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Govt gives nod for extension of urea subsidy till 2020

Urea subsidy is projected to be Rs 45,000 crore for the 2018-19 fiscal, as against Rs 42,748 crore for this year.

business Updated: Mar 15, 2018 08:48 IST
Gireesh Chandra Prasad
Gireesh Chandra Prasad
Livemint, New Delhi
CCEA,direct benefit transfer,Urea
A farmer casts urea on her mustard field in Allahabad.(REUTERS File Photo)

The government on Tuesday decided to implement direct benefit transfer (DBT) for fertilizer subsidy payments across India, seeking to prevent diversion of fertilizers for commercial use and generate data on the usage of the nutrients to help farmers.

The department of fertilizers has already rolled out the programme in most states, data from which shows that transaction time and alleged instances of overcharging by retailers have come down. Also, offtake has moderated, suggesting that overuse of subsidized fertilisers and their diversion for industrial use have declined. As a result, the Union government could limit the fertilizer subsidy for 2017-18 to Rs64,999 crore in the revised budget estimate, down more than 7% from the initial estimate made at the beginning of the fiscal year.

The DBT model for fertilizers, however, is slightly different from that for others such as cooking gas, in which the ultimate consumer gets the entitlement in their bank account. That is because farmers cannot be forced to pay large amounts upfront on fertilizers and wait for reimbursement.

“DBT would entail 100% payment to fertilizer companies on sale of fertilizers to farmers at subsidized rates,” said the official statement. At the time of the sale, details of the buyer, the quantity, Aadhaar number, land records wherever available and soil health will be captured using a point-of-sale machine. The subsidy amount will be settled in a few days with the manufacturer, which will end the precedence of subsidy in the fourth quarter spilling over to the next fiscal.

The cabinet also approved continuation of the urea subsidy scheme for three years till 2020 at an estimated cost of Rs1.64 trillion. There will be no urea price hike till 2020, said the official statement.

The subsidy for locally produced and imported urea is part of the annual fertilizer subsidy outgo, which also covers similar spending on phosphatic and potash fertilizers. For FY19, the government has allocated Rs70,090 crore as total fertilizer subsidy.

Direct transfer of entitlements is now adopted in a large number of government schemes to reduce delays, remove fake beneficiaries and ensure better targeting of subsidy.

First Published: Mar 14, 2018 22:53 IST