The government has set up a Group of Ministers under Finance Minister Pranab Mukherjee to take up the issue of overhauling the fertiliser subsidy policy and shifting towards a regime of providing the dole-out directly to farmers.
The Budget 2009-10 had announced moving towards a regime where subsidy would be granted on nutrients (like N, P, K that go into the making of fertilisers) instead of the current practice of providing dole-out on prices of fertilisers.
It had also proposed the government's long-term goal of supplying fertiliser subsidy directly to farmers instead of routing it through the industry.
"A GoM has been constituted under the chairmanship of Pranab Mukherjee to look into all aspects of nutrient-based subsidy," a top government official told PTI, who did not wish to be named.
The GoM will decide on when to shift to the new subsidy regime and also the time frame for moving to the system of direct subsidy to farmers, he added. Already, the Fertiliser Ministry has convened meetings with senior officials from different states and the industry separately to "sensitise" them about the proposed system.
At present, the government controls the pricing of key fertilisers and offers funds to companies, known as fertiliser subsidy, to compensate them for selling key farm nutrients at the rates determined by it.
India's fertiliser subsidy surged to Rs 1,17,000 crore in the last fiscal on unprecedented rise in its import bill following skyrocketing global prices, from Rs 45,659 crore a year before.
The record rise in subsidy bill paved the way for a fresh debate among policy makers with the Fertiliser Ministry saying such kind of a burden is not sustainable for a long time.
However, announcing the government's intention, Mukherjee had said in the Budget the declining farm yields due to the increased use of urea is "a matter of concern" and sought to shift to the new regime to promote balanced application of different fertilisers.
The industry had also hailed the Centre's decision to provide subsidy directly to farmers, saying it will spare fertiliser companies many troubles that are affecting their books. Currently, the subsidy is routed through the industry.
The unshackling of the fertiliser manufacturing sector is expected to attract fresh investment to the segment that has not witnessed any significant inflow of funds, the Finance Minister had said.
According to an official estimate, companies recover less than 15 per cent of the actual cost of fertilisers by selling at MRPs, while the rest is borne by the Centre.
