Fertiliser subsidy payment linked to retailer receipts

Govt raises urea prices to get vendors into tracking system

The Cabinet Committee on Economic Affairs today approved a proposal to link the release of fertiliser subsidy to manufacturers and marketers with the acknowledgement of receipts from retailers.

The government also raised urea prices by Rs 50 a tonne (Rs 2.5 for a 50-kg bag) to incentivise retailers to give receipts through the Fertiliser Monitoring System (FMS), which is via mobile phones.

The panel also approved a pilot project to track fertiliser sale to farmers in 10 districts by using kisan credit cards, bank account numbers and Aadhaar numbers. The project would be implemented by the end of the year.

SPRAYING IT WIDE

• Rs 50 Per-tonne price increase of urea by the government to incentivise retailers
   
• 10 Districts will be part of a pilot project to track fertiliser sale to farmers
   
• 30% Of subsidised fertilisers, mainly urea, gets diverted to non-agricultural use
   
• 10% Increase in urea prices proposed by the department of fertilisers’, and was sent back by the Cabinet earlier
   
• Rs 5,310 The current price for subsidised urea per tonne

There was some confusion initially when it was reported in a section of the media that the government would directly transfer the subsidy to retailers. These resulted in a sudden spurt in stock prices of some fertiliser companies by over five per cent.

Minister of State for Chemicals and Fertilisers Srikant Jena told Business Standard the subsidy would continue to be given to manufacturers and marketers of fertilisers. The only change was that another level of transparency had been added to the movement of fertilisers, before making payments.

FMS is aimed at plugging the loophole that leads to diversion of fertiliser subsidies for industrial use and smuggling. It is ultimately designed to facilitate direct transfer of subsidy to farmers. Up to 30 per cent of subsidised fertilisers, mainly urea, get diverted to non-agricultural use, Jena said, adding the subsidy would come down indirectly if illegal use was curbed.

Todays’ move adds retailers to the loop of acknowledgement. Through mobile-based applications or via SMS, they’d have to acknowledge the receipt of fertilisers at their shops. This data would be cross-checked with shipment data from companies by the department of fertilisers. Once the department is satisfied, the subsidy would be released to manufacturers.

Currently, a major part of the subsidy (100 per cent for urea, 85 per cent for non-urea subsidised fertilisers) is released as soon as a company reports dispatch of fertiliser. The rest is released after acknowledgement from the state governments that the fertiliser had reached.

Earlier this year, the cabinet sent back a proposal by the department of fertilisers to increase urea prices by 10 per cent. This meant raising urea prices by Rs 531 a tonne. Currently, subsidised urea is sold at Rs 5,310 a tonne. The prices were revised in 2010.