After a five-fold increase in nitrogen subsidy under the nutrient-based subsidy formula for the current kharif season, the Centre has launched a nationwide crackdown to save over 10 lakh tonnes (lt) of agriculture-grade urea that get diverted annually for industrial uses. About ₹6,000 crore subsidy is spent on this.

The government has identified leakages worth ₹100 crore through various covert operations in the last two-and-a-half months.

The Centre provides urea at a highly subsidised rate of ₹266 per bag (of 45 kg) to farmers. It has to bear a subsidy of over ₹2,700 per bag. For current kharif season, the subsidy on nitrogen (N) was hiked to ₹91.96 per kg from ₹18.78/kg last season. A bag of urea contains 46 per cent nitrogen.

Imports lower than demand

It is estimated that the annual requirement of technical-grade urea for industrial usage is around 13-14 lt, out of which only 1.5 lt are produced in the country. The industry imports only 2 lt against the required level of more than 10 lt. Urea is used in making of resin/glue, plywood, crockery, moulding powder, cattlefeed, dairy and industrial mining explosives.

“According to our estimate, about 10 lt of agriculture-grade urea is getting diverted every year. Apart from that, some quantity is also going to neighbouring countries,” an official said, estimating the leakage at about ₹6,000 crore, since the government bears the subsidy of agriculture-grade urea.

Asked how the leakages happen as the government claimed 100 per cent neem coating has been achieved, the official said the coating is removed through some chemical process and then the urea is used for industrial purposes.

Nation-wide crackdown

A nationwide crackdown against erring units has been launched by the Department of Fertilisers, along with States and other various central authorities for which “Fertiliser Flying Squads” have been formed with a special team of dedicated officers. The flying squads are conducting surprise inspections of units involved in diversion, black marketing, hoarding and supply of sub-standard quality of fertilisers.

Though the initial estimate of leakage is ₹100 crore, investigations are still on. This figure may go up further, the official said. States have been asked to take action as fertiliser is an essential commodity, he said.

The department has also launched a crackdown on 38 manufacturing units of mixture fertilisers across eight States. “Samples have been collected for quality analysis and 70 per cent of samples were found sub-standard. Manufacturing licences of 25 erring units were cancelled,” the official said.

GST evasion

Meanwhile, the department has also unearthed GST evasion worth ₹64.43 crore by industrial-grade urea suppliers and shared the information with the GST authority, which has already recovered ₹5.14 crore. “Unaccounted stock of agriculture grade urea of about 25,000 bags worth ₹7.5 crore has been recovered. Six persons have been arrested under the CGST Act, 2017 and remanded to judicial custody. Follow up investigation is under process,” the official said.

India’s annual domestic consumption of urea was 333 lt in 2021-22, down 5 per cent from the previous year. While, about 260 lt were locally produced, about 91 lt were imported. The government’s annual fertiliser subsidy bill is likely to be around ₹2.5 lakh crore during this fiscal because of high international prices.

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