Examine the problems associated with the current fertilizers subsidy regime in India, discuss the need for reforms.
The fertiliser subsidy accounts for the third highest subsidy burden on government expenditure.
Issues of current subsidy regime:
- Economic-
- High fiscal burden.
- State administered prices of urea caused one of the highest prices internationally.
- Regulated distributors, sellers causing inefficiency in price discovery.
- Administrative-
- Pilferage and leakages causing huge losses.
- Diverting for industrial use, defeating the purpose to support agriculture.
- Environmental-
- Excessive use causing eutrophication, soil alkalinity, groundwater pollution and carcinogenic food chains.
- Social-
- Accessibility remains biased and only to green revolution zones, while remaining out of reach for poor farmers.
Reforms to be taken up:
- Domestic production at agglomeration with chemical industries.
- Relaxing state administered price for better competition reducing costs.
- Neem coated urea to reduce divergence.
- Forward and export market for phosphoric fertilisers.
- Shift towards organic manure and composting.
- Direct benefit transfer for inclusion of small and marginal farmers.
Fertiliser sector reforms are critical in ushering second green revolution.