The Centre’s decision to roll out a ‘One Nation, One Fertilizer’ scheme to save on the subsidy bill and make farmers aware of the benefit they enjoy, appears to be a remedy that is worse than the disease. The scheme, to be called Pradhan Mantri Bhartiya Janurvarak Paryojna (PMBJP), requires all fertiliser manufacturers and marketers to drop their brands and to substitute them with a homogenous ‘Bharat’ brand from October 2. As per the scheme only standard government-designed packaging must be used, with the ‘Bharat’ brand and PMBJP logo to be displayed over two-thirds of the bag’s surface and the manufacturer’s name and the fertiliser grade relegated to one-third of the display. These new measures add an additional layer of control to an already over-controlled industry where selling prices and distribution are dictated by the government. The bar on branding will effectively deprive fertiliser makers of the ability to differentiate their products and retain market shares, serving as a deterrent to private presence in the sector. A throwback to the license era, the scheme dashes hopes of reforms that could have set this critical sector on the path to commercial viability and self-sufficiency.
The Centre has offered two explanations as to why it is keen to white-label fertilisers. It contends that, as a major portion of the production cost for fertilisers is met by the exchequer, there’s no point in individual fertiliser makers incurring freight costs on shipping their products cross-country, just because farmers prefer one brand over another. This argument is weak because freight costs, by the Centre’s own admission, account for just ₹6,000 crore of the subsidy bill of ₹2.25 lakh crore. While the savings on freight will be small, the bar on branding could prompt fertiliser makers to suspend all marketing, advertising and extension activities that they’ve so far used to build farmer connect and market share in this commoditised business. Private players would also have little incentive to experiment with customised products or new nutrient combinations. Should these constraints prompt them to reduce their presence in this sector over time, the country may come to rely on public sector producers who may not be efficient or low cost. Two, the Centre seems to be keen on making farmers aware that it is footing a hefty bill to make nutrients available to them at ultra-cheap prices. While it’s true that the subsidy component on fertilisers has been shooting through the roof lately, the main reason for this is the Centre’s own unwillingness to hike selling prices even marginally to keep up with inflation. Branding this scheme with the acronym ‘PMBJP’ smacks of an attempt to gain political mileage out of an expense that is funded by taxpayer money.
If the intent is to prune the bloating subsidies, the Centre can explore the more intuitive solution of decontrolling prices of fertilisers, while subsidising farmers directly through Direct Benefit Transfer (DBT). With JAM-enabled bank account penetration quite high and DBT being successfully used for PM Kisan Samman Nidhi and other welfare payouts, there’s no reason why fertiliser subsidies cannot be transitioned to this mode. Making subsidy payments directly into farmers’ accounts instead of routing it through manufacturers will not only help in targeting of small farmers and reduce leakages, but also promote the Centre’s objective of making them aware of the subsidy element in fertilisers in a more direct manner.
August 30, 2022