Fertilizer industry hopeful of direct cash transfer of subsidy as Ministry prepares pilot
The fertilizer industry hopes that 2025 will be a year of reform as the Fertilizer Ministry prepares to launch a pilot for direct cash transfer of subsidy in select districts, for which it is currently believed to be developing a module. However, the details of the plan are yet to be discussed with the industry while officials are tight-lipped.
The subsidy has reached ₹1,23,833.64 crore — ₹86,560.29 crore for urea and ₹37,273.35 crore for phosphatic and potash fertilizers during April-November of current fiscal.
Data shared
It is learnt that the Agriculture Ministry has shared the data of different schemes such as PM-Kisan, PM Fasal Bima Yojana, Soil Health Card and also the latest unique ID to each farmer mentioning their details such as land holdings, crops sown and yield with the Fertilizer Ministry. Once the API is shared, the Fertilizer Ministry can devise the module as per requirement, sources said.
“It is for the Fertiliser Ministry to develop the module, based on where they want to launch the pilot and how many farmers they want to cover. It is very well possible to start cash transfer as a tenant farmer can also be authorised by the land-owning farmer to collect the subsidy so that the government knows where the actual subsidy is going,” said a senior official in Agriculture Ministry.
The main advantage is the government can fine-tune the subsidy as per the need, based on land area, crops selected and also soil conditions as the fertilizer requirement may vary from place to place.
Currently, the direct benefit transfer (DBT) of fertilizer subsidy is implemented across the country, after it was launched in 2018, in which 100 per cent payment of subsidy is made to the fertilizer manufacturing companies on the basis of actual sales through POS machines by the retailer to the farmer.
The Parliamentary Standing Committee on Fertilizers in a report in December 2024 had said that it is “strange that buyer identification is established only through Aadhaar authentication on ‘no denial basis’ and therefore the actual beneficiary is not defined.” But, the panel also appreciated the steps taken by the ministry to explore possibility of using the PM-Kisan database.
The report mentioned quoting Fertiliser Ministry that the Agriculture Ministry was requested in July, 2024 “to develop a module” for entitlement of fertilizers using land, cropping pattern, soil health data of the farmer. It also mentioned that the there was a suggestion from the Agriculture Ministry to implement a pilot direct cash transfer project in selected districts based on data on farmers’ registration.
However, some industry officials contacted by businessline told that there was no government-industry consultation on the subject yet. But they expect it may be rolled out in 2025 since the industry is also in favour of it as it will free up the retail price.
Advance payment
Asked if subsidy could be paid in advance as there may be resistance from farmers to buy at a much higher rate from current level in case of urea if the subsidy is paid after sales, a senior officer of a top company said, “It is possible to pay in advance as it will be as per actual need. Once the subsidy is deposited, there should not be any botheration where it got spent.”
But he admitted that in the first year there may be some hesitance as urea price is ₹267/per 45 kg bag now. Though subsidy to manufacturing facility varies, on an average the urea’s retail price will be around ₹1750/bag if there is no subsidy, sources said.
But some other industry officials said that there are also some issues to be resolved for cash transfer as the urea subsidy varies from factory to factory and the retail sales prices will also be different. On the other hand officials said that when P and K fertilisers were removed from control prices in 2010, there were uniform rates by companies even after that.