DBT for Fertiliser Subsidy - The Fertiliser Association of ...

1 DBT for Fertiliser SubsidyFood is the basic necessity for survival. Keeping inview the importance of food for survival of humanbeings, various countries provide support toagriculture, particularly to food grains in differentforms. The subsidies are provided either on inputs,such as, seeds, fertilisers, irrigation, etc., or on finishedfoodgrains or combination of both. Different countrieshave experimented, adopted and used various modelsof Subsidy payment. Developed countries mostlyprovide income support to farmers. Even some of theemerging and developing economies are changingpolicies for agriculture from product support toincome support to being a vital input for agriculture, subsidyscheme was introduced in India way back in then, the government of India has entrusted theresponsibility to the industry to make availablesubsidized fertilisers to farmers.

2 In other words, Subsidy to farmers have been routed through thefertiliser industry for administrative convenience ofthe government. The system worked well till the year2001-02 or so. Under the scheme, industry first passesthe benefit to the farmer and gets reimbursement fromthe government after bills are raised. Industry hasbeen performing the task for such a long periodwithout fail and with no cost to the exchequer. Of late,it is becoming increasingly difficult for the industryto carry on the burden of this responsibility in viewof (i) deteriorating financial health caused due to delayin payment and carry forward of Subsidy dues fromevery year to next year and (ii) under recoveries onvarious heads under pricing and Subsidy has also to deal with micro-management ofday to day operations by the government.

3 Major timeand energy of the industry is wasted in collection oflegitimate dues from the government. This hasseriously vitiated the business environment in thefertiliser industry has been advocating for directbenefit transfer (DBT) of Fertiliser Subsidy to farmersfor last several years. Government of India hasexpressed its intention to implement DBT in phasedmanner in Union Budgets. Government has madeIndian Journal of Fertilisers, March 201712 Satish ChanderFrank Notessome efforts in this direction albeit half-heartedly inlast 6-7 years. Fertiliser industry has been extendingfull support and cooperation to the governmenttowards the steps taken by the government for allthese years. A substantial amount of money has beenspent by the industry on training of field staff andretailers and on associated expenses.

4 Government ofIndia is now implementing DBT in 19 pilot analysis of data available from pilot districtswould facilitate to roll out the scheme across thecountry. Meanwhile, Fertiliser companies have beenasked to fulfill the deadline of the procurement ofabout one lakh seventy six thousand Point of Sale(POS) machines by end of May, 2017 for everyregistered retailer operating in the country. Fertilisercompanies have already procured POS machines forthe pilot districts and are also in the process ofprocurement of more machines. All Fertiliser salestransactions June, 2017 have to be done throughPoS machines. Any non-compliance may lead towithholding Fertiliser Subsidy by Department ofFertilizers (DoF). This is an unrealistic deadline devoidof any logical of India is implementing the DBT schemefor Fertiliser in 19 districts which is not DBT in truesense.

5 Unlike DBT for LPG, under present DBT schemefor Fertiliser , beneficiaries are continued to besupplied subsidised Fertiliser instead of subsidygetting transferred to their bank accounts. In otherwords, the existing practice of routing subsidythrough the industry continues with change inmethodology of disbursement. The present schemeprovides payment of Subsidy based on actual salesby the retailers to the beneficiaries captured on POSmachine on weekly basis. Accordingly, fertilisercompanies operating in pilot districts can generateweekly Subsidy claims. However, in practice, nosubsidy bill has been processed/ paid so far asimplementation of the scheme is yet to be have incurred all costs upfront and non-payment of Subsidy on Go-Live districts has affectedcash flows adversely.

6 Before rolling out the schemecountrywide, it was necessary that so called DBT isfirst stabilized in pilot districts. The present DBTscheme being tried in pilot districts has posed manytechnical and operational problems. These arediscussed in the following are various technical problems experienced inpilot districts. These include network failure issuesin PoS, biometric authentication issues, etc. Moreover,the response time from NIC to address varioustechnical problems at the field level is far fromsatisfactory. Pointing out this problem in theWorkshop on DBT Implementation held on 2ndFebruary, 2017, the Collector of Krishna districtsuggested to strengthen NIC into 3 separate teams,viz., Development Team, Data Updation/MaintenanceTeam and Helpdesk/ troubleshooting Team.

7 There{}Indian Journal of Fertilisers, March 201713 There is no mention oftime line by when thedirect benefit transferwill be credited tofarmers bankaccounts. There is needfor a clear road map toachieve the ultimateobjective of the be better coordination,technical support and promptresponse from NIC to address theoperational challengesencountered at the field are a variety of otherproblems which need to beresolved before implementationof DBT. Fertiliser production is acontinuous process. Productiontakes place throughout the are prepositionednearest to the consumption centersto meet total Fertiliser demandduring few months of the twocropping seasons, , Kharif andRabi. Industry has been paidsubsidy on the basis of despatchesof materials from factory forseveral decades since the inceptionof Subsidy scheme in now gets 95 per centsubsidy for urea after materials arereceived in districts and thebalance amount is paid afteracknowledgement made by theretailers.

8 Under present ureapolicy, there is provision of for sales carrying period willincrease to about six months forurea industry under the proposedDBT scheme. This will increase therequirement of working capital andthe interest cost for the industrysignificantly. There is need formaking provision of workingcapital for at least 180 days inpricing policy as the DBT isimplemented across the present scheme, industry isthe only stake-holder which willsuffer due to non-performance ofretailers and state state governments shouldmake it mandatory for the retailersto sell fertilisers through POSdevices only. Moreover, retailerswill be the key players as they areloaded with additional roles andresponsibilities under DBT. Thepayment of Subsidy is entirelydependent on accurate record oftransaction with respect to thebeneficiaries, origin of material,quantity of material, etc.

9 Error maylead to delay or non-payment ofsubsidy. Retailers should beaccountable under relevantprovisions of FCO to transact andrecord the sales accurately andefficiently. Currently, retailers donot have incentive to maintainthis additional need to be incentivizedto discharge the additional of inter-districtmovement of fertilisers underiFMS may restrict fertiliseravailability at retailers point. Inmany cases, the hired warehousein one district is nearer to retailerin adjoining district. Foroptimizing costs, companies maymove material from rakes togodown network and wholesalersand moved to retailers in the stateacross the district , the wholesalers districts are captured in DBT, if the supplyingwholesaler is not from the samedistrict as that of DBT district, thenthe quantities supplied by them tothe retailers of DBT district couldbe ignored for Subsidy restriction will increase thecost in the field causing undueburden on companies.

10 Therefore,there is need for continuation ofinter-district movement offertilisers in the interest of thefarmers to get fertilisers current truck challan systemis cumbersome and system envisages at each rakepoint on the details of movementof Fertiliser entering lorry number,name of drivers, mobile number ofdriver, name of the owner, copies of challan/ invoiceshould be printed at the rakepoint. There are more than 700rake points for handlingfertilisers. Current rake points donot have infrastructure forinstallation of IT facilities. Thesystem requires complete reviewand the Ministry of Railways betaken on board to assess whetherthe system is the present scheme of DBT, Subsidy is paid on actual sale tothe farmers and hence B1certification for quantity has lostany relevance.