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Direct benefit transfer for fertilizers may begin in August

LiveMint logoLiveMint 09-07-2017 Gireesh Chandra Prasad

New Delhi: With pilot projects indicating success, direct benefit transfer (DBT) of fertilizer subsidy will be introduced across the country from next month, a government official aware of the plan said.

Point of sale (PoS) machines which will capture details of the farmer, the retailer and the transaction have been deployed in most of the states, the official said, asking not to be identified. States like Gujarat, Rajasthan, Delhi and Goa have nearly completed the exercise.

“Fertilizer retailers in all states will complete deployment of PoS machines by the end of this month. We are doing dry runs in many places. The scheme will be rolled out in August,” the official said.

Any savings in subsidy outgo — Rs70,000 crore estimated for fertilizers alone in 2017-18—will help finance minister Arun Jaitley balance budget in a year capital expenditure is projected to increase 11% to over Rs3 trillion.

The government received encouraging response on minimizing subsidy misuse in Krishna and Godavari districts of Andhra Pradesh, the official said. Misuse includes excessive use of subsidized fertilizer with little regard for balanced use of plant nutrients and smuggling of the subsidized commodity to neighbouring countries where it is sold at market prices.

“The reduction seen in the sales in fertilizer in these districts could either be because of the efforts taken to promote balanced use of fertilizers or because of the streamlining of the subsidy delivery through PoS machines,” said the official cited above.

ALSO READ: GST rate: Fertilizers to come under 12% tax slab, prices likely to rise

In DBT for cooking gas, customers buy gas cylinders at the market price, and the government deposits the subsidy into the customer’s bank account. However, fertilizers—especially imported ones like potash—can be very costly and farmers may not be able to make heavy up-front payments. Hence, under DBT, farmers will continue to buy subsidized fertilizer from the retailer, and all details of the transaction will be electronically recorded. The government will directly reimburse the fertilizer manufacturer a day or two later. The digital trail will ensure the fertilizer reaches the right person.

Besides, quick subsidy payments on a daily basis is expected to end delays in companies receiving their dues from the government, besides leaving an electronic trail of every transaction with all relevant details. The PoS machines will capture details of the farmer, his Aadhaar number, details of the retailer, the product purchased, the farm land in which the commodity is used, health of the soil, land ownership details if available and the opening and closing stock of every retailer.

“For farmers, there is no change in the system when DBT is rolled out except that the purchase will be recorded in a PoS machine. For retailers too, there is not much change, except that they have to upload data. But if retailers do not perform that obligation, the manufacturer will not get the subsidy. This is the hardship manufacturers will face. However, we welcome the DBT scheme and are doing everything possible to install PoS machines at all retail stores,” a director at a leading fertilizer manufacturer said on condition of anonymity.

Indian Farmers Fertilizer Cooperative Ltd (IFFCO) managing director and chief executive officer U. S. Awasthi said his organization was fully prepared for rolling out DBT on fertilizers in all states.

“Our training programme for retailers are progressing well, “ added Awasthi.

To ensure balanced use of fertilizers, the government initiated the soil health card scheme in 2014, and later mandated 100% neem coating of urea, the most widely used fertilizer in the country, to prevent its diversion. Farmers tend to overuse urea as it is cheaper and highly subsidized, compared with other macronutrients such as phosphorous and potassic fertilizers.

Fertilizers account for 29% of the government’s projected Rs2.4 trillion subsidy outgo in 2017-18. The other two subsidy payments are for food and fuel. With prices of petrol and diesel now fully market-linked, subsidy on oil is limited only to kerosene and cooking gas.

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