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Any doubts?


  1. G. Kamal

    What is mean by DBT??

    1. Rini Sen

      DBT = Direct benefit transfer.

  2. Shashi Kumar

    What’s feedstock cost, in the first image? plz someone explain to me.

    1. Rohit Pande

      Feedstock cost = Fuel etc which needs to run the Urea production. They used to use Naptha (which was costlier) and so govt asked fertilizer units to run on Natural Gas (lower cost).

      Higher fuel cost would mean higher prices right?

      Did it help?

  3. gurshinder sidhu

    Isn’t price control better option than DBT???

    1. Shashank Agarwal

      DBT per se is good but, as mentioned, the biggest challenge is in identifying the right beneficiaries. More over DBT, as claimed by many, may also lead to conspicuous consumption.
      Need is to make fertiliser subsidy entirely nutrient based, including urea which’ll not only bring the subsidy bill down but also reduce excessive use of urea. But this is not being done as urea price is a political issue.

    2. Saravana Uportal

      In the price control mechanism, subsidy amount is directly paid to the manufacturers whether the produces are utilized by farmers or not. But in DBT mode, subsidies can be paid based on consumption of fertilizer. Hence, in DBT mode there is a possibility to control over-use of a particular fertilizer so as to protect soil health.

      1. gurshinder sidhu

        Thanks for clarification. .was not clear about the difference..so I think with DBT corruption can also be curbed as only consumption will give the exact figure of subsidy to be released..correct me if I m wrong..

DBT scheme for fertilizer subsidies gets cabinet nod

Note4students

Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: Direct benefit transfer (DBT), Urea subsidy scheme

Mains level: Benefits of DBT scheme in various sectors


News

DBT for fertilizer subsidy payments

  1. The government has decided to implement direct benefit transfer (DBT) for fertilizer subsidy payments across India
  2. By this, the government seeks to prevent diversion of fertilizers for commercial use and generate data on the usage of the nutrients to help farmers

Rollout already began in most states

  1. The department of fertilizers has already rolled out the programme in most states
  2. Data obtained from it shows that transaction time and alleged instances of overcharging by retailers have come down
  3. Also, offtake has moderated, suggesting that overuse of subsidized fertilizers and their diversion for industrial use have declined

DBT model for fertilizer

  1. The DBT model for fertilizers, however, is slightly different from that for others such as cooking gas, in which the ultimate consumer gets the entitlement in their bank account
  2. DBT would entail 100% payment to fertilizer companies on sale of fertilizers to farmers at subsidized rates
  3. This is done because farmers cannot be forced to pay large amounts upfront for fertilizers and wait for reimbursement

Urea subsidy scheme

  1. The cabinet has also approved the continuation of the urea subsidy scheme for three years till 2020
  2. There will be no urea price hike till 2020
  3. The subsidy for locally produced and imported urea is part of the annual fertilizer subsidy outgo

DBT scheme for fertilizer subsidies gets cabinet nod

Note4students

Mains Paper 2: Governance | Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential

From UPSC perspective, the following things are important:

Prelims level: DBT policy

Mains level: Possible benefits of the decision.


News

Direct benefit transfer (DBT) for fertilizer subsidy payments

  1. The government has decided to implement direct benefit transfer (DBT) for fertilizer subsidy payments across India
  2. Government is seeking to prevent diversion of fertilizers for commercial use and generate data on the usage of the nutrients to help farmers
  3. The department of fertilizers has already rolled out the programme in most states,
  4. data from which shows that transaction time and alleged instances of overcharging by retailers have come down

It is different from cooking gas DBT transfer

  1. The DBT model for fertilizers, however, is slightly different from that for others such as cooking gas, in which the ultimate consumer gets the entitlement in their bank account
  2. That is because farmers cannot be forced to pay large amounts upfront on fertilizers and wait for reimbursement

Other important decision taken by the cabinet

  1. The cabinet also approved continuation of the urea subsidy scheme for three years till 2020 at an estimated cost of Rs1.64 trillion
  2. There will be no urea price hike till 2020, said the official statement

[op-ed snap] From Plate to Plough: For farmers, the next big idea

Note4students

Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices

From UPSC perspective, the following things are important:

Prelims level: NCU and SHCs

Mains level: Why it is important to cut down the usage of Urea


News

PM’s comment on urea usage

  1. PM has asked farmers to cut urea consumption by half by 2022

Is it beneficial?

  1. A village in HP has increased wheat productivity by three times,
  2. By reducing urea consumption significantly through the use of soil health cards (SHCs) and increased their income by Rs 5,000 to 6,000 per acre

India’s urea market

  1. India consumes about 30 million tonnes (MT) of urea annually, of which about 24.5 MT is domestically produced and the rest is imported

Reason behind rising demand of urea

  1. Most of the industry players had been projecting increasing consumption of urea in India, given that higher incomes have increased the demand for food in the country
  2. Puzzling statement by the PM: In such a situation, the PM’s call for halving urea consumption by 2022 was somewhat puzzling to the fertiliser industry
  3. More so when the government itself is trying to increase urea production

But per hectare use of Urea is declining

  1. Urea consumption on a per hectare basis, has stagnated in India and the overall per hectare consumption of nitrogen (N), phosphorous (P) and pottasium (K) has declined somewhat (See chart below)
  2. May be, this is due to dramatic changes in pricing of DAP (diammonium phosphate) and MOP (muriate of potash)
  3. Or government policies pertaining to to SHC or Neem Coated Urea (NCU)

Low price of urea in India

  1. Urea prices in neighbouring countries in South and Southeast Asia, including China, are at least two to three-times higher
  2. Also, the price ratio of urea to DAP and MOP is highly skewed
  3. Indian farmers are using higher doses of urea (nitrogen) compared to phosphate (DAP) and potash (MOP), and not getting the best results in terms of yields

Why is countering this situation important?(health wise)

  1. Indian soils are deficient in micronutrients, especially zinc (about 48 per cent) — a fallout of which is zinc deficiency in wheat and rice, which, in turn, contributes to stunting in children
  2. The imbalanced use of N, P and K, therefore, needs urgent correction
  3. And therefore, serious thought needs to be given to the PM’s call to slash urea consumption
  4. The PM’s call is as important as his call on February 28, 2016 to double farmers’ incomes by 2022

Importance of Neem Coated Urea(NCM) and Soil Health Cards(SHCs)

  1. NCU can improve nitrogen use efficiency (NUE) by about 10 per cent by slowing the release of nitrogen
  2. SHCs  can also help rationalise the use of urea, provided they are backed by a massive extension programme

The way forward

  1. If the government can move quickly in right direction, there is hope to cut urea consumption significantly, at least for some time

Back2basics

Soil health cards(SHCs)

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Neem Coated Urea(NCU)

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Govt plans DBT in fertiliser subsidy

  1. Context: Govt plans to directly transfer the fertiliser subsidy to farmers
  2. Department (DoF) is working closely with the mission directorate (DBT) to implement DBT in fertilisers
  3. Pilot: in 20 districts, on phosphoric and potassic fertilisers, in Gujarat & Odisha
  4. Allocation: Rs 73,000 crores for the fertiliser subsidy in the current financial year

Fertiliser Industry is best candidate for direct benefit transfer

If the farmers are given subsidy directly, this will not only stop leakage but will also avoid unnecessary paper work and red-tapism

  1. There is a need to increase the urea price by at least 15 per cent. The current selling price of urea which is highly subsidised is almost one-fourth the world price
  2. If we increase urea price then it can lead to more balanced fertilization and lower subsidy outgo
  3. It is desirable to have freight merged into subsidy so that there is only one stage of disbursement
  4. To grant support for organic compost is a welcome move, as this ensures replacement of carbon into the soil thereby making it more conducive for farming
  5. Single Super Phosphate (SSP) is the appropriate fertiliser for the small and marginal farmers.
  6. Countries like Brazil have used this cheaper alternative with some support rather than depend on imported di-ammonium phosphate (DAP)

Ministry seeks more than Rs. 25,000-cr for urea subsidy bills

The Fertiliser Ministry has sought Rs.25000 cr from the Finance Ministry for making subsidy payments to domestic urea manufacturers.

  1. The govt. had allocated Rs.72,968.56 crore for fertiliser subsidy, out of which Rs.38,200 crore was earmarked for domestic urea.
  2. It is facing shortage of funds for making payments to domestic urea manufacturers due to subsidy arrears from the previous years.
  3. The govt. has taken slew of measures to improve the efficiency of urea manufacturers so as to reduce the subsidy bill.
  4. It has issued revised energy norms under the new urea policy for existing 25 gas based urea plants in the country.

India saves $1.8b on fertiliser subsidies. How?

  1. The reason is the fall in naphtha and gas prices.
  2. This would likely reduce the fertiliser subsidy bill to ₹600 billion ($9.1 billion) this fiscal year, about 18% below last year.
  3. The savings will help India towards its goal of reducing the fiscal deficit to 3.9% by the end of March.
  4. It would simultaneously increasing spending on roads and rail in an attempt to revive the economy.

Tough times for fertilizer industry

  1. In absence of a well-planned Govt. policy, top fertilizer manufacturers like Tata and Birla are mulling upon exiting the industry.
  2. Major reasons are excess focus and usage of urea, delayed subsidy payments, non-availability of domestic natural gas and inconsistent Govt. policy.
  3. Urea is highly subsidized which makes the prices of decontrolled NPK fertilizers 3-4 times higher, thereby, decreasing their consumption.
  4. Though the Govt. allowed gas pooling recently, but the entire benefit goes to urea industry and not to NPK manufacturers.
  5. Without a developed fertilizer industry, schemes like Soil Health Cards, Second Green Revolution etc. will remain only paper schemes.
  6. Subsidy of more than Rs. 30,000 crores is outstanding to manufacturers some of which dates back to 2008.

 

Consensus eludes meet on urea subsidy

At present, the subsidy is paid to urea producers and importers, not farmers. 

  1. Govt. is mulling to provide DBT to farmers directly.
  2. No decision could be taken on criteria for identifying the eligible farmers.
  3. The criteria of landownership would exclude majority of farmers and result in the emergence of a black market for urea as not all farms require the fertiliser.

[cd explains] Issues related to Urea Subsidy in India

 

Breather for three urea units

  1. Govt. approved the continuation of production of urea using naphtha or any other means in 3 fertiliser plants in Southern India.
  2. These alternative sources are to be used until the availability of gas through the pipeline.
  3. The total requirement of Karnataka, Tamil Nadu and Kerala is 23 lakh tonnes, and the annual production of these 3 units is 15 lakh tonnes per annum.

Govt clears new urea policy, will cut subsidy by Rs 4.8K Crore

  1. Aims to increase domestic production by 2 MM tonnes & reduce its subsidy bill by over Rs 4,800 crore annually.
  2. The maximum retail price (MRP) of urea for farmers has been left untouched at Rs 268 per bag of 50 kg, excluding local taxes.
  3. Farmers would have to pay an additional Rs 14 per bag for neem-coated urea.
  4. Earlier, the government had approved gas pooling policy under which all urea units would get gas at a uniform price.

The issues with Naphtha-based fertilizer units

  1. Center has been giving subsidy on the urea production but last year, they asked the units to switch over to natural gas as the cost of naphtha (as feedstock) was very high.
  2. Interestingly, in recent times, naphtha prices have fallen again.
  3. The 3 plants – MFL, SPIC and Mangalore Chemicals and Fertilizers Ltd. are not able to make use of the price fall because their fate hangs in limbo.
  4. These plants still do not have a regular connectivity to the natural gas & they can’t take a call on the Naptha price drop.

Naphtha-fed urea units won’t be closed down

  1. Centre had decided to discontinue subsidy for the Naphtha based urea fertilizer plants in the South since October 2014.
  2. Mangalore Chemicals and Fertilisers, Madras Fertilisers and Southern Petrochemicals Industries Corporation affected.
  3. But since Natural Gas could not be supplied to these units in time, Center has agreed to give a grace period.
  4. Fertilizer plants are the biggest consumers of domestically produced natural gas.
  5. Natural gas accounts for as much as 65-70% of urea production costs in India.

Discuss: In 2013, CSAT asked a ques on which industry has the highest water input (Ans – Thermal). Make a note for Fertiliser and Gas.

 

Why is KRIBHCO neem-coating the urea?

  1. KRIBHCO (Krishak Bharati Cooperative Ltd.) coats urea with neem to improve its productivity by ~15%.
  2. It also reduces pollution of air, water when the fertiliser is left unutilised.


:( We are working on most probable questions. Do check back this section.







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