Centre may introduce DBT system for fertiliser subsidies this Budget

Under the proposed scheme, farmers will be directly transferred the subsidy for fertilizer purchases through their bank accounts as it is done in the case of LPG subsidies.

For representational purposes (Photo | EPS)

NEW DELHI: Struggling with a very high fertilizer subsidy, the Centre is considering implementing a direct benefit transfer (DBT) scheme for the sector.

“The Direct Benefit Transfer  route is working well where it has been implemented. It has helped the government save money by plugging loopholes and ensured that money reaches genuine beneficiaries only.  It was of great help during the Covid-19 period too, which is why the Centre is considering this for fertilizer subsidies as well. The proposal is under consideration and can be announced in the upcoming budget,” a senior finance ministry official said.  

Under the proposed scheme, farmers will be directly transferred the subsidy for fertilizer purchases through their bank accounts as it is done in the case of LPG subsidies. The government will use the database of the PM Kisan Scheme to transfer the money.  

Under current practice, the  government transfers subsidies to fertiliser companies while farmers purchase the product at a lower rate. However, subsidies are transferred only after internal verification against bills. 
While the government complains of dubious bills, fertilizer companies complain of delayed payments which affects their liquidity.  

In the Union Budget for 2020-21, the central government had allocated Rs 71,309 crore towards fertiliser subsidies and, on top of that, had announced an additional Rs 65,000 crore to clear the backlog of payments for fertilizer companies as part of the Aatmanirbhar Bharat relief package.

According to ratings agency ICRA, the subsidy requirement for FY22 is expected to be in the range of Rs 85,000-90,000 crore.

The official noted that the Comm­ission for Agricultural Costs and Prices (CACP) has strongly recommended switching over to direct cash subsidies to farmers for fertilizer. 

However, experts also note that it is as yet uncertain whether the government will go ahead with this proposal this year considering the ongoing farmers agitation. Rs 85,000-90,000 cr Estimated fertiliser subsidy required for financial year 2021-22, according to ICRA.