FERTILIZER SUBSIDY
- October 20, 2020
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Subject: Economy
Context: The Centre is working on a plan to restrict the number of fertiliser bags that individual farmers can buy during any cropping season.
Concept:
- Farmers buy fertilisers at MRPs (maximum retail price) below their normal supply-and-demand-based market rates or what it costs to produce/import them.
- The difference between the retail price and production cost/domestic price is given as subsidy to manufacturers.
Present regime of fertilizer subsidy – Partial DBT (Since April 2018)
- The subsidy goes to fertiliser companies, although its ultimate beneficiary is the farmer who pays MRPs less than the market-determined rates.
- Manufacturers of fertilizers (urea) receive 100% of subsidy after fertiliser is delivered to the farmer, and the latter’s identity viz. Aadhaar is captured on the point of sale (PoS) machine at the dealer’s shop.
- Therefore, the subsidy continues to be routed through manufacturers even though the sale of fertilizer is being verified using Aadhar ecosystem
- The manufacturers sell urea at the maximum retail price (MRP) controlled by the Centre, which is kept at a low level. They also get subsidy reimbursement on unit-specific basis under the new pricing scheme (NPS).
- 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 (based on Nutrient based Subsidy scheme)
Recent proposal:
- At present, the Centre is following a “no denial” policy. Anybody, non-farmers included, can purchase any quantity of fertilisers through the PoS machines. It leads to bulk purchase of urea that is used for non agri purposes.
- Hence , government is considering to put a cap on the maximum amount of fertilisers anybody can buy during kharif/rabi seasons.