The Hindu Business Line : GoM to look into direct subsidy

The feasibility of delivering fertiliser subsidy directly to the farmer and a transition from the current ‘fixed product’ to a ‘nutrient-based’ subsidy regime will be examined by the Group of Ministers at its first meeting on July 9.

The group consists of Mr P. Chidambaram, Union Finance Minister, Mr Sharad Pawar, Union Food and Agriculture Minister, Mr Montek Singh Ahluwalia, Deputy Chairman of Planning Commission, and Mr Ramvilas Paswan, Minister of Chemicals & Fertilisers.

It would focus on these proposals as part of a wider mandate to consider “sustainable use of fertilisers and persistent subsidy and pricing issues,” sources said.

Besides the Ministers concerned, the meeting may be attended by representatives of the industry, including Mr U.S. Awasthi, Managing Director of Indian Farmers Fertiliser Cooperative (Iffco), Mr A. Vellayan, Chairman of Coromandel Fertilisers, Mr H.S. Bawa, Deputy Chairman of Chambal Fertilisers & Chemicals, and Mr R.C. Gupta, Deputy Director-General of the Fertiliser Association of India.

At the meeting, Mr Awasthi is scheduled to make a presentation on Iffco’s proposed radio frequency identification device (RFID)-based system of direct fertiliser subsidy payment.

The industry will also impress upon the need to move into a nutrient-based subsidy regime.

Currently, manufacturers are entitled to claim subsidy reimbursement only on sale of defined products such as urea, diammonium phosphate (DAP), muriate of potash (MoP) and various complexes.

The subsidy on urea, for instance, is about Rs 7,170 per tonne (average retention price of Rs 12,000 minus maximum retail price of Rs 4,830).

Since urea contains 46 per cent nitrogen, the subsidy per tonne of nutrient works out to Rs 156 per tonne.

On the other hand, DAP (18 per cent nitrogen and 46 per cent phosphorus) gets a subsidy of roughly Rs 7,500 per tonne.

Despite higher nutritive content, the per tonne nutrient subsidy on DAP comes to only Rs 117.

Similarly, there are many complex fertilisers where the nutrient subsidy per tonne is below Rs 60.

“The current system forces farmers to consume nitrogen only through urea, just as it discourages companies from product innovations such as replacing some nitrogen with sulphur, zinc, iron and other micronutrients,” the sources said.

“Shifting to a nutrient-based subsidy system will enable manufacturers to offer products suited to different soil types.”

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