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Buoyed by its landslide win in the recent Uttar Pradesh assembly elections, the Narendra Modi government has decided to fast-track the implementation of the direct benefit transfer (DBT) system for payment of fertiliser subsidy to farmers.
From the coming kharif season, beginning June, the Rs 70,000-crore fertiliser subsidy budgeted for 2017-18 will be disbursed to companies based on actual sales to farmers captured on point-of-sale (POS) machines installed at nearly two lakh retail points across India.
This would be a significant change from the current system, where firms are paid the subsidy on receipt of their fertiliser at the railhead point or any approved godown of a district. Prior to this, till October 2012, they were getting the subsidy on despatch of material from their respective factories.
“From kharif 2017 onwards, we are moving to disbursal of subsidy only after sale to the farmer takes place. The farmer’s identity will be verified through Aadhaar-based biometric authentication, voter ID or Kisan Credit Card. The sale transaction as well as buyer details would be captured in the POS machine installed at the retailer’s end and connected with a central server,” a Department of Fertilisers official told The Indian Express.
The proposed subsidy-post-sale system — as opposed to after receipt-at-district or despatch-from-plant — is already being implemented as a pilot scheme in 17 districts. They include UP Chief Minister Yogi Adityanath’s home district of Gorakhpur; Kishanganj and Begusarai (Bihar); Dhanbad (Jharkhand); Hoshangabad (Madhya Pradesh); Pali (Rajasthan); Nashik and Raigad (Maharashtra); Narmada (Gujarat); Krishna and West Godavari (Andhra Pradesh); Ranga Reddy (Telangana); Tumkur (Karnataka); Thrissur (Kerala); Karnal and Kurukshetra (Haryana); and, Una (Himachal Pradesh).
“We will have a nationwide roll-out of this system from June 1. Fertiliser companies have been given a deadline of May 31 for procurement and installation of POS machines at all the 1.98 lakh-odd registered outlets selling to farmers. All transactions thereafter will have to be done through POS machines in order to be able to claim subsidy,” the official said.
The proposed system’s biggest advantage is that it can track actual purchases by the final buyer. A farmer growing wheat or paddy may apply up to three 50-kg bags of urea, one bag of di-ammonium phosphate (DAP) and half-a-bag of muriate of potash (MOP) per acre. That requirement could be more — say, three bags urea and 1.5 bags each of DAP and MOP per acre — for potato and sugarcane.
But under the new system, it is possible to record transactions at individual farmer-level. If someone is buying 200 bags of urea, that person is more likely to be a plywood or particle board manufacturer than a farmer. Either way, he isn’t deserving of subsidy.
“Neem-coating has already helped check illegal diversion of a highly-subsidised fertiliser towards non-agricultural use. The linking of subsidy payment to data generated at retail sale point leaves virtually no scope for diversion that is always possible from the godown or rail rake point,” the official said. Nor can fertilisers be smuggled from border areas to Bangladesh or Nepal, since there will be no POS machines there for recording sales and claiming subsidy.
The fertiliser industry has cautiously welcomed the proposed reform. “I want this to succeed, as it is an important first step that should culminate in the subsidy being transferred directly to farmers’ bank accounts, which is what DBT is ultimately about”, said Suresh Krishnan, managing director, Zuari Global Ltd, a leading urea and phosphatic fertiliser marketer.
The industry’s main apprehension is on the preparedness of retailers to accurately record not just farmers’ details and quantities purchased, but also the company/unit supplying the material in each case. The fact that fertiliser sales are also concentrated over just few months (June-August and October-December) of the year only complicates matters further. Add to this the possibility of the POS device not working due to network connectivity or signal strength problems, it could be a recipe for chaos during the peak agricultural season.
“We are also concerned over timely subsidy payment. As it is, the industry is owed Rs 40,000 crore of unpaid subsidy bills carried forward each year, entailing an annual interest outgo of Rs 4,000 crore for which there is no reimbursement. If payment of subsidy will now happen only after actual sale of material to the farmer, it will add to our working capital costs,” said Satish Chander, director-general, Fertiliser Association of India.
Under the proposed system, payment of subsidy is to be based on weekly settlement of claims from actual sales data captured on POS machines. “The industry will be happy if it really happens that way. We have supported this scheme, so much so that the entire cost of procuring and installing the two lakh POS devices (about Rs 400 crore) is being borne by us. We only want that it should lead to the implementation of DBT in the true sense of the subsidy going directly to the farmers,” said Chander.