Fertiliser Subsidy Hike
Source : PIB
GS III : Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System- objectives, functioning, limitations, revamping; issues of buffer stocks and food security; Technology missions; economics of animal-rearing

Why in News?

Decision was taken to increase the subsidy for DAP fertiliser from Rs. 500 per bag to Rs. 1200 per bag which is an increase of 140%.

Diammonium phosphate (DAP)

• It is the world’s most widely used phosphorus fertiliser.
• Its relatively high nutrient content and excellent physical properties make it a popular choice in farming and other industries.

Key Facts

• The price of fertilisers is undergoing an increase due to the rising prices of phosphoric acid, ammonia etc internationally.
• Central Government was giving a subsidy of Rs. 500 per bag previous years.
• The international prices of phosphoric acid, ammonia etc. used in DAP have gone up by 60% to 70%.
  • The actual price of a DAP bag is now Rs 2400, which could be sold by Fertiliser companies at Rs 1900 after considering a subsidy of Rs 500.
  • Farmers will continue to get a DAP bag for Rs 1200.

Subsidy for Chemical Fertiliser

• Fertiliser Subsidy
  • Buy fertilisers at MRPs (maximum retail price) below their normal supply and demand based market rates or what it costs to produce/import them.
  • The subsidy goes to fertiliser companies.
• Current Method of Subsidy Transfer
  • From March 2018 direct benefit transfer (DBT) system was introduced to curb diversion.
  • The subsidy payment to the companies would happen only after actual sales to farmers by retailers.
  • A point-of-sale (PoS) machine linked to the Department of Fertilisers’ e-Urvarak DBT portal.
  • Anybody buying subsidised fertilisers is required to furnish his/her Aadhaar unique identity or Kisan Credit Card number.
  • The quantities of the individual fertilisers purchased along with the buyer’s name and biometric authentication have to be captured on the PoS device.
  • Only upon the sale getting registered on the e-Urvarak platform can a company claim subsidy.
• At present, the Centre is following a no denial policy. Anybody, non-farmers included, can purchase any quantity of fertilisers through the PoS machines
• Central Government spends about Rs 80,000 crore on subsidies for chemical fertilisers every year excluding arrear.
• With the increase in subsidy in DAP Government of India will spend an additional Rs 14,775 crore as subsidy in Kharif season.
• This is the second major decision in the farmers interest, after directly transferring Rs. 20,667 crore in Farmers account under PM-KISAN.
• Fiscal Policy statement of the Budget mentions that a total of 610.08 lakh metric tonnes (LMT) of fertilisers have been sold under DBT scheme from March 2018 to May 2019.
• The fertiliser subsidy allocated for 2020-21 will be around Rs 1.36 trillion while the requirement for this year is about Rs 1.28 trillion including for the amount for pending arrears. 
• Urea is the top fertiliser sold in India and almost 75 per cent of its cost of sales comes from subsidies from the government.

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