Ahead of the DBT roll-out next January, the government is more than doubling the dealers’ commission on urea to win their support for its implementation but would be taking on the extra burden jointly with fertiliser makers to so as not to further aggravate the farmers. Sources said fertiliser minister Ananth Kumar has approved a uniform dealer margin of Rs 400 per tonne for both private and cooperative traders instead of the current margin of Rs 180 for private traders and Rs 200 for cooperatives. The dealer margin was last raised in June 1999. The enhanced margin — amounting to an additional burden of Rs 703.3 crore per annum — would be in addition to Rs 50 per tonne incentive paid to all retailers for acknowledging the receipt and reporting the stock of fertilisers.
“The retailer is a key player in the implementation of the DBT (Direct Benefit Transfer)… The increase in dealers’ margin appears to be justified considering that soon DBT would be applied throughout the country,” says a government proposal. Under the proposed DBT scheme for fertilisers, subsidy will be given directly to its producers after sale is registered by retailers on authenticating fingerprints of farmers on the point of sale (PoS) machines. It is expected to plug leakages and help bring in savings in the subsidy bill of up to 20 per cent. According to the proposal, the extra Rs 220 per tonne margin would be shared between the government and the urea manufacturers.
While the national exchequer would contribute Rs 113 per tonne, urea producers would have to forgo Rs 107 per tonne as the incentive given to manufacturers for neem coating the fertilizer would be brought down to Rs 161 per tonne (three percent of retail price) from the existing Rs 268 per tonne (five percent). This would entail an extra subsidy pay out of Rs 361.24 crore by the central government with manufacturers forgoing Rs 342.06 crore out of neem coating incentive. In the event that the entire burden was to be passed on to the farmers, the retail price would have increased by Rs 11 per bag of urea.
However, the proposal leaves open the option of charging the extra commission from farmers after three years. “It would be appropriate to consider to collect this additional amount from the farmers once the DBT project is fully implemented after three years (sic),” says the proposal. The Fertiliser Association of India had demanded that the margin be raised to Rs 500 per tonne as the retailers had been loaded with additional duties and responsibilities from time to time.