Govt plans pilots on new direct benefit transfer model for fertilisers

In a significant step, the Centre is planning to conduct pilots in a few districts of the country on a modified version of the direct benefit transfer (DBT) in fertilisers that would establish some connect between land holding and the nutrient’s consumption.

To conduct the pilots, a few rounds of discussions have been held with a few southern states and a response is awaited, a senior government official said. This version could help in monitoring consumption.

Currently, the version of DBT in fertilisers involves farmers purchasing their fertilisers through point of sale (PoS) devices after undergoing Aadhaar authentication. This ensures that the identity of the person who purchases the fertiliser bags is well established.

However, there is no restriction on the number of bags a farmer can purchase. This sometimes leads to excess usage and chances of misuse.

To curb this, officials said that a system is being thought of where farmers’ details will be fed on the PoS machines, including the land he holds and area, among others. And, as soon as he enters the Aadhaar details, it would show up on the machines as to how many bags of urea, DAP or NKPS he is entitled to, based on details entered.

The state government will feed the farmer details on the PoS machines, which can then be used for this process.

“In the initial stage, we plan to keep the number of bags allowed quite liberal so that there is no discontent,” the official added.

He said a classic DBT in fertilisers — like in case of kerosene or LPG —is not possible or desirable.

This is because the extent of pilferage and diversion towards non-agriculture purposes has come down to a large extent in the last few years. Also, there is the problem of tenant farmers.

“It would not be possible to go for a classical model of DBT in fertilisers as farmers won’t make the high upfront payment and wait for the reimbursements to come. Therefore, something which builds on the existing framework and mechanism is being thought of,” the official said.
 

Diversion and pilferage largely happen in urea due to the massive price differential between cost of production and sale price.

In India, an average 45-kilogram bag of urea is sold to the farmer at around Rs 245 while its cost of production is almost Rs 3,000. The remaining is subsidised by the Centre to keep prices affordable for the farmers.

Similarly, for non-urea fertilisers, the Centre gives some amount of subsidy to keep prices down, though on paper, non-urea fertilisers are decontrolled.

In the classical DBT model, urea farmers first have to pay the market price for a bag of urea while the subsidy will get credited into their bank accounts.

“We have, to a large extent, controlled the pilferage that used to happen due to price differential between India and neighbouring countries like Nepal and Bangladesh. This is also borne by the fact that Nepal is now seeking Indian urea through proper trade channels. The second route of pilferage that used to happen by way of diversion towards industrial grade has also come down considerably due to constant steps,” the official said.

He said out of the 35 million tonnes of urea consumed in the country, around 1.5 million tonnes — if used for industrial needs — goes into making items like melamine. Of the 1.5 million tonnes of industrial urea consumption, roughly around 0.3-0.4 million tonnes is diverted. This is a very small proportion of the annual total consumption.

“Therefore, to say that the classical model of DBT will check diversion and excess subsidy allocation is wrong. 

But some sort of linkage between land record and urea usage is desirable,” the official further said.