The government proposes to limit the amount of fertilisers each farmer can buy during a cropping season. What is the objective of this move, and what will its implications be, including on the subsidy bill?

 

What is fertiliser subsidy?

Subsidy is given by Goverment of India to the P&K fertilizer companies which are therefore able to provide P&K fertilizers to the farmers at a subsidized MRP, which is lower than it would have been. Accordingly, farmers across the country who are procuring fertilizers at MRP, is availing the benefit of subsidy.

·         The MRP of neem-coated urea, for instance, is fixed by the government at Rs 5,922.22 per tonne, whereas its average cost-plus price payable to domestic manufacturers and importers comes to around Rs 17,000 and Rs 23,000 per tonne, respectively. The difference, which varies according to plant-wise production cost and import price, is footed by the Centre as subsidy.

 

·         The MRPs of non-urea fertilisers are decontrolled or fixed by the companies. The Centre, however, pays a flat per-tonne subsidy on these nutrients to ensure they are priced at “reasonable levels”. The per-tonne subsidy is currently Rs 10,231 for di-ammonium phosphate (DAP), Rs 6,070 for muriate of potash (MOP) and Rs 8,380 for the popular ‘10:26:26’ complex fertiliser, with their corresponding average MRPs at Rs 24,000, Rs 17,500 and Rs 23,500 per tonne, respectively.

 

Government has taken several steps to ensure that the farmers get the benefit of subsidy granted to the Fertilizer Companies:

(i) Introduction of DBT platform to monitor in real time the movement, supply, availability of various fertilizers.

(ii) Monitoring the prices of P&K fertilizers so that no manufacturer/distributor reaps undue benefit.

(iii) Provision of substantial budgetary allocation relating to fertilizer subsidy so that the fertilizer companies are able to supply fertilizer in adequate quantity in a timely manner.
(iv) Invoking the provision of the Fertilizer Movement Control Order, 1973 so that adequate supply
of fertilizer is ensured through nooks and corners of the country.

(v) Prevention of diversion of subsidized urea for non-agricultural purposes through sale of fertilizers primarily through authentication based on Aadhar. In absence of Aadhar Card, Kishan Credit Card and Voter Identify Card are accepted for authentication.

 

Recently government proposes to limit the amount of fertilisers each farmer can buy during a cropping season. What is the objective of this move,is

·         At present, the Centre is following a “no denial” policy. Anybody, non-farmers included, can purchase any quantity of fertilisers through the PoS machines. That obviously allows for bulk buying by unintended beneficiaries.

·         The main motive is to curb diversion.

Limitations :