What is Fertiliser Subsidy and why on news

 The government of India  is working on a plan to restrict the number of fertiliser bags that individual farmers can buy during any cropping season 

Fertilizer  Subsidy 

Indian farmers purchase fertilizer at MRP (maximum retail price) below their normal supply and demand-based market ratesFor example, the MRP of neem coated urea has been fixed by the government at Rs 5,922.22 per tonne, while its average cost-price payable to domestic manufacturers and importers is Rs 17,000 and Rs 23,000 per tonne respectively. This difference, which varies according to plant-wise production cost and import price, is kept as subsidy by the Center. 

The Center pays a flat per tonne subsidy on these nutrients to ensure that their prices remain at the "appropriate level"


The subsidy goes to fertilizer companies, although its ultimate beneficiary is the farmer who pays MRP below market-determined rates. 

What is Direct Benefit Transfer system ?

From March 2018, a new so-called direct benefit transfer (DBT) system was introduced, wherein subsidy payment to the companies would happen only after actual sales to farmers by retailers. Each retailer — there are over 2.3 lakh of them across India — now has a point-of-sale (PoS) machine linked to the Department of Fertilisers’ e-Urvarak DBT portal. Anybody buying subsidised fertilisers is required to furnish his/her Aadhaar unique identity or Kisan Credit Card number. The quantities of the individual fertilisers purchased, along with the buyer’s name and biometric authentication, have to be captured on the PoS device. Only upon the sale getting registered on the e-Urvarak platform can a company claim subsidy, with these being processed on a weekly basis and payments remitted electronically to its bank account.

Reason for Restriction Plan

  • The main objective is to curb the diversion, which is natural with any under-product. For example, urea whose original MRP (excluding taxes and neem-coating costs) has increased barely 11% since April 2010.
  • Being super-subsidized, urea is always used for non-agricultural use. For example, it is used by plywood / particle board manufacturers, animal feed manufacturers, as a cheap protein source or by milk vendors as smuggled into Nepal and Bangladesh. 

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