Fertiliser subsidy
GS PAPER III: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.
Context: The Cabinet Committee on Economic Affairs, chaired by Prime Minister has approved the proposal of the Department of Fertilizers for fixation of Nutrient Based Subsidy Rates for P&K Fertilizers for the year 2021-22.
Nutrient Based Subsidy Scheme
- Under the scheme, a fixed amount of subsidy decided on an annual basis is provided on each grade of subsidized Phosphatic and Potassic (P&K) fertilizers, except for Urea, based on the nutrient content present in them.
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, thus, 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.
- From March 2018, 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 has a point-of-sale (PoS) machine linked to the Department of Fertilisers’ e-Urvarak DBT portal.
- Anybody buying subsidised fertilisers is required to furnish his/her Aadhaar unique identity or Kisan Credit Card number.
- Only upon the sale getting registered on the e-Urvarak platform can a company claim subsidy, with these being processed on a weekly basis and payments remitted electronically to its bank account.
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