FERTILISERS SUBSIDY
1. Context
The Centre is working on a plan to restrict the number of fertilizer bags that individual farmers can buy during any cropping season.
2. Fertilizer subsidy
- Fertiliser subsidy is a government policy wherein farmers purchase fertilizers at prices below their market rates, aimed at promoting agriculture and ensuring affordable inputs for farmers.
- Farmers buy fertilizers at a maximum retail price (MRP) set below the market rates or production/import costs. The government covers the difference between MRP and actual costs as a subsidy.
- Neem-coated urea's MRP is set by the government at a lower rate (e.g., Rs 5,922.22 per tonne). The Centre subsidizes the difference between MRP and production/import costs, which can be significantly higher (e.g., Rs 17,000 - Rs 23,000 per tonne).
- MRPs of non-urea fertilizers are market-driven or set by companies. The government offers a flat per-tonne subsidy to ensure reasonable pricing. For instance, DAP receives a subsidy of Rs 10,231 with an average MRP of Rs 24,000 per tonne.
- Non-urea fertilizers retail at higher prices compared to urea due to lower subsidies. However, the per-tonne subsidy aims to balance costs for farmers.
- Fertiliser subsidy intends to support agriculture, enhance crop productivity, and maintain affordable fertilizer access for farmers.
3. Fertiliser Subsidy and DBT implementation
- Fertiliser subsidy primarily benefits farmers who pay less than market rates. However, companies are the recipients of this subsidy.
- Under the previous system, companies received subsidies after their fertilizers reached district railheads or approved storage points.
- Starting from March 2018, a Direct Benefit Transfer (DBT) system was adopted. Subsidy payments to companies are now linked to actual sales to farmers through retailers.
- Retailers across India (over 2.3 lahks) are equipped with PoS machines connected to the Department of Fertilisers' e-Urvarak DBT portal.
- Purchasers of subsidized fertilizers need to provide their Aadhaar unique identity or Kisan Credit Card number. Details such as fertilizer quantities, buyer's name, and biometric authentication are captured on the PoS device.
- Companies can claim subsidies only after the sale is registered on the e-Urvarak platform. These claims are processed weekly, and payments are electronically transferred to the company's bank account.
- The DBT implementation ensures more accurate targeting of subsidies, reduces leakages, and enhances transparency in the distribution of fertilizer subsidies.
4. Purpose of New Payment System
- Curbing Diversion: The introduction of the new payment system, the Direct Benefit Transfer (DBT), aims to address the diversion of subsidized fertilizers. Urea, being heavily subsidized, is particularly susceptible to misuse for non-agricultural purposes.
- Leakage Reduction: Under the earlier system, leakage occurred from dispatch to retailer, increasing the potential for misuse. DBT minimizes pilferage as subsidy payments are linked to sales through Point-of-Sale (PoS) machines with biometric authentication.
5. Proposed Next Step
- Caps on Purchases: To prevent unintended beneficiaries and bulk buying, discussions are ongoing about imposing limits on the total number of subsidized fertilizer bags an individual can purchase during a cropping season (kharif or rabi).
- Reasonable Cap: A suggested cap is around 100 bags per individual, covering the seasonal requirements of an average-sized farmer. Excess bags could be purchased at unsubsidized rates.
6. Actual Subsidy Benefits to Farmers
- Fertiliser Subsidy Calculation: For three bags of urea, one bag of DAP, and half a bag of MOP per acre, the subsidy is calculated based on existing MRPs. Subsidy values for these fertilizers sum up to approximately Rs 2,418.3 per acre.
- Taxation Impact: Farmers also bear taxes on other inputs, such as diesel, and GST on various agricultural inputs. A significant portion of the subsidized amount is recovered through taxes, including diesel and input taxes like GST.
- Input Tax Credits: Unlike other businesses, farmers cannot claim input tax credits on their agricultural sales due to the absence of GST on farm produce.
7. What is Di-ammonium phosphate (DAP)?
Di-ammonium phosphate (DAP) is a widely used and important fertilizer in modern agriculture. It is a chemical compound that contains nitrogen and phosphorus, two essential nutrients crucial for plant growth and development. DAP is valued for its role in enhancing crop productivity and improving soil fertility.
- Nutrient Composition: DAP is composed of two key nutrients – nitrogen and phosphorus. Nitrogen supports leafy growth and overall plant health, while phosphorus promotes root development, flowering, and fruiting.
- Water Solubility: DAP is highly water-soluble, making it readily available for plant uptake. This solubility ensures efficient nutrient absorption by plant roots.
- Versatility: DAP is suitable for various crops and soil types, making it a versatile choice for farmers cultivating different types of plants.
- Agronomic Impact: The balanced nitrogen-phosphorus ratio in DAP helps in optimal plant growth, early maturity, and increased yield potential. It is particularly beneficial for crops with high phosphorus demands, such as cereals, oilseeds, and vegetables.
Application and Use
- DAP is typically applied to the soil before or during planting, providing plants with essential nutrients right from the early stages of growth.
- It can be used as a basal or starter fertilizer, ensuring that young plants receive adequate nutrients for healthy establishment.
- Farmers often incorporate DAP into the soil or place it in close proximity to the seeds during planting. This proximity allows developing roots to access the nutrients efficiently, leading to improved crop growth.
8. Use of Nitrogen (N), Phosphorous (P), and Potassium (K)
Nitrogen (N)
- Function: Nitrogen is essential for the formation of proteins, enzymes, and chlorophyll – all of which are vital for plant growth and photosynthesis.
- Impact: Adequate nitrogen promotes lush foliage, leaf expansion, and vibrant green coloration. It enhances vegetative growth, leading to healthy stems and leaves.
- Crop Use: Nitrogen is particularly important for crops like leafy vegetables, grains, and grasses. It contributes to high yields and quality produce.
Phosphorus (P)
- Function: Phosphorus is integral to energy transfer within plants and aids in root development, flowering, and fruiting. It is also involved in cell division and genetic material.
- Impact: Adequate phosphorus supports robust root systems, early plant establishment, and the production of flowers and fruits. It contributes to overall plant vigor.
- Crop Use: Phosphorus is beneficial for crops like fruits, vegetables, and root crops, which require strong root systems and reproductive structures.
Potassium (K)
- Function: Potassium regulates water movement, nutrient uptake, and enzyme activation within plants. It enhances disease resistance and stress tolerance.
- Impact: Adequate potassium contributes to improved water use efficiency, stronger stalks, and disease resistance. It helps plants cope with adverse conditions.
- Crop Use: Potassium is essential for a wide range of crops, including fruits, vegetables, and grains, where it enhances yield, quality, and resilience.
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For Prelims: Fertiliser Subsidy, Di-ammonium phosphate (DAP), Nitrogen (N), Phosphorous (P), and Potassium (K), Maximum retail price (MRP), Direct Benefit Transfer (DBT), and e-Urvarak DBT portal.
For Mains: 1. Examine the Significance and Challenges of Fertiliser Subsidy in Indian Agriculture. Discuss the role of fertilizer subsidy in enhancing agricultural productivity and supporting farmers.
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| Previous year Question
1. With reference to chemical fertilizers in India, consider the following statements: (UPSC 2020)
1. At present, the retail price of chemical fertilizers is market-driven and not administered by the Government.
2. Ammonia, which is an input of urea, is produced from natural gas.
3. Sulphur, which is a raw material for phosphoric acid fertilizer, is a by-product of oil refineries.
Which of the statements given above is/are correct?
A. 1 only
B. 2 and 3 only
C. 2 only
D. 1, 2 and 3
Answer: B
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Source: The Indian Express
