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A complicated pricing formula is what the Government has reportedly come up with to persuade fertiliser producers to produce more at their existing factories. The best that can be said about the latest proposal is that, on the surface, there is some internal consistency as it tries to keep fertilisers affordable to farmers even as it limits the subsidy costs to the Government. The proposal which is expected to go for Cabinet approval soon would seem to suggest a distinctio n between the output from existing capacities, that require no further incentives than a fair price to keep them going, and the need for extra incentives to induce investors to set up fresh capacity.

The contradictions surface the moment it stipulates that the scheme will be applicable only to existing producers putting up additional capacity in their current locations (brown-field) and not to new capacities created by existing producers at another location, or new investors coming forward to put up capacities (green-field) on the same terms. After all, if capacities under the latter categories are found profitable enough for someone to put up the needed capital, the denial of concessions would only lead to the Government being dragged to the courts, with a strong likelihood of it being struck down by the latter on the ground that its distinction is arbitrary.

It is time the Government took a new look at the overall policy on promoting fertiliser use. Its current approach is based on the questionable belief that channelling supply through the producers is the best means of delivering affordable, quality fertilisers to farmers. Such a presumption has also meant that the subsidy is targeted at the use of synthetic fertilisers while ignoring the potential of organic fertilisers because the inclusion of such fertilisers would make the logistics of delivering subsidy to the farmers through the producers too complex for the Government to handle. Since producers are at the fulcrum of the arrangement, they prefer standardisation to complexity in operations and there is a tendency to focus on nitrogenous nutrients to the long-term detriment of soil fertility. In contrast, a scheme that provides a direct cash subsidy to all eligible farmers would enable them to buy the fertiliser that best suits their land and crop. Such a scheme can be made to work effectively since information and communication technology can help the Government network with farmers and banking institutions to deliver subsidies directly and seamlessly. A vibrant and competitive market involving a multiplicity of producers of all manner of soil nutrients and farmers backed by effective farm extension services will work much better in achieving the objective of improving farm productivity than the existing producer-based subsidy scheme.

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