From UPSC perspective, the following things are important :
Prelims level : One Nation One Fertiliser (ONOF)
Mains level : India's fertilizer subsidy
Prime Minister has inaugurated 600 Kisan Samridhi Kendras and ‘One Nation, One Fertilizer’ scheme and said that these steps were being taken to modernise agriculture.
One Nation One Fertilizer (ONOF)
- The single brand name for UREA, DAP, MOP and NPK etc. would be BHARAT UREA, BHARAT DAP, BHARAT MOP and BHARAT NPK etc. respectively for all Fertilizer Companies, State Trading Entities (STEs) and Fertilizer Marketing Entities (FMEs).
- Also a logo indicating Fertilizer subsidy scheme namely Pradhanmantri Bhartiya Janurvarak Pariyojna will be used on said Fertilizer bags.
- Under the scheme, companies are allowed to display their name, brand, logo and other relevant product information only on one-third space of their bags.
- On the remaining two-thirds space, the “Bharat” brand and Pradhanmantri Bharatiya Jan Urvarak Pariyojana logo will have to be shown.
What is the government’s argument for introducing this scheme?
The government’s logic for introducing a single ‘Bharat’ brand for all subsidised Fertilizers being marketed by companies is as follows:
(1) Subsidies normalization
- The maximum retail price of urea is currently fixed by the government, which compensates companies for the higher cost of manufacturing or imports incurred by them.
- The MRPs of non-urea Fertilizers are, on paper, decontrolled.
- But companies cannot avail of subsidy if they sell at MRPs higher than that informally indicated by the government.
- Simply put, there are some 26 Fertilizers (inclusive of urea), on which government bears subsidy and also effectively decides the MRPs;
(2) Harmonizing markets
- Apart from subsidising and deciding at what price companies can sell, the government also decides where they can sell.
- This is done through the Fertilizer (Movement) Control Order, 1973.
- Under this, the department of Fertilizers draws an agreed monthly supply plan on all subsidised Fertilizers in consultation with manufacturers and importers.
- This supply plan is issued before the 25th of each month for the following month, with the department also regularly monitoring movement to ensure Fertilizer availability as per requirement, including remote areas.
(3) Farmers welfare
- The government is spending vast sums of money on Fertilizer subsidy (the bill is likely to cross Rs 200,000 crore in 2022-23).
- By deciding where and at what price companies can sell, it would obviously want to take credit and send that message to farmers.
What can be the drawbacks of the scheme?
- It may disincentivize Fertilizer companies from undertaking marketing and brand promotion activities.
- They will now be reduced to contract manufacturers and importers for the government. Any company’s strength ultimately is its brands and farmer trust built over decades.
- Currently, in case of any bag or batch of Fertilizers not meeting the required standards, the blame is put on the company. But now, that may be passed on fully to the government.
- Politically, the scheme might well boomerang rather than benefit the ruling party.
Challenges in the fertilizer sector
- Distortion in use due to price difference: In 2019-20, fertilizer use per hectare of cultivated area varied from 70 kg of NPK in Rajasthan to 250 kg in Telangana
- Shift in the composition of fertilizer used:The high price differences among fertilizers (Nitrogen is much cheaper than Potassium and Phosphorus) have disturbed the relative prices of various fertilizers and resulted in a big shift in the composition of fertilizers used in the country in favor of urea and thus Nitrogen.
- Increasing fertilizer subsidy: Fertilizer subsidy has doubled in a short period of three years. For 2021-22, the Union Budget has estimated fertilizer subsidy at ₹79,530 crores (from ₹66,468 crores in 2017-18).
- Burden on exchequer: Taxpayers bear 78% of the cost of urea and farmers pay only 22%. This is expected to increase and is not sustainable.
- Sensitive to Global impacts: The subsidy is likely to reach a much higher level due to the recent upsurge in the prices of energy,the international prices of urea and other fertilizers, and India’s dependence on imports.
- Import dependence: The total demand for urea in the country is about 34-35 million tonnes whereas the domestic production is about 25 million tonnes.
- Lesser expansion of Irrigation facilities and consequent low fertilizer consumption leads to low demand and therefore, restricts the growth of the industry.
- Use of Obsolete Technology: Most of the fertilizer industry operates under PSUs that are using decade-old technology and thus making huge losses and also the competitive edge.
- India should pay attention to improving fertilizer efficiency through need-based use rather than broadcasting fertilizer in the field.
- The use of bio-fertilizers is necessary to maintain soil health as more and more use of chemical fertilizers kills all the microorganisms available in the soil, which are so essential for maintaining soil health.