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Govt starts direct transfer of subsidy to check diversion, smuggling of fertilizers

LiveMint logoLiveMint 06-09-2017 Gireesh Chandra Prasad

New Delhi: With a view to preventing diversion of subsidized fertilizers for industrial use and their smuggling across the border, the government on Monday soft-launched the direct benefits transfer (DBT) scheme for the commodity in the national capital.

The scheme will be scaled up to at least 10 states including Gujarat, Maharashtra and the North-East as well as to the Union territories in September, a government official privy to the development said on condition of anonymity. “By end of December, we intend to extend the scheme to the entire country,” the official added.

Industry leaders said they are ready for a nationwide rollout of the scheme that could help prevent the leakage of subsidies meant for farmers. However, unlike in the case of liquified petroleum gas, subsidy on fertilizers will not be passed on to farmers directly as the latter cannot be forced to shell out large sums upfront for fertilizers and get bank transfers later.

Instead, companies will sell the product at state-set prices and the government will settle the subsidy involved in every individual sale to farmers with the companies within a week of the transaction.

“Nationwide rollout of DBT on fertilizers is not a difficult task. If there is a will, there is a way. We have deployed over 50,000 point-of-sale machines,” said U.S. Awasthi, managing director and chief executive officer of Indian Farmers Fertiliser Cooperative Ltd.

The point-of-sale machines will capture sales data including the identity of the farmer, quantity of purchase, soil health details and land details where possible. Using this data, the government intends to limit diversion of subsidised fertilizers to other sectors such as plywood manufacture.

Any savings in subsidy outgo—Rs70,000 crore estimated for fertilizers alone in 2017-18—will help finance minister Arun Jaitley balance the budget in a year when dividend from the Reserve Bank of India as well as deferred spectrum payment receipts from telecom companies are likely to be lower than expected.

Mint reported on 10 July that the government received an encouraging response on minimizing subsidy misuse in Krishna and Godavari districts of Andhra Pradesh, where pilot projects of direct benefit transfer were rolled out.

However, some industry representatives said they are in talks with the government regarding software and connectivity-related issues that need to be resolved before a nationwide roll out of the scheme.

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