Mumbai: The finance ministry on Wednesday met select banks to discuss about the modalities of the new fertiliser subsidy policy which envisages the transfer of such subsidy directly to the farmers instead of the fertiliser company, according to a banking source present at the meeting.
Union finance minister Pranab Mukherjee said in his 2010 budget speech that in due course it is intended to move to a system of direct transfer of subsidy to the farmers.
At present subsidy is given to the producers of fertilizers and not to the farmers directly.
However, the finance minister had not mentioned during his budget speech if banks will be involved in the process. To include banks into the process, a preliminary discussion meeting was called on Wednesday by the joint secretary, ministry of finance K.V. Eapen and Sudhir Bhargava, joint secretary, department of fertilizers. ministry of chemicals and fertilizers.
Representatives from six banks, State Bank of India (SBI), Punjab National Bank (PNB), Overseas Bank of India, Syndicate Bank, Uco Bank and Indian Bank were also present in the meeting.
Two approaches to shift subsidy directly to farmers were discussed.
The first approach was that an authority could certify about the amount of fertiliser purchased by a farmer. The farmer could later claim the subsidy against the certification. Such claims can be consolidated and later sanctioned by some district level authority for disbursement of funds. The farmers can then collect their share of subsidy from the bank involved in the disbursement of such funds.
However, bankers raised their concern that not all farmers have a bank account to avail the facility.
Another approach was discussed under which the subsidy will be given at the dealers’ end. So, for example, if a bag of a fertiliser costs Rs400, and the subsidy is Rs100, a farmer can buy the bag at Rs300. The subsidy of Rs100 can be collected by the dealer from a bank.
Since the meeting was only for discussion purpose, no conclusion was reached.