Fertiliser Subsidy: To help farmers afford fertilisers, the government established the Fertiliser Subsidy scheme. The reason behind the government providing subsidies to farmers is to facilitate farmers’ affordability of costly fertilisers.
To further protect farmers from price increases of fertilisers, Finance Minister of India Nirmala Sitharaman informed on 21 May 2022 that an additional subsidy of Rs 1.10 Lakh crore would be provided.
Transferring subsidies to farmers has a variety of challenges, including the possibility that individuals who don’t deserve them may profit from them. The government introduced the Direct Benefit Scheme (DBT) programme in October 2016 after realising the difficulties associated with subsidies.
Following the DBT scheme’s pan-India implementation, 100% subsidies on different P&K fertiliser grades are released to the fertiliser firms based on actual sales made to the beneficiaries by the retailers. Under the fertiliser DBT system, fertiliser firms receive a 100% subsidy on various fertiliser grades depending on actual sales made to the beneficiaries by the retailers.
Nutrient-based subsidy (NBS) prices for phosphatic and potassic fertilisers have been authorised by the Union Cabinet for the Kharif season (from April 1, 2022, to September 30, 2022). The DAP subsidy has been enhanced from 512 per bag in 2020–21 to 2,501 per bag.
Key features of Fertiliser Subsidy:
- Based on Aadhar card verification, every farmer is identified. The fertiliser won’t be sold for more than the going rate on the market. Therefore, the farmers won’t have to pay more.
- The government will provide the corporations with the subsidy money immediately so they may buy fertiliser.
- The farmer is in charge of determining how much and what he or she must purchase.
- The subsidy money for the fertilisers the farmer purchased will be sent to the fertiliser businesses’ bank accounts when the farmer’s Aadhar card has been properly verified.
- Since the producers would receive a 100% subsidy amount following the registered purchase of fertilisers from the farmers, the introduction of this scheme completely digitises the system.
- Additionally, it will guarantee that farm workers buy fertilisers at the appropriate prices.
- The government will also receive documentation of the farmers who received the subsidies.
Objectives of the Fertiliser subsidy
- The Fertiliser Subsidy Scheme’s primary goal is to give Indian farmers more leverage.
- In the past, intermediaries used a split payment scheme to sell fertiliser at prices above those set by the government.
- Farmers were burdened as a result, and the intermediaries received unfair profits.
- With this plan, mediators’ influence on fertiliser prices is to be lessened.
- Additionally, it will guarantee that farm workers buy fertilisers at the appropriate prices.
- The government will also receive documentation of the farmers who received the subsidies.
- Since the producers would receive a 100% subsidy amount following the registered purchase of fertilisers from the farmers, the introduction of this scheme completely digitises the system.
Now let’s try to understand how the Fertiliser subsidy is paid and who gets the ultimate benefit from it
The farmer, who pays MRPs less than the market-determined rates, is the true recipient of the subsidy, even though fertiliser businesses receive it. Until recently, businesses earned payment only after their bagged goods were sent and retrieved at a district’s railhead point or authorised godown. With effect from March 2018, a new system known as direct benefit transfer (DBT) was implemented, under which corporations would only get subsidies after making actual sales to farmers on the part of retailers.
The Department of Fertilisers’ e-Urvarak DBT portal is now connected to each retailer, of which there is more than 2.3 lakh in India.
Anyone purchasing fertilisers on a subsidised basis must provide their Kisan Credit Card number or unique Aadhaar identity.
The government is aware that to increase agricultural production and attract more people to the farming industry, it is crucial to offer fertiliser subsidies to farmers so they can easily access them. India’s agricultural sector, which is the top importer of urea and makes up 15% of the country’s $2.7 trillion economy, is a significant consumer of diammonium phosphate (DAP).
Some fertiliser businesses, like National Fertilisers Limited, Rashtriya Chemicals and Fertilisers Limited, and Chambal Fertilisers and Chemicals Limited, which sell fertilisers below market prices, receive financial assistance from the government. India used 61 million tonnes of fertilisers in the fiscal year 2020 (FY20), and 5 million tonnes more in the subsequent fiscal year (FY21).
Based on the cost of production, the Centre provides fertiliser subsidies. The Maximum Retail Price (MRP) for non-urea fertilisers was determined by the firms. To ensure that the farmers have access to non-urea fertilisers, the Centre provides a per-tonne subsidy on nutrients.
A farmer’s ability to purchase a certain amount of fertiliser bags during any crop season is limited by the Center. The Government is attempting to set a limit on the total number of fertiliser bags that every farmer may purchase during a Rabi or a Kharif season under the subsidy system.
Such measures are taken to reduce diversion at the retail level and sizable purchases by con artists. The Centre determined that for farmers with 20 acres of land, a fair limit of 100 bags of fertiliser would be sufficient.
In India, fertiliser subsidies are not given to farmers who have more than 100 bags. The farmers purchase fertilisers at MRP, which is less than the market prices determined by supply and demand.
In essence, farmers receive a fertiliser subsidy from the difference in the cost they must pay.
Due to their extremely generous subsidies, urea fertilisers are vulnerable to misuse by unintended recipients for purposes other than agriculture. The government’s “no denial” policy is blamed for the gap. Anyone with a PoS device can buy any amount of fertiliser under the programme. These flaws prevent the legitimate and worthy farmers in India from receiving the full advantage of the fertiliser subsidy.
One more flaw in the limiting scheme is that each purchase allows for the purchase of 100 bags. However, the Centre did not specify how frequently the person may use fertilisers.