The Hindu Business Line : Plan for direct fertiliser subsidy to farmers dropped

The Government has dropped the idea of paying fertiliser subsidy directly to the farmers. The subsidy is now routed through the producing companies. The idea has been dropped as it has been found to be unimplementable, highly-placed sources said.

"It is a very complex issue and disturbing the status quo would involve complete structural overhaul of the industry which is not likely to happen in the foreseeable future," informed sources said.

The sources also pointed out that apart from implementation problems, one of the critical issues involved in giving the subsidy directly to the farmers is that whether it should also involve allowing the producers to determine the prices instead of the current practice of fixing the maximum retail price (MRP).

Current practice

As of now the subsidy is given to the producing companies that assures them a 12 per cent operational return and the subsidy is determined as the difference between their cost plus 12 per cent and the Government determined MRP.

The second problem is that different producers have different costs of production based on their technology and feedstock and this leads to multiplicity of problems.

Practical problems

Then practical implementation problems such as how to assess how much fertiliser a farmer will use and what proof would be acceptable that he has actually purchased that fertiliser. Moreover, the question remains on how to monitor which producer's fertiliser which farmer is buying because based on that his receivable subsidy would have to be calculated. The subsidy for urea, the most widely used fertiliser in India, could vary between Rs 5,000 and above Rs 8,000 per tonne depending on the producer. However, the MRP for all of them are the same.

Distribution woes

The problem of distribution, too, is a gigantic one, sources said. The issues that had been discussed within the Ministry also include whether district administrations would be capable for such distribution. But they are already over burdened, while a new set up would involve huge initial and recurring costs.

"In fact no model had been found that could be followed for paying the farmers directly though most people agree that this would be a better alternative to the present one. Even suggestions to distribute the subsidy through cooperatives was not found inadequate," sources said.

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