CACP bats for cash fertiliser subsidy of ~5K

Close on the heels of the Centre passing three ordinances to regulate out-of-mandi transactions, provide a framework for contract farming and amend the Essential Commodities Act, the Commission for Agricultural Costs and Prices (CACP) has recommended a fertiliser cash subsidy of ~5,000 per year to farmers.

The government’s main rate setting panel suggested that this be done in two tranches of ~2,500 each in the kharif and rabi seasons.

CACP’S non-price recommendations are largely advisory in nature and the Centre is under no compulsion to implement them. However, if the government accepts this, it can alter the ongoing practice of transferring subsidy to fertiliser producing companies. Sources said the calculation by CACP involves two parameters: Total cumulative annual subsidy per hectare and average farm size (of 1.08 hectares).

“We have arrived at the figure by dividing the total cumulative annual subsidy on fertiliser by the average farm size, which comes to around ~5,000 per annum. It does not consider average usage by farmers,” a senior official said.

Currently, almost 70 per cent of the purchase price of urea is subsided by the central government. In case of nonurea fertiliser, though the prices are market linked, there is an element of subsidy in them as well. In the 2020-21 Union Budget, the central government allocated ~71,309 crore towards fertiliser subsidy of which around ~48,000 crore (67.3 per cent) was towards urea and the remaining nonurea fertilisers. In case of fertilisers, the subsidy is routed through companies that provide farmers items at cheap rates. The bills of these companies are then cleared by the government. A few years back, the government improved the method of subsidy payment to fertiliser companies by changing the point of the subsidy.

The firms get the subsidy once fertilisers are sold to farmers through point of sale (POS) machines with biometric authentication. Earlier, they used to get the subsidy at the district level based on the receipt of fertilisers.

“There is a need to shift to DBT (direct benefit transfer) of fertiliser subsidy so that farmers can make choices about use of different nutrients based on soil nutrient status,” the CACP said in its rabi price policy report for marketing year 2021-22.