In this backdrop, let us look at the long-pending reform that was recommended by several committees in the past Successive governments have not initiated meaningful reforms in the fertiliser sector due to the significant gap between the cost of fertilisers and the price paid by farmers. Consider this: Currently, the cost of supplying a 45 kg bag of urea, the most widely used nitrogen fertiliser, is Rs 2650, against only Rs 240 paid by the farmer. In the case of diammonium phosphate, or DAP, the cost of a 50 kg bag is Rs 4000, against Rs 1350 paid by farmers. The excess cost over the price of Rs 2410 in the case of urea and Rs 2650 for DAP is paid...
More
Comments are closed
Category: Targeting subsidies
Administrative measures can’t curb misuse of fertiliser subsidies
Routing the subsidy through manufacturers and keeping the selling price of fertilisers artificially low, makes diversion of subsidised fertilisers profitable for dubious players The availability of fertilisers at an ‘artificially’ low price is very tempting to all stakeholders in the supply chain. (File image) About 41 percent of fertiliser subsidy is diverted to non-agricultural uses including smuggling to neighbouring countries, 24 percent is consumed by larger farmers and another 24 percent is spent on inefficient producers, the Economic Survey 2015-16 noted. That essentially means that just about 11 percent of the subsidy goes to small and medium farmers. The Union government subsidises fertiliser sales to keep input costs low for farmers. Diversion to purposes other than farming is a misuse...
More
Comments are closed
DBT is the way forward for balanced fertiliser use
The flawed subsidy and pricing policy followed by governments for years has led to excessive use of urea and a deterioration in soil health The subsidy is given directly to the farmers even as the manufacturers charge consumers a price that fully covers the cost of supply. For over a decade, Indian agriculture has been grappling with an imbalance in fertiliser use involving excessive use of nitrogen or ‘N’ vis-à-vis phosphate or ‘P’ and potash or ‘K’ even as the present NPK use ratio at 6.7:2.4:1 (against the desired 4:2:1) is tilted in favour of ‘N’. This, in turn, has led to a decline in crop yield, deterioration in soil health and adverse impact on the environment. The imbalance has...
More
Comments are closed
Fertiliser subsidy must go to farmers directly
This is the only way to eliminate diversion, prevent excess use, promote competition, and lower cost The Centre is planning to conduct pilots in a few districts of the country on a modified version of direct benefit transfer (DBT) in fertilisers that would establish some connection between land holding and the nutrient’s consumption. The intent is to monitor consumption, prevent excess usage and chances of misuse. DBT, as the wording implies, has to do with transfer of fertiliser subsidy. Fertiliser subsidy arises because the Centre directs manufacturers/importers to sell fertilisers to farmers at a low maximum retail price (MRP), unrelated to the cost of supply, which is much higher. In the case of urea, the difference is reimbursed to the...
More
Comments are closed
Reining in fertilizer subsidy in India
From an already high of Rs 83,000 crore during 2019-20, the subsidy could cross Rs 200,000 crore during 2022-23. Fertilizer subsidy or payments made to manufacturers or importers to cover the excess of the cost of production/import and distribution over a low maximum retail price (MRP) – they are asked by the Union Government to charge from the farmers -has increased by leaps and bounds during the last three years. From an already high of Rs 83,000 crore during 2019-20, it increased to Rs 138,000 crore during 2020-21, Rs 162,000 crore during 2021-22 and could cross Rs 200,000 crore mark during 2022-23. Is there a way this escalating trend could be reined in? Subsidy payments are made under two broad...
More
Comments are closed
Budget 2022-23: Avoid a debt trap
‘Demand recession’ is inevitable if Government does not reform taxation, subsidy administration, unshackle farmers and ruthlessly tackle corruption The Union Budget for 2022-23 provides for capital expenditure of Rs 750,000 crore which is a jump of over 35 percent from the budget estimate (BE) of Rs 554,000 crore for 2021-22 (revised estimate (RE)for the current year is Rs 604,000 crore which is more or less close to the BE when we exclude Rs 50,000 crore given to Air India Asset Holding Company Limited AIAHCL where the debt of now divested Air India resides). Considering that the BE for current year was 26 percent higher than the RE of Rs 439,000 crore during 2020-21, this sounds impressive. However, when seen in...
More
Comments are closed
Fertiliser DBT stymied by lobbies for years
When a subsidised product is not available in the marketplace, the dubious characters will have nothing to prey upon It is budget time. After two years of splurge, Finance Minister Nirmala Sitharaman has alluded to a return to fiscal consolidation. A major area meriting attention is fertilizer subsidy which jumped from `80,000 crore during 2019-20 to `134,000 crore during 2020-21 and is likely to be `140,000 crore during 2021-22. Fertilizer subsidy arises because the Union Government wants manufacturers/imports to sell fertilizers to farmers at a low maximum retail price, unrelated to the cost of production and import and distribution, which is much higher. In case of urea, it exercises mandatory control on MRP and reimburses the manufacturers for the excess...
More
Comments are closed
Fertilizer DBT – stymied by lobbies
It’s budget time. After two years of splurge, the finance minister, Nirmala Sitharaman has alluded to returning to fiscal consolidation. A major area meriting attention is fertilizer subsidy which jumped from Rs 80,000 crore during 2019-20 to Rs 134,000 crore during 2020-21 and is likely to be Rs 140,000 crore during 2021-22. Fertilizer subsidy arises because the Union Government wants manufacturers/imports to sell fertilizers to farmers at a low maximum retail price (MRP), unrelated to the cost of production/import and distribution, which is much higher. In case of urea, it exercises mandatory control on MRP and reimburses the manufacturers for the excess of cost over it as subsidy on a ‘unit-specific’ basis under the new pricing scheme (NPS). In case...
More
Comments are closed
Fertiliser industry is not yielding results
The Govt should remove control on urea and stop giving subsidy through manufacturers; instead, the Government can give it directly to farmers Inaugurating the revival project —annual production capacity of 1.27-million-ton(MT) neem coated urea — of the Hindustan Urvarakand Rasayan, a public sector joint venture of Coal India Limited, NTPC, Indian Oil Corporation and FCIL — at Gorakhpur on December 7, Prime Minister, Narendra Modi made the following four observations: Despite steep increase in international price of fertilizers during the current year, the Government has ensured that the farmers don’t have to pay more; 100 percent neem coating has helped in reining in diversion of urea to non-agricultural/industrial uses; Gorakhpur a long with four other revival projects currently under implementation...
More
Comments are closed
P&K fertilizers – subsidy conundrum
A major factor fueling resentment among farmers is the spiraling prices of fertilizers which are critical inputs used in the production of agricultural products. The maximum retail price (MRP) of urea – the predominant source of nitrogen or ‘N’ nutrient supply – is controlled by the Centre at a low level un-related to the cost of production and distribution which is higher (the excess amount is reimbursed to the manufacturers via the subsidy on a ‘unit-specific’ basis under the new pricing scheme or NPS in short). This price has remained unchanged (today’s price is the same as in 2002) even as all cost escalations are absorbed by increasing the subsidy. However, the worry is with regard to another category of...
More
Comments are closed