One of the major objectives of the Direct Benefit Transfer (DBT) scheme for fertilisers was to ensure timely payment of subsidy to companies and clear the backlog, apart from plugging pilferage and leakages in the system.
Senior industry representatives said while it remained to be analysed to what extent pilferage and leakage had been checked, timely payment of subsidies had not materialised so far.
As far as farmers' satisfaction with the new system is concerned, studies are still being conducted, but nothing concrete has emerged.
Under the DBT scheme, the subsidy for each bag of fertiliser sold through a retailer has to be credited into bank account of the company concerned within a week of the transaction being captured in a point of sale (PoS) device through biometric authentication.
This is not only meant to smoothen the process of subsidy disbursal, but also minimise human interface in the system and promote transparency.
However, in reality, companies maintained that this time the scheme had been rarely followed since March 2018, when the system was expanded to cover most parts of the country.
As a result, around Rs 73 billion of fertiliser subsidy, on account of DBT transactions, still remained to be paid as on November 1, this year. Around Rs 162 billion, on account of non-DBT fertiliser subsidy, still remained unpaid.
In total, around Rs 235 billion of subsidies, on account of fertilisers sold, remained to be unpaid as on November 1.
"As still four-five months are left for the financial year to end, we believe that the total backlog of unpaid subsidies would come around Rs 300 billion by March 31, 2019, unless the government decides to release some funds through the supplementary demand for grants," K S Raju, chairman of Fertiliser Association of India (FAI) said.
He said DBT looked impressive on paper, but unless government had substantial amount of money in its coffers, the system would not work in favour of the companies.
The firms recollected that earlier subsidy bills were generated as soon as the stocks moved to the district retailers according to the supply plan. The initial 85-90 per cent payment of subsidy (95 per cent in case of urea) was released as "on account payment" on receipt of fertilisers in the district.
The balance 10-15 per cent (five per cent in case of urea) was released on the confirmation of receipt by retailers on the online fertilizer monitoring system FMS.
This apart, the state governments, too, had to certify the receipt of fertilisers (i.e. the quantity and quality) and upload in the FMS within 30 days and 180 days, respectively.
This process, the companies said, would ensure almost round-the-year payment of subsidy from the government, even while the payment was made only during peak purchase seasons of kharif and rabi, restricted to 6-8 weeks under DBT. This was because the subsidy payout was linked to final sale to the consumers.
"This way, we only get the subsidy payment for a few months in a year, which also blocks our working capital requirement," Raju said.
He said around Rs 30-35 billion was spent on clearing last year's dues on account of fertiliser subsidy against the budgeted Rs 700 billion in 2017-18. This system has been continuing for long.
Meanwhile, India could become self-sufficient in urea production in four-five years, once all the expansion plans of state-run firms come on-stream.
In total, around 7 million tonnes of additional urea production capacity is expected to be created through these plants.
India currently needs around 31 million tonnes of urea, of which 26 million tonnes is produced domestically while the rest is imported.