Direct Benefit Transfer (DBT) in Fertilizers

DBT in fertilizer is a modified payment of subsidy in which the fertilizer companies are paid subsidy only after the retailer has sold the fertilizer to the farmer. The buyer identity is authenticated using a point of sale machine through Aadhaar authentication. An amount of Rs 70,000 crore has been sanctioned annually to distribute fertilizer subsidies. Seven small states and union territories were targeted initially with 11 big states also setting themselves ready for the implementation of the scheme.

Merits

• Reduces leakages due to due to diversions and cross border smuggling.
• The point of sales machine generates a receipt which provides information about the money to be paid by the farmer. This protects the farmers from the overcharging by retailers by providing transparency about the price.
• Reduction of subsidy burden on the exchequer.
• With introduction of the Aadhaar in this area, 97% people have been able to get authentication, transaction receipts have also been received by 85% of the farmers and the grievance redressal mechanism (one of the major issues previously) has been functioning close to satisfaction of the beneficiaries.

Challenges

• Infrastructure issues: Various components like point of sales machines, Aadhaar authentication needs to work in tandem. Lack of quality digital infrastructure will hinder the smooth working of the system.
• Burden on the retailers who need to constantly upload the transactions. This will find fewer acceptances from them due to increased burden.
• Aadhaar authentication issues. Incidents are reported wherein people are facing authentication using Aadhaar. It may lead to exclusion errors.

Future Prospects

• Integrating the sale of fertilizer with the data from soil health cards will provide for better soil health management.
• Reduce the imbalance in the use of fertilizers as the Indian fertilizer usage is heavily tilted towards urea.
• Better data with the government about the fertilizer usage will help in designing of policy interventions.
• It can give a major boost to the Make in India Campaign as subsidized purchase will increase the demand for domestically produced fertilizers. It will decrease imports of fertilizer, especially urea, the import of which is sought to be done away with by 2021.
• The working capital pressure on companies is also likely to reduce with the introduction of the DBT.

With the introduction of regional language in the applications that can be operated from laptops, smartphones and so on, more and more people can be brought within the realm of the DBT. The efficiency is likely to increase further as more authentication systems will be introduced other than the Aadhaar.

Should fertilizer subsidy be directly transferred to farmers?

Direct subsidy to farmers will provide advantages like more transparency, reduced diversion, hence lesser subsidy burden on the government and also there will be greater independence for farmers to decide on the input usage.

But the fertilizer sector of India is facing unique challenges. India is not self sufficient in fertilizer production. It is facing problems like cartelization, inefficient fertilizer units, lack of access etc. Hence the DBT for farmers instead of fertilizer companies may create issues with the availability in the market. Also India has a challenge of absentee farmers which will result in misuse of subsidies. Therefore DBT directly for farmers would be viable only after the issues of fertilizer sector and absentee farmers are addressed.

What is the Difference between DBT for agriculture and DBT for cooking gas?

Although both have been launched under the same scheme, there is a major difference in their disbursement. In case of LPG subsidy, the customer buys the cylinder at the market price. Later the difference in the market price and subsidized price is credited to the bank account of the customer. So, the subsidized amount is routed to the customer.

But in case of fertilizer subsidy, the farmer buys the fertilizer itself at the subsidized rate. The subsidized amount here is routed to the manufacturer’s account and not the farmer’s. This has been done keeping in mind the fact that farmers will usually not be in a position to pay the market price at the time of purchase. The delay in obtaining the soil nutrients due to lack of funds at the required time can cause serious harm to agricultural growth.