How DCT can help the fertiliser sector deal with main challenges

 These challenges can be substantively tackled if the design of DCT is optimal

Fertilizer subsidy accounts for the second-highest subsidy in India at around 22% of the overall subsidy burden amounting to Rs 79.5 thousand crores. Given the high fiscal outlay, it is crucial to responsibly design and implement an efficient, effective, and environmentally sustainable architecture for the distribution system of fertilizer.

The government has introduced several path-breaking reforms laying a strong foundation for this endeavor. These include the introduction of the Fertiliser Management System to monitor operations across the value chain, neem coating of urea to prevent pilferage into non-farm uses, gas-pooling to increase production efficiency of domestic urea, Direct Benefit Transfer System enabling the capture of real-time movement from plant port to retail and also the sale of fertilizer through point-of-sale machines.

There has been an intensive focus on the revival of 5 fertilizer plants (Ramagundam, Gorakhpur, Barauni, Sindri, and most importantly Talcher) to augment the country’s overall urea production by 63.5 LMTPA aligned with the Atma Nirbhar paradigm. Finally, the government has allocated Rs 65 thousand crores to clear all the compensation dues of fertilizer companies.

These carefully orchestrated reforms provide the building blocks for the next iterative reform, direct cash transfer (DCT). As of now, farmers pay the subsidized price and the difference between the MRP and the cost goes as a subsidy to the manufacturers. This involves procedural hassles, monitoring difficulties, and informed access challenges for farmers.