Fertiliser subsidy transfer for farmers by October

Ministry utilising data of Kisan Credit cards to compile land holding figures.

The fertiliser ministry has set a target of three months to roll out the direct subsidy transfer to farmers on a national scale. It is utilising the data of Kisan credit cards and cooperative banks to compile the figures on land holdings.

“The country is estimated to have 110 million farm holdings. We are collecting the data from banks and cooperatives about the holdings. We are also using the Kisan Credit Card network to compile our database. We have been working on it for the last six-seven months, and by October we should be able to roll out the new scheme,” said Fertliser Secretary Atul Chaturvedi. This is a zero-cost scheme and would only use the existing infrastructure and not add anything.

The subsidy, to be calculated on the basis of a farmer’s land holding, would be directly transferred to his bank account. In regions where farmers may not have bank facilities, the government would work out some alternative arrangement, he said.

The cash subsidy is part of a policy decision to move from the existing product pricing regime to a nutrient-based subsidy regime, as announced in the 2009-10 Budget. “Currently, we have a price-based subsidy programme where the price is fixed but subsidy keeps on fluctuating. On adopting the nutrient-based subsidy formula, the subsidy would be fixed while the price of fertilisers would be adjusted to the market. If there is an increase in price, it would be passed on to the farmer and vice-versa. You cannot have a nutrient-based subsidy and a fixed price,” he added.

The nutrient-based subsidy formula is expected to promote a balanced use of fertilisers. Subsidy will be given on the actual nitrogen, phosphorous and potassic content of different fertilisers rather than a blanket subsidy.

At present, prices of various fertilisers are fixed and the manufacturing units have to sell at that price. The losses, incurred by them on account of higher raw material cost, is reimbursed by the government as subsidy. Chaturvedi hinted that the move might lead to some increase in prices but said the increase could be calculated once the subsidy was fixed.

This will lead to decontrol of prices and attract fresh investment in a sector which has seen no investment in the last 10 years. “There are companies which want to invest in this sector once it is decontrolled. There is a growing demand for fertilisers and now gas is also available. There is no reason why investment should not flow in,” Chaturvedi added.

The industry is also upbeat on the prospect of a decontrol. Since fertiliser prices are coming down, this is the best time to decontrol prices. It would help the industry, said R S Nanda, director and chief operating officer, Nagarjuna Fertilisers and Chemicals.