UPSC

1. DBT in Fertiliser Subsidy – From Pilot to
Success
By Vishnu Agarwal

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3. Introduction
• Nitrogen (N), Potash (K), Phosphorous (P),
Calcium (Ca), Magnesium (Mg) and Sulphur(S)
are macronutrient of the soil. Fertilizers are
used to reduce their deficiency.
• Farmers find it unaffordable to pay the
market price for the fertilizers, thus
government gives subsidy for it.
• Fertiliser subsidy is the 2nd largest
component of the total subsidy after food
subsidy.
• The government estimated Rs 79,996 crore in
fertilizer subsidy this year budget.

4. How the system has changed?
Older System
Initial 85% -90% payment
(95% in Urea) is released
to manufacturer on
receipt of fertilizers at
the district level. The
balance 10%-15% (5% in
Urea) is released on the
confirmation of receipt
by retailers in mobile
Fertilizer Monitoring
System, “mFMS”.
New System
100% payment of subsidy
to manufacturing
companies on the basis of
actual sales by the retailer
to the beneficiary. Sale of
all subsidised fertilizers to
farmers/buyers will be
made through Point of
Sale (PoS) devices installed
at each retailer shop.

5. Other Features of New system
• The farmer or buyer’s identity is authenticated either through
Aadhar based biometric authentication or Voter ID Card or Kisan
Credit Card.
• Aadhar based biometric authentication is preferred as this is
linked to land records and the soil health card of the farmer.
• The sale of fertilizers would initially be on a “no denial mode”.
• All the Fertilizer sale transactions are captured online in the
Integrated Fertilizer Management System (iFMS) system on real
time basis.
• The claims will be processed on weekly basis and subsidy will be
remitted to the company’s bank account through electronic
mode.

6. Implementation
• Pilot project started initially with 17 districts in different
states and gradually implemented to whole country.
• “Project Monitoring Cell” - to oversee implementation of
DBT exclusively.
• 24 State Coordinators - to monitor the on-going DBT
activities.
• Dedicated 15-member Multi-lingual Help Desk - to quickly
respond to all typed of queries.
• Organising about 4,500 training sessions across India.

7. Success of Pilot
• NITI Aayog findings:
– Increased Aadhaar authentication strike rate i.e. more
than 99%.
– Transaction time improved: to less than 3 minutes for
51% and between 3-5 minutes for 33% of the
respondents.
– Grievance redress mechanism has improved; and
• Alleged instances of overcharging by retailers have
come down.

8. Benefits Expected
• Making transaction digital: Increased transparency.
• Beneficiary (farmer) driven subsidy mechanism.
• Aadhaar seeded database: detecting ‘Ghost
beneficiary’.
• Minimizing illegal diversion of fertilizer for non-
agriculture applications.
• Better soil health management: Appropriate mix of
fertilizers compatible to the soil health profile of the
agricultural land.

9. • Quick subsidy payments to Companies.
• It will plug leakages and save huge amount of
money to the exchequer.
• Generating data on the usage of the nutrients.
Through this, the right Use Ratio (like 4:2:1 for
NPK) can be implemented.
• This will automatically cover all small and
marginal farmers.

10. How DBT in Fertiliser is different from other types
of DBT?
• DBT in MGNREGA: Payment of wages directly to
beneficiaries’ bank account.
• DBT in PAHAL: Consumers receive LPG subsidy for 12
cylinders a year in their bank account. People earning more
than Rs.10 lakh a year would not be eligible for the LPG
subsidy.
• DBT in Kerosene: Beneficiaries purchase kerosene and
subsidy is transferred directly to their bank account.
• DBT in Fertiliser: The fertilizer subsidy will be released to
the fertilizer companies instead of Farmers.

11. Why Subsidy is not directly transferred to Farmers
Bank Account?
• Many farmers lack capacity to pay large amounts upfront.
• Difficulty in calculating the amount of subsidy:
– Exact amount of subsidy required by farmers.
– Cost of production for Urea is different for each fertiliser
company.
• Case of DBT in Kerosene:
– Misuse of Kerosene like it is used to adulterate diesel;
– Poor Banking system in rural areas;
– All farmers do not have banking account;
– Possibility of misuse of cash.

12. Issues with New System
• Issues such as biometric mismatch (like fingerprints),
authentication failure, server downtime and power and
internet connectivity.
• Around 60% retailers reported issues while serving
customers during the peak season.
• Dealer attrition: Due to declining margins; requirement of
higher working capital and more staff etc.
• Different subsidy rate for each company.
• Companies claimed that payment of subsidies is not timely.

13. Way Forward
• Improve the quality PoS machines with long term battery.
• Supply of gloves along with fertiliser bags – for better
fingerprint authentication and to protect skin of farmers.
• Creating awareness among farmers: Use of local languages,
user friendly videos etc.
• Reducing the waiting time especially during peak season.
• Subsidy directly to the bank account.
• Sustainable Agriculture and Organic Farming: Over usage of
fertilizer is a bigger challenge than subsidy.

14. Fertiliser DBT 2.0
• It targets transfer of fertiliser subsidy directly to
farmers' bank accounts.
• For this, 3 steps have been initiated on 10 July, 2019:
– a dashboard with details of fertiliser supply, availability
and requirement at national, state and district level;
– advanced version of point of sale (PoS) software, a multi-
lingual facility with a provision for Aadhar virtual
identification option; and
– a desktop PoS version.

15. Thank You