The Union government is likely to introduce a nutrient-based subsidy regime for fertilizers in an attempt to optimize use of these agricultural-inputs. The proposal, which replaces one that suggested a direct subsidy to farmers, will address what experts term “soil-fatigue”—a decline in the fertility of soil arising from excessive and imbalanced use of fertilizers over the years.
“We are against any proposal which puts a strain on the farmer. In this regard, giving direct subsidy to the farmer is not a feasible idea. Although there is a general consensus on the idea of nutrient-based subsidy, the exact details are still to be worked out,” said minister for chemicals & fertilizers and steel Ram Vilas Paswan.
Paswan’s view found support from farm ministers from various states attending the 2nd Fertilizer Advisory Forum in the Capital on Wednesday.
The government’s strategy is to encourage a more balanced use of fertilizers, while at the same time steering clear of the administratively difficult and politically delicate task of reaching fertilizer subsidy directly to millions of farmers.
The Union Budget for 2007-08 had spelt out the government’s plan to start a pilot scheme in one district of each state to pay fertilizer subsidy directly to the farmer.
Instead, the group of ministers (GoM) deliberating the issue of fertilizer subsidy and sustainable fertilizer use, is currently debating the shift to a regime where only the nutrient content, such as nitrogen and phosphorous, in a fertilizer will be subsidized.
Under a nutrient-based subsidy, a wide variety of fertilizers customized to a farmer’s specific needs will be available. The rationale is to address the falling fertilizer responsiveness of the soil due to imbalanced use of fertilizers. PTI Photo
Paswan is part of the GoM that is headed by agriculture minister Sharad Pawar and includes finance minister P. Chidambaram.
At present, the government follows a product subsidy regime. As a result has very little choice of fertilizers and opts for those that are subsidized. This results in soil fatigue.
Under a nutrient-based subsidy, a wide variety of fertilizers customized to a farmer’s specific needs will be available. The rationale is to address the falling fertilizer responsiveness of the soil due to imbalanced use of fertilizers.
“The use of other minor and micro nutrients, crucial for soil health, is ignored as they are not subsidized. It is high time to subsidize the nutrients and not any one fertilizer product like urea or DAP (diammonium phosphate),” said a senior finance ministry official who did not wish to be identified.
“If the nutrient-based subsidy can be implemented by modifying the existing indirect subsidy regime, then it can be looked at positively,” he said.
The finance ministry had recommended a direct subsidy mechanism initially devised by the Indian Farmers Fertiliser Cooperative Ltd. This scheme involves the use of cards embedded with a radio frequency identification device (RFID).
Paswan expressed his apprehensions about the practicality of this. “In our country we have still not provided everyone with voter ID cards and ration cards. I wonder how realistic is the idea of handing an RFID card to the farmer?”
The proposed direct subsidy regime will require the government to subsidize millions of farmers individually. It would also require the maximum retail price to be decontrolled.
“Apart from the fact that direct provisioning of subsidy will be more cumbersome for the government to execute, it will also lead to a huge spike in the fertilizer prices and in all likelihood lead to a further increase in the subsidy outgo of the government,” said a senior fertilizer ministry official on condition of anonymity.
The government has allocated Rs22,532 crore as fertilizer subsidy for the year 2007-08. However, the actual requirement of subsidy, according to Paswan, is expected to be close to Rs48,000 crore. The increase in prices of raw materials and intermediates has meant that the government’s subsidy burden has more than doubled over the last two years.
The fertilizer ministry official further explained that “the current system of providing indirect subsidy can be fine-tuned to resolve the imbalanced use to fertilizers and improve soil productivity. As far as bringing down the subsidy bill is concerned, shifting from indirect to direct subsidy regime per se will not solve the problem. Direct or indirect provisioning is just a mechanism. Subsidies can either be brought down by increasing the prices or by reducing the production costs”.
Experts, too, believe problems such as imbalanced fertilizer use and declining land productivity can be resolved without resorting to direct subsidy. Interestingly, the Fertiliser Association of India, the representative body of all fertilizer manufacturers in the country, had earlier resisted the idea of a direct subsidy.