Cash-for-fertiliser trial hit by hurdles

Ram Singh Khullar, a fertiliser seller near Sonepat, is dreading a new business model, as the government tries to replace subsidies in kind, such as fertilisers, with direct cash, Zia Haq reports.

Ram Singh Khullar, a fertiliser seller near Sonepat, is dreading a new business model, as the government tries to replace subsidies in kind, such as fertilisers, with direct cash.

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To spare farmers high prices, the government limits retail fertiliser prices. Producers sell them at below-market rates and recover the cost from the government. This costs the government nearly Rs. 95,000 crore in annual fertiliser subsidies. As part of an ambitious national cash transfer plan, the government aims to eventually pay farmers directly.

The Centre has billed money transfers as a panacea for India’s choked, dead-slow delivery system. But that’s easier said than done, because even test-runs are floundering. A trial in 13 districts missed its January 1 deadline, and then exposed new hurdles including Internet outages, the most critical component for swift payments.

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Khullar now has to buy and sell fertilisers at market price, requiring him to raise his working capital by more than a third. Harnam Singh, a farmer and Khullar's client, is harried too. He often gets crop nutrients on credit. Now, he now has to borrow from private lenders to pay the high rack rates.

Although being overseen by the fertiliser ministry, the agriculture ministry is worried because fertilisers are critical to food security. In a recent internal meeting, it flagged off virtually everything that can go wrong — including delayed payments, cash-strapped dealers and weak internet, among others.