Ripe for reform

Implementation of direct benefit transfer of fertiliser subsidy should not be delayed for too long

By: Editorial | Published:July 10, 2017 12:45 am
fertiliser subsidy, Narendra Modi, Modi government on fertiliser subsidy, farmer protest, Mandsaur farmer protest  The data generated from PoS machine sales would make it possible to both weed out non-farmers and also restrict the subsidy to a maximum of 30-35 bags of all fertilisers per farmer.

The Narendra Modi government has deferred the implementation of a new system of disbursal of fertiliser subsidy — based on actual sales to farmers captured on point-of-sale (PoS) machines installed at retail outlets — to the next rabi season. The official reason for not going ahead in the current kharif season, as earlier planned, has been the lack of availability of the PoS devices — they have been installed in only half of the country’s nearly 2 lakh fertiliser retail points — and technical glitches in their integration with the central server that may have to track over 50 crore transactions, assuming 10 crore farmers making an average five purchases a year.

The fact that these transactions largely happen over a few months — June-August in kharif and October-December in rabi — and there are issues of network connectivity in remote rural areas, no doubt, poses significant challenges. Given the potential disruptions to sales from an imperfect roll-out and, more so, post-Mandsaur, the Modi government clearly did not want to take any chances. But that said, the move to the post-sale fertiliser subsidy payment system cannot brook further delay. Currently, firms are paid subsidy when the fertiliser is received at a railhead point or any approved godown of a district. It always leaves the scope for diversion of a highly-subsidised material.

With the new system, the PoS machine would capture the buyer’s identity based on Aadhaar biometric authentication along with the quantities purchased against every transaction. Somebody buying 200 bags of urea, for instance, is more likely to be a plywood maker using it as a cheap binder. A one-acre farmer wouldn’t require more than 5-6 bags of urea per year. The data generated from PoS machine sales would make it possible to both weed out non-farmers and also restrict the subsidy to a maximum of 30-35 bags of all fertilisers per farmer. This will automatically cover all small and marginal farmers. The subsidy itself should be credited directly into their Aadhaar-seeded bank accounts, rather than paid to companies making or importing the fertilisers.

The one silver lining today is the monsoon, which has been pretty good with average precipitation across India about 2 per cent above normal so far. Most areas — barring Jharkhand, southern Karnataka, Vidarbha, West Bengal and Kerala — have received decent showers. As a result, cumulative kharif sowing area is up 8.9 per cent compared to last year at this time. This is the right time for the Modi government to lift all stockholding limits, along with export and domestic movement restrictions on farm produce. The positive price signals from it, on top of a bumper harvest, will provide a much-needed boost to rural incomes. It will also create the right political environment to reform the current regime of farm input subsidies.

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