Key Points:
- For the budget 2021, the Fertilizer Association of India (FAI) department has proposed a subsidy of ₹1 trillion for the next fiscal after having cleared the backlog to producers.
- One priority for the next fiscal is to extend the direct benefit transfer (DBT) scheme in the sector to farmers.
- At present, the scheme, which was rolled out as a pilot in 2017 and extended nationwide in 2018, transfers subsidy to manufacturers based on data captured in the point of sale (PoS) devices at the retail shop.
For the budget 2021, the Fertilizer Association of India (FAI) department has proposed a subsidy of ₹1 trillion for the next fiscal after having cleared the backlog to producers. This has taken the total subsidy expenditure in this fiscal year to ₹1.36 trillion, plus an extra allocation of ₹65,000 crore made as part of the economic stimulus package, according to a government official.
The government may also roll out an ambitious scheme to transfer the subsidy directly to the bank accounts of possibly 140 million farmers in the country, instead of financing manufacturers who at present sell at subsidized prices, the official said, requesting anonymity.
One priority for the next fiscal is to extend the direct benefit transfer (DBT) scheme in the sector to farmers. At present, the scheme, which was rolled out as a pilot in 2017 and extended nationwide in 2018, transfers subsidy to manufacturers based on data captured in the point of sale (PoS) devices at the retail shop. In FY19, this had led to savings of about ₹10,000 crore, but it is hard to calculate the savings in subsequent years as factors such as fertilizer sales and price of natural gas used in urea production fluctuate, the official said.
Fertilizer subsidy has been around ₹70,605 crore and ₹79,998 crore in FY19 and FY20, or 10-11% of the Centre’s total spending on various schemes. The increase in the current fiscal and the next is expected to widen the Centre’s fiscal deficit.
The Centre’s annual subsidy on fertilisers is a little over Rs 70,000 crore. Over 14.6 crore farmers with average farm size of 1.08 hectare are the intended beneficiaries.
