Context:

• For better targeting of subsidies and plugging leakages, the government plans to roll out direct benefit transfer for fertiliser subsidy across the country.
• The fertiliser subsidy will be given directly to the manufacturer after capturing the Aadhaar number through a point-of-sale (PoS) device of the farmer on purchase of a bag of fertiliser. An authenticated receipt comes out giving details of the purchase and subsidy to be paid by the government to the producer.
• The records of dealers are automatically updated and payment is made digitally or in cash. Farmers now can receive fertilisers at a printed price with complete transparency.
• A pilot project to introduce DBT in Fertilizer Sector has been undertaken successfully in 16 districts from different States.

DBT in Fertilizer: How it works? How is it different from other government’s subsidy programmes?

• Direct Benefit Transfer (DBT) being implemented in fertilizer subsidy payment is slightly different from the normal DBT being implemented in LPG subsidy.
• The fertilizer subsidy will be released to the fertilizer companies instead of the beneficiaries (Farmers), on the basis of actual sales made by the dealers to the farmers.
• The difference between the cost of production and the price at which it is sold to the farmer is really the subsidy which goes to the fertilizer industry
• At present direct transfer of subsidy to beneficiaries like in LPG cannot be introduced in fertilizer sector as the beneficiaries and their entitlement is not clearly defined.
• Multiple subsidized products, urea and 21 grades of Phosphatic & Potassic fertilizers have different subsidy rates.
• The subsidy rate in respect of urea varies from company to company due to different production processes, energy efficiencies of plants, vintage etc.
• The amount of subsidy in some fertilizers is huge. So it will be an enormous financial burden on the farmers to pay the MRP and subsidy upfront and receive the subsidy amount subsequently.

What are the benefits?

• DBT in Fertilizer subsidy restricts diversion, prevents leakages, and brings about greater transparency, accountability and efficiency. It will lead to better soil health management, balanced fertilization, and better productivity, besides increasing transparency.
• Successful implementation of pilot project : A pilot project to introduce DBT in Fertilizer Sector has been undertaken successfully in 16 districts from different States. Since then DBT in fertilizers has been rolled out in 19 States and Union Territories.
• 12 States are expected to come on board this month. In another three months, DBT in fertilizers is expected to expand its footprint in the entire country.
• These initiatives have been supplemented with allied processes set in motion by the Department of Fertilizers including appointment of 24 State DBT co-coordinators, and organising about 4,500 training sessions across India.
• Training videos are also placed on YouTube, and the comprehensive redress system in place is being expanded to a multilingual help desk.
• Pilot project revealed a fact that there is an increased Aadhaar authentication strike rate, many farmers received transaction receipts, and they were charged the same amount as mentioned in the receipt; and there is an improved grievance redress mechanism.

What are the challenges?

1. Issues, such as biometric mismatch, authentication failure, and internet connectivity are still present, although they have reduced over time.
2. An important issue has been connectivity, like other IT-based initiatives, especially in rural areas. While this has been addressed through flexibility in choosing the connectivity option (Wifi, LAN, PSTN) or use of external antenna to improve signal strength, other options have also been considered.
3. Developing the systems and sensitising all stakeholders to migrate to the new system was an arduous task but it was successfully implemented as part of pilot project.
4. Some dealer attrition, which is probably on account of declining margins, is a major concern. This would need to be addressed on priority basis.
5. Fertilizer retailers worry that transactions authenticated through PoS may not be feasible during the Peak Kharif season due to long transaction times. It is likely that retailers will resort to higher ‘adjusted transactions’ (retailer registers all sales for the day on a few Aadhaar numbers) to handle peak load.

What are the solutions for an efficient fertilizer distribution system?

1. A strong communication campaign in vernacular languages is the need of the hour. This will enable farmers understand about the new subsidy scheme which is different from other DBT schemes.
2. Retailers should be allowed to use desktops, laptops, tablets, smartphones, etc. to run the application.
3. A formal Grievance Redress Mechanism is important when the DBT in fertiliser is rolled out across India. The revamped toll-free number will soon allow conversations in regional languages.
4. Reducing the waiting time for farmers purchasing fertilizers is important.
5. An ‘early check out’ system to pre-authenticate farmers at designated Points of Authentication (PoA) before they purchase fertiliser can tackle the peak-time transaction load.
6. While Aadhaar is the preferred form of identification of buyers, other forms of identification may also be used.
7. As the pilot expands to more States, the efficiencies of the new system would be increasingly visible. The need to devise and test solutions for these challenges in the subsidy distribution system before it is scaled-up is essential.

Conclusion

The broad and overriding goal is to ensure that under no circumstances should any farmer be denied or refused the opportunity to purchase fertilizers.