India basis, currently this ratio...
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Deregulate pricing: How not to curb urea blackmarketing
Instead of ending urea price control and the fertiliser subsidy—replacing it with DBT for farmers—the govt continues to choose zero-impact administrative measures The government must recognise this flaw in the existing policy, decontrol urea and introduce DBT. In a bid to tackle diversion, hoarding and blackmarketing of urea (a widely used fertiliser that constitutes nearly half of India’s total fertiliser 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, addressed to state chief secretaries, the secretary, ministry of chemicals and fertilisers, Chhabilendra Roul, has sought their opinions on ‘how many such transactions should be allowed per month to each purchaser’. He has...
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Urea black marketing – how not to curb
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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