Fertiliser Subsidy

What is fertiliser subsidy? Farmers buy fertilisers at MRPs (maximum retail price) below their normal supply-and-demand-based market rates or what it costs to produce/import them. The MRP of neem-coated urea, for instance, is fixed by the government at Rs 5,922.22 per tonne, whereas its average cost-plus price payable to domestic manufacturers and importers comes to around Rs 17,000 and Rs 23,000 per tonne, respectively.

The difference, which varies according to plant-wise production cost and import price, is footed by the Centre as subsidy. The MRPs of non-urea fertilisers are decontrolled or fixed by the companies. The Centre, however, pays a flat per-tonne subsidy on these nutrients to ensure they are priced at “reasonable levels”.

Decontrolled fertilisers, on the other hand , retail way above urea, while they also attract lower subsidy. How is the subsidy paid and who gets it? The subsidy goes to fertiliser companies, although its ultimate beneficiary is the farmer who pays MRPs less than the market-determined rates.

Companies, until recently, were paid after their bagged material had been dispatched and received at a district’s railhead point or approved godown. From March 2018, a new so-called direct benefit transfer (DBT) system was introduced, wherein subsidy payment to the companies would happen only after actual sales to farmers by retailers. Each retailer — there are over 2.3 lakh of them across India — now has a point-of-sale (PoS) machine linked to the Department of Fertilisers’ e-Urvarak DBT portal.

Being super-subsidised, urea is always prone to diversion for non-agricultural use — as a binder by plywood/particle board makers, cheap protein source by animal feed manufacturers or adulterant by milk vendors — apart from being smuggled to Nepal and Bangladesh.

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