In a business-as-usual scenario, there won’t be any respite from a high fertiliser subsidy. Things could change if the Modi government plays the hard ball in Budget 2023 by going for measures such as urea decontrol and direct benefit transfer (DBT) or a significant increase in maximum retail price Fertiliser subsidy is payments made to manufacturers or importers to cover the excess of the cost of production/import and distribution. Propelled by the need to return to a fiscal consolidation path, the Union government is keen to rein in major subsidies. It wants to slash fertiliser subsidies from the likely actual of around Rs 2.50 lakh crore during the current fiscal year (FY) to Rs 1.40-1.50 lakh crore during FY2024. Going...
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News & Media
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...
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Is free food welfare or a freebie?
During FY 2021–22, the economy rebounded, with the GDP registering a growth of 8.9% On January 1, 2023, the Union Government terminated the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). Accordingly, in the Union budget 2023-24, it has reduced allocation for food subsidy from Rs 287,000 crore during 2022-23 (RE) to Rs 197,000 crore. Beginning in April 2020, PMGKAY provided 5 kg of rice or wheat per person per month for “free” via the Public Distribution System (PDS), as well as 1 kg of pulses per family per month to around 820 million families. Run for three months initially, the scheme got six extensions till December 31, 2022. In the unprecedented situation triggered by the Covid-19 pandemic of large-scale job and income...
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Budget 2023 targets inclusive growth
The Finance Minister has given a push to growth through a judicious blend of encouraging investment and consumption Guided by the overriding objective of laying the foundation of putting India on a rapid and sustainable growth trajectory, for three years in a row, the Narendra Modi government has presented an investment-led Budget. Most of the budgetary allocations are going into building infrastructure, while the government has taken measures to promote investment by the private sector. The Budget for 2023-24 continues with this overarching strategy. In her maiden Budget for 2019-20, Finance Minister Nirmala Sitharaman had laid a roadmap for catapulting the Indian economy to $5 trillion by 2024-25. In sync with this target, she had projected an investment requirement of...
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Bringing back OPS may be catastrophic
The new pension scheme or NPS has addressed the inequity issue by providing a platform to the private sector Even as the finances of states were beginning to look better as reflected in decline in the ratio of state government debt to GDP from 31.2 per cent during 2021-22 to 29.5 per cent during 2022-23—as per the budgetary estimate (BE) —the political brass in different states have made populist announcements which don’t augur well for the future. One of these relates to the revival of the old pension scheme (OPS). Making a statement in the Lok Sabha, the Minister of State for Finance Bhagwat Kishanrao Karad said, “The state governments of Rajasthan, Chhattisgarh, and Jharkhand have informed the Central government...
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Fertiliser subsidy: Shortcuts won’t work
The initiatives taken by the Government are unlikely to bring down the quantum of fertiliser subsidy Propelled by the need to return to fiscal consolidation path and targeting fiscal deficit as a proportion of GDP at 5.9 per cent for financial year (FY) 2023-24 (against 6.4 per cent for FY 2022-23), the Union government is keen to rein in major subsidies. It wants to slash fertilizer subsidies from the likely actual of around Rs 250,000 crore during the current FY to Rs 140,000–150,000 crore during 2023-24. Does it have measures to deliver? Is it merely banking on a drop in international fertiliser prices? Fertilizer subsidy is payments made to manufacturers or importers to cover the excess of the cost of...
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Stop demonising demonetisation
Demonetisation was a major reform that helped in laying the foundation for inclusive and sustainable growth Delivering a majority 4:1 verdict on January 2, 2023, the Supreme Court (SC) upheld the constitutional validity of the demonetization announced by the prime minister, Narendra Modi on November 8, 2016. But the controversy refuses to die down. Reiterating its stance that the decision was disastrous, the grand old party (GOP) opines that the question of ‘whether the stated objectives of demonetization have been achieved’ was not examined by the SC. Being a policy matter that lies within the exclusive domain of the Union government/executive, its examination by the judiciary was not required; SC’s mandate was to deliver its verdict on the legality of...
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Baby steps will not help rein in fertiliser subsidies
The government should pursue major reforms which can force suppliers to cut costs, stop leakages, and farmers to improve fertiliser efficiency Faced with a steep rise in international fertiliser prices caused by the Ukraine war, the Modi government has implemented two cost-cutting policies: (i) the “One Nation, One Fertilizer” (ON, OF) scheme, under which all fertiliser companies will sell all subsidised fertilisers under a single brand “Bharat”; and (ii) hiring an aggregator like GAIL India Limited to procure the fuel on their behalf or buying from gas exchanges and incentivizing companies The Centre controls the maximum retail price (MRP) of urea at a low level unrelated to the cost of production, which is higher. The excess of cost over the MRP...
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India must tax MNCs for revenues here
Ideally, the source country from where an offshore firm is deriving its income should have sole right to collect tax Over the years, an increasing share of the income generated globally has gone towards boosting the profits. The proportion of corporate profit in global GDP (gross domestic product) went up from 14.5 per cent during 1975 to 16.2 per cent in 2000 and further to 20 per cent during 2019. The growth in profit, in turn, was driven largely by multinational companies (MNCs) – companies which operate in several jurisdictions. Their share in corporate profit increased from four per cent during 1975 to 18 per cent during 2019. Even more disconcerting is the fact that such companies didn’t pay taxes...
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PMGKAY withdrawn but free food stays
Government should seriously ponder over giving subsidy directly to the beneficiary as the current system is defective After much dilly-dallying, the Union Government has cleared the air on the fate of Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). On December 23, 2022, the Cabinet decided to terminate it from January 1, 2023. At the same time, it has decided to provide free ration to about 820 million poor in the country under the National Food Security Act (NFSA) for one year i.e. till December 31, 2023, in a bid “to shield the masses from shocks to the system at a time the economy was recovering in the aftermath of Covid crisis”. Making these announcements, Consumer Affairs, Food and Public Distribution...
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