Fertiliser Subsidy Reforms | RSTV

Government of India has decided to fast track the implementation of the Direct Benefit Transfer system for payment of fertiliser subsidy to farmers. From the upcoming Kharif season beginning from June, Rs 70,000 crore fertiliser subsidy (budgeted for 2017-18) will be distributed to companies based on the actual sales to farmers taken on point of sale machines installed at nearly 2 lakh retail points throughout India. This would be a substantial change from the present system in which the firms are paid subsidy on the fertiliser receipt at the terminus point or any approved godown of the district. Until October 2012, the companies were getting the subsidy on the dispatch of material from their respective factories. 

Fertiliser Subsidy | Why reform?

  • Currently, it has not been calculated that how much fertiliser subsidy each farmer will actually require due to which the it cannot be directly allocated to the farmers. Government is trying to control the leakage of the subsidy which occurs because the sale does not always happen to the farmer as it is done to washing powder, plywood manufacturers or other manufacturing units who use urea as a by-product.
  • During demonetisation, the government specifically asked the fertilizer companies to create ‘Point of Sales’ because they were arguing that fertilizers had to be disbursed which was a challenge at that point of time. Thus, the aim is to take the digital route to transactions between the farmer and the fertilizer company.
  • It will also allow them to possibly track where the consumption is happening. There were reports ofleakage to neighbouring countries like Bangladesh and Nepal as the sale happens in India but the product is transferred to these countries. If few farmers are buying the fertilizers in surplus, that can also be checked. It should be noted that the largest consumers of fertilizers in India are Punjab and Uttar Pradesh.

Fertiliser Subsidy | Issues

  • Government is not promoting ecological farming in a right manner as it is concerned with only three chemicals- NPK (nitrogen, phosphorus and potassium), despite the fact that plants require at least 17 elements for their growth.
  • Although Government proclaims to promote organic farming, subsidy is being given to chemical fertilizers where there is huge discrepancy in the usage. We all know that the ratio of NPK usage should be 4:2:1, but in Punjab, this ratio is 61:19:1. Urea is cheap (in terms of price) in market so the farmers use it more often which creates imbalance and affects the yield which either goes down or becomesTherefore, the whole system of subsidy should look into overall benefits to agriculture.
  • Over-usage of fertilizer is a bigger issue than the fertiliser subsidy itself. It should be noted that in 1950, with the use of less NPK, the yield was more as compared to today’s productivity. Today, with the use of more NPK, lesser yield is being produced. Hence, there is a need to improve the organic content of the soil through organic farming or compost techniques.
  • A serious issue at hand is that the Government is selling compost at the same rate as of urea which would not push the farmers towards organic farming. It is essential that farmers should produce fertilizers in their fields through organic techniques. A cropping pattern should be followed to promote organic farming.
  • Even by efficiently subsidising fertiliser usage, we are not handling the issue at hand which is a fact that these subsidies will only help fertilizer companies to sustain their business. In the long run, farmer’s business will be affected badly because the input costs will continuously increase with outputs inversely proportional to it. Moreover, the end product is also unsafe for consumption. We should remember that instead of giving subsidies on chemicals, it is essential to incentivise those farmers who are practicing organic farming. If the subsidy is linked to productivity, it will remove fertilizer companies from the game. It is doubtful, if the corporates who rely on agri-business would welcome it if the Government tries to make such a move.

Fertiliser Subsidy | Way forward

  • State Governments and Central Government should work in tandem to encourage farmers to adopt ecological farming techniques, the momentum of which should be created through robust policies.
  • In western UP and Punjab, the farmers should be moved away from wheat and rice because the ground water has depleted to an alarming level.
  • Farmers need to be educated and taught to alter their cropping pattern and move to multiple cropping methods so as to reduce both their input costs and optimum utilisation of resources.

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