The Hindu Business Line : Direct targeting is the way to go

It would be very unfortunate if the Government were to give up without a fair trial the idea of reaching fertiliser subsidy directly to farmers, instead of the current practice of routing it through manufacturers which sell the nutrients at a concessional price. The subsidy for the current year works out to about Rs 1,500 for each of the 12 crore farmers in the country. In a milieu where caution is the watchword on issues of development administration, there is clearly a policy bias in favour of the status quo. More so, if the Government has to also reckon with the prospect of opposition from the fertiliser industry. In the new arrangement, the industry would have to give up the luxury of operating in an environment of assured prices and markets in favour of a competitive and, by implication, an uncertain business environment.

There have been mainly three objections to targeting the fertiliser subsidy at farmers directly. One, the problem of identifying the farmers. This should not be major issue as the Kisan Credit Card (KCC) scheme has progressed to cover a vast section of the farming community. The process has to be accelerated to rope in those yet to be brought under the KCC ambit. Two, that it is difficult to estimate in advance the price of fertiliser to arrive at the monetary value of a normative estimate of consumption. Any under-estimation, the argument goes, would result in reduced entitlement for the farmer and consequently a reduction in fertiliser use with all its implications for food production. On the other hand, any over-estimation results in a windfall gains to the farmer. But price volatility need not be a stumbling block. The entitlement can be provided first as a crop loan and then compensated at the end of the season after taking into account the actual market prices of fertilisers used. Lastly, the argument that the entitlement could be diverted for non-farm purposes too does not hold water. The nation possesses a vast rural banking network that administers crop loans — a system of financing a farmer's working capital needs. Integrating fertiliser subsidy payments to retail transactions of purchase of fertiliser by the farmers should address the problem of misuse.

No doubt, there will be some loose ends in the course of administering a radically new system of securing access for the farmers to fertiliser at an affordable price. For instance, extensive though the KCC coverage is there are still many who are outside its scope and whose claims under the new scheme cannot be ignored. But the local administration should be capable of handling these issues. It is worth bearing in mind that the present system for all its history of extended usage cannot be termed as entirely flawless.

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