The Telegraph
Friday , October 12 , 2012
Since 1st March, 1999
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Baby steps to urea overhaul

Forward march

New Delhi, Oct. 11: The government today marginally hiked the retail price of urea by Rs 50 per tonne to Rs 5,360 per tonne to encourage retailers to provide receipts of fertiliser stocks with them for sale. The decision is aimed at moving towards direct cash subsidy to farmers.

The hike, which was approved today by the cabinet committee on economic affairs (CCEA), will be effective from next month.

For farmers, urea will now become costlier by Rs 2.50 per bag of 50 kg.

“This (increase in urea prices) is a revenue neutral hike. It will increase the dealer or retailer margin, which is now Rs 180 per tonne, to Rs 230 per tonne,” an official said.

According to the fertiliser ministry, the higher margin is meant to incentivise retailers to acknowledge the receipt of the fertilisers either through mobile messages or logging into a Web-based application.

The decision to incentivise retailers has been taken in the context of the phased implementation of the project for the direct transfer of subsidy to farmers, a government statement said.

“This phase is currently getting consolidated and will lead to the greater transparency in the movement of fertilisers and availability at the farm gate. It also aims to prevent black marketing and use of subsidised urea fertilisers for industrial purpose,” it noted.

Based on this information, the government will release subsidy to fertiliser firms.

Earlier, subsidy was paid on the basis of claims filed by the fertiliser companies on production and sales without any detailed verification.

The government fixes the maximum retail price (MRP) of urea and the difference between MRP and the production cost is reimbursed by the government as subsidy to fertiliser companies.

The price of urea was last increased 10 per cent to Rs 5,310 per tonne in April 2010.

The CCEA has also approved a pilot project in 10 districts to make fertiliser sales fully transparent by tracking through ICT tools how fertilisers passes through various channels till it reaches the farmers.

The aim is to obtain as much as information as possible on the movement of fertilisers from companies to farmers before providing direct cash subsidy to the farmers. The farmers will be verified through Kisan Credit Card, Aadhaar or bank account numbers. The project will start by the end of this year.