Direct Benefit Transfer of Fertiliser Subsidies Problems and Challenges in Effective Implementation

摘要

For a variety of political and socio-economic reasons, magnitude of fertiliser subsidies has escalated and captured a rising share of government budgets in the country, and become politically difficult to reduce or dismantle fertiliser subsidy. Government has been contemplating several measures to contain these subsidies through better targeting, ceiling on amount of subsidy or amount of subsidised fertilisers, reducing leakages and inefficiencies involved in their delivery, cash versus in-kind transfers, etc. The recent initiative of direct benefit transfer (DBT) scheme has generated a lot of political and economic debate on the comparative advantages and limitations of the scheme and its impact. Although subsidies on fertiliser have not been included in the first phase but there is a proposal to extend the scheme to fertiliser and food subsidies in future. The article questions the basic rationale for direct cash transfer of fertiliser subsidy scheme and highlights some of the challenges in its effective implementation. The paper argues that the basic premise of Indian fertiliser industry being over-protected, subsidy benefits the manufacturers and subsidized fertilisers are prone to leakages, therefore, direct cash transfer of subsidy, is misconceived and not well founded. Moreover, there are several challenges such as low coverage of Aadhaar enrolments, poor land records, low penetration of banking services, informal tenancy, working capital constraints, etc., in effective implementation of the scheme.