Chanakya IAS Academy Blog


Big fertilizer subsidy reform soon

Ganga, Yamuna accorded the status of living human entities

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
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