Fertiliser Industry Calls For Direct Benefit Transfer To Address Subsidy Imbalances

(MENAFN- KNN India) New Delhi, Jun 4 (KNN) The fertiliser industry has urged the government to implement direct benefit transfers to farmers rather than continuing the current system of providing highly subsidised fertilisers through companies, citing concerns over imbalanced soil nutrient usage.

The industry argues that the existing subsidy mechanism is contributing to skewed fertiliser application patterns that may be detrimental to soil health.

S.C. Mehta, Chairman, Fertiliser Association of India and Chairman and Managing Director of Deepak Fertilisers, stated that the direct benefit transfer system for subsidy disbursement should be rolled out over the next two to three years.

He emphasised that such a transition would make the fertiliser industry more market-oriented and improve operational efficiency while addressing the current imbalance in fertiliser subsidies that favours urea over other nutrients.

Under the present system, all subsidised fertiliser sales to farmers are conducted through 260,000 point-of-sale devices installed at retail outlets since March 2018.

Beneficiaries are identified using Aadhaar numbers, Kisan Credit Cards, and other approved documents, with subsidies released to companies based on actual sales to farmers by retailers.

The direct cash transfer proposal has previously faced opposition due to concerns that farmers would need to pay substantial upfront amounts for fertilisers before receiving subsidy transfers in their bank accounts.

Despite these concerns, industry leaders maintain that reform is necessary to address systemic issues in the current subsidy structure.

Mehta highlighted significant concerns about soil health deterioration, noting that fertiliser utilisation continues to increase while crop yields have plateaued.

He attributed this trend to insufficient encouragement of micronutrient usage and called for measures to promote balanced fertiliser application to improve soil health outcomes.

The industry chairman also advocated for government support in encouraging strategic overseas investments in the fertiliser sector, from mining operations to finished product manufacturing, through the formulation of comprehensive long-term policies.

Such investments could help address supply chain vulnerabilities and reduce dependence on volatile global markets.

India's domestic soil nutrient consumption stands at approximately 60 million tonnes annually, with imports accounting for one-third of this volume.

Geopolitical factors continue to drive volatility in global fertiliser prices, contributing to increased government subsidy expenditure. The fertiliser subsidy allocation for 2025-26 is projected at Rs 1.67 trillion.

The pricing structure for urea remains heavily subsidised, with farmers paying a fixed price of Rs 242 per 45-kilogram bag while the actual production cost is approximately Rs 2,650 per bag.

The government covers the difference through direct subsidies to fertiliser manufacturers.

In contrast, phosphatic and potassic fertiliser prices, including diammonium phosphate, were decontrolled in 2020 with the introduction of a fixed-subsidy regime under the Nutrient Based Subsidy mechanism, which is announced by the government twice annually.

India's fertiliser import dependency remains substantial, with 55-60 percent of the annual diammonium phosphate consumption of 10-11 million tonnes sourced primarily from West Asia and Jordan.

The country meets its entire muriate of potassium demand through imports from Morocco, Saudi Arabia, Belarus, Canada, and Jordan.

To ensure supply security, the government has established long-term agreements with Morocco and Saudi Arabia for approximately 2 million tonnes of annual imports from each country.

(KNN Bureau)

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