Fertilizer Subsidy Current Affairs - 2019

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SBI Ecowrap Report recommends Unconditional Cash Transfer to Farmers

The SBI Ecowrap report recommends the government to opt for the unconditional cash transfer to farmers to alleviate agrarian distress rather than Universal Basic Income (UBI) scheme.

Why does the SBI report recommend unconditional cash transfer?

The report has recommended the unconditional cash transfer based on the following reasons:

  • Currently, it is not feasible to implement Rythu Bandhu Scheme at the national level because the land data is yet to be digitized in several states including Jharkhand, Bihar, Gujarat, and Tamil Nadu.
  • Hence the unconditional cash transfer scheme is a best available option as it will be more equitable (on a per farmer basis) with a meaningful impact and once the problems are ironed out in terms of proper tenancy laws, then it can be made conditional.
  • The report mentions that many countries have found that UBI does not address the structural problems and is at best a solution in interregnum.
  • The report estimates various subsidy benefits the farmers are availing and suggests if a farmer is availing one or all the three modes of subsidy/supports (Crop Insurance, Interest Subsidy and Fertilizer Subsidy) then he/she will receive a minimum of Rs 5,335 to maximum Rs 10,162 per annum as cash support.
  • The report predicts that government would be required to provide cash support in the range of Rs 10,000-12,000 per annum to make it completely cash neutral and the annual cost of such a scheme is Rs 1.2 lakh crore per annum.
  • The challenge of providing cash transfer to tenant transfer would be left unaddressed under this scheme.

The study notes that there have been reports saying that the government is planning to provide direct cash support to the farmers in lieu of various farm level subsidies/support.

CCEA approves continuation of Urea Subsidy Scheme

The Cabinet Committee on Economic Affairs (CCEA) has approved continuation of Urea Subsidy Scheme from 2017 upto 2020 and implementation of Direct Benefit Transfer (DBT) for disbursement of fertilizer subsidy. The proposal in these regards was forwarded by Department of Fertilizers, Ministry of Chemicals and Fertilizers.

Key Facts

The continuation of the urea subsidy scheme will ensure timely payment of subsidy to urea manufacturers resulting in timely availability of urea to farmers at statutory controlled price. Implementation of DBT in Fertilizer Sector will reduce diversion of fertilizers to non-agricultural use and plug leakages.

DBT in Fertilizer Sector

Department of Fertilizers is in process to roll out DBT in fertilizer sector nationwide. DBT will entail 100% payment to fertilizer companies on sale of fertilizers to farmers at subsidized rates. The DBT in fertilizer sector being implemented is slightly different from normal DBT implemented for other schemes. Under it, the subsidy will be released to the fertilizer companies instead of the beneficiaries, after the sale is made by the retailers to the beneficiaries. The subsidy will be released on submission of claims generated in the web-based online Integrated Fertilizer Monitoring System (iFMS) by fertilizer companies.

Urea Subsidy Scheme

Urea Subsidy is part of Central Sector Scheme (CSS) of Department and is wholly financed by Central Government of India through budgetary support. It also includes Imported Urea subsidy which is directed towards import to bridge gap between assessed demand and indigenous production of urea in the country. It also includes freight subsidy for movement of urea across the country.

Background

The use of chemical fertilizers have played pivotal role in making India self-reliant in food grain production and provide very vital input for growth of Indian agriculture. For sustained agricultural growth and to promote balanced nutrient application, urea is made available to farmers at statutorily controlled price.

The fertilizer subsidy mainly is difference between delivered cost of fertilizers at farm gate and MRP payable by farmer. It is given to fertilizer manufacturer/importer by Central Government. At present, there are 31 urea manufacturing units, out of which 28 urea units use Natural Gas as feedstock/fuel and remaining 3 urea units use Naphtha as feedstock.