Aadhaar-based fertilizer subsidy transfer in limbo

New Delhi: The Aadhaar-based direct benefit transfer (DBT) of fertilizer subsidies may not see the light of day anytime soon.

“The roll-out of DBT in fertilizer will take some time because there are various hurdles,” said a government official, who is working on DBT.

The official, who requested anonymity, said that “this is more challenging” than the DBT of subsidy for cooking gas cylinders, foodgrain and kerosene.

The problems arise from factors such as identifying the actual beneficiaries. “Most of the farming in the country is on contract basis, or what is called tenant farming. Whom to give subsidy and how?” the official said.

Under the DBT for cooking gas, 142.5 million beneficiaries have received Rs.25,795.93 crore in their bank accounts since the scheme was relaunched in November 2014. The government expects to save Rs.15,000 crore in leakages in cooking gas subsidies every year. The government also expects the DBT in foodgrain will check leakages worth 30-40% of the total food subsidy rolled out through the public distribution system, as reported by Mint on 25 September.

If the government succeeds in saving 40% of what it spends on the foodgrain subsidy, it will mean savings of another around Rs.50,000 crore annually.

The Supreme Court in an 11 August interim order restricted the use of Aadhaar, the unique identity number, to paying subsidies for the public distribution system and cooking gas. However, the Unique Identification Authority of India, or UIDAI, last week sought the court’s permission to use Aadhaar for all government social benefit schemes till it decides on the case, as reported by Mint on 24 September.

The savings from fertilizer subsidies are expected to be next to that from foodgrain if leakages are checked. A committee headed by former food minister Shanta Kumar, which submitted its report in January, recommended that farmers should be given direct cash subsidy (of aboutRs.7,000 per hectare) and that the fertilizer sector can then be deregulated. “Most of the OECD (Organisation for Economic Co-operation and Development) countries as well as large emerging economies do support their farmers. India also gives large subsidy on fertilizers (more than Rs.72,000 crore in budget of FY15 plus pending bills of about Rs.30,000-35,000 crore),” the report noted.

For FY16, the budgetary outlay for fertilizer subsidies routed through manufacturers is Rs.72,969 crore. At present, manufacturers sell fertilizer at a subsidized rate to farmers and realize the amount from the government.

According to the committee, DBT of fertilizer subsidy to farmers will plug diversion of urea for non-agricultural uses as well as to neighbouring countries, and raise the efficiency of fertilizer use. “It may be noted that this type of direct cash subsidy to farmers will go a long way to help those who take loans from moneylenders at exorbitant+ interest rates to buy fertilizers or other inputs, thus relieving some distress in the agrarian sector,” added the report.

The country’s agriculture sector is facing one of its worst crises in recent years with farm incomes hit by falling prices of produce and drought-like conditions in several states.

The government official quoted above added that some pilots have been launched to test the feasibility of the scheme. The centre’s approach in select districts is to verify farmers’ land records and proof of identity through the Aadhaar number at retail fertilizer stores. The government expects to create a comprehensive database of beneficiary farmers over a period of time.

However, given the condition of land records in India, the task seems gigantic. “That is the most daunting task. The land records are in a bad shape and we have not cared to fix it in so many years,” said Biswajit Dhar, professor of economics at Delhi’s Jawaharlal Nehru University.

Dhar added that the problem of absentee landlords has compounded the issue of identifying beneficiaries.

He added that the US abandoned the practice of farm benefits in the Farm Bill, 2014, as it was found to be inefficient, and that the country has moved to a price support mechanism.