Direct benefits transfer for fertiliser: Scope, problem and challenges

DBT in fertiliser is more about checking leakages and diversions than disbursing cash

A pilot for DBT in fertiliser has been going on since last kharif season. For the 2016-17 rabi season, the government had planned to conduct a pilot in DBT for fertiliser in over 16 districts and based on the response, a formal nationwide launch of DBT in fertiliser would be undertaken.

Though, according to some reports, the Centre feels that a nationwide DBT in fertiliser can be started from the coming kharif season across the country, some industry players say it could be challenging, unless the entire machinery is put in place; else, it would only lead to a delay in their subsidy clearance, which anyway is mostly behind time.

The Centre has budgeted for Rs 70,000 crore as fertiliser subsidy in 2017-18, but industry players say much of this would be spent on clearing past dues, which have mounted to more than Rs 40,000 crore.

DBT in fertiliser is not strictly subsidy transferred into the bank account of farmers. Instead, it is more of an identification process to ensure actual subsidy gets credited into the account of companies for every bag of fertiliser sold.

It is more to check leakages and diversions than to disburse cash.

Officials say the conventional method of DBT has been set aside in case of fertilisers because the difference between the subsidised sale price and the actual market rate is huge, sometimes more than double the current sale price per bag which would have made it difficult for farmers to pay.

That apart, as in many places, land is not in the name of the tiller; it is taken on lease for cultivation. Government officials say it will have been difficult to ensure actual subsidy went through the right person, so a revamped version of DBT is being adopted for fertiliser.

In the new system, unlike LPG or foodgrain, the Centre won’t credit the subsidy in the bank accounts of beneficiaries -- in this case, farmers. Instead, as soon as a farmer purchases a bag of fertiliser, he will have to identify himself through a point of sale device placed with the retailer.

The PoS devices has to be installed by fertiliser companies at their own cost at their retail shops or dealer outlets. So far, over 200,000 PoS machines have been installed, while remaining are also in the process of getting installed.

Aadhaar number or Kisan Credit Cards will be the basis for identification. The farmer will buy fertiliser at a subsidised rate itself and not at the market price, which is the case with most such experiments.

Once he identifies himself through Aadhaar, a recommendation of his soil condition and fertiliser requirement will be generated, which he may or may not follow.

Thereafter, the difference between the market rate and the subsidised amount will be credited into the bank account of the manufacturer. Initially, the subsidy will be paid weekly and then on a real-time basis as and when the system stabilises.

Officials say the decision to rework the traditional DBT structure in the case of fertilisers have been taken because the quantum of subsidy is fairly large in the case of fertilisers.

Sometimes, it is more than double the actual sale price, which would have put farmers in great discomfort if farmers were asked to pay the market rates.

At present, fertiliser companies produce receipts of their sale at each district duly authenticated by company representatives and CAs. After that, the more than 90 per cent of the subsidy is credited within two months.

“The change in conventional DBT manner has been made not only because the quantum of subsidy is large but also because it is difficult to identify actual farmers from those who till someone else's land,” the official explains.

The central government feels that the savings due to better targeting and stopping of pilferage would start flowing in only when DBT is implemented across the country.