Big fertilizer subsidy reform soon
Government has decided to fast-track the process of payment of fertilizer subsidy to farmers through the Direct Benefit transfer (DBT) system.
The proposed subsidy-post-sale system is opposed to the earlier after receipt-at-district system.
Starting with the coming kharif season, the budgeted Rs 70,000-crore fertilizer subsidy for 2017-18 will be disbursed to companies based on actual sales to farmers, captured through point-of-sale (POS) machines installed at nearly two lakh retail points across the country.
The Current System:
- Under the current system, firms are paid subsidy on receipt of their fertilizer at the railhead point or any approved godown of a district
- Till October 2012, subsidy is provided to companies on dispatch of material from their respective factories
How will Direct transfer of fertilizer subsidy take place:
- Disbursal of subsidy will take place only after the fertilizer is sold to the farmer
- Verification of identity will take place through Aadhar-based biometric authentication, Voter ID or through Kisan Credit Card
- The data will be captured in the POS machine installed at the retailer’s end and connected with a central server
- A pilot scheme is being implemented in 17 districts across the country
Advantages associated with the proposed system:
- It can track actual purchases of the final buyer
- Record transactions at the individual farmer level. Thus, a person buying 200 bags of urea is likely to be a plywood or particle board manufacturer than a farmer
- It will prevent illegal diversion of highly subsidized fertilizer
- Measures like Neem-coating of urea has helped in preventing illegal diversion subsidized fertilizer towards non-agricultural use
Apprehensions related to the scheme
- The preparedness of retailers to accurately record not just details of farmers and quantities purchased but also the data of the company supplying the material
- The fact that fertilizer sales are concentrated over just few months (June-August and October-December) of the year complicates the matter further
- Timely payment of subsidy is another concern expressed by the industry
- If payment of subsidy takes place after actual sale of material to the farmer, it will enhance the working capital cost of firms