Fertilizer Subsidy Current Affairs - 2020

Parliamentary Standing Committee: No Sufficient Checks on genuineness of Fertilizer Subsidy

On March 20, 2020, the Parliamentary Standing Committee that was set up under the leadership of the Lok Sabha Member Kanimozhi Karunanidhi submitted its report. The Committee was set up to check whether genuine farmers are getting fertilizer subsidy.

Highlights

The Report says that until December 2019, 1182.04 lakh metric tonnes of fertilizers have been sold under Direct Benefit Transfer Scheme. Currently, the identity of the buyer or farmer is authenticated through Aadhar-based identification, Kisan Credit Card, biometric or voter ID.

According to the committee, there are chances of misuse of the methodology by retailers. The retailers might collect Aadhaar cards or demand thumb impression for an amount. They are then selling the fertilizers in black market showing false sale.

What is the issue?

Currently, the subsidies are paid to the fertilizer companies based on the receipts of their sales made by the retailers to the beneficiaries. This has created a black market and is hurting farmers badly.

Also, fertilizers subsidies consume 0.5% of GDP which is the second highest after food.

Solution

The GoI in order to curb black marketing of fertilizer introduced Point of Sale machines selling of fertilizers. These machines were directly connected to the central server that captures details of every buyer. Hence, the data collected will help identify the impersonator.

Types of Fertilizers

The three major types of fertilizers used are Urea, Muriate of Potash and Diammonium Phosphate. O all these fertilizers, urea accounts to 86%. Currently, GoI is taking several steps to control the use of urea and replace it with NPK fertilizers.

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.