Context: 

The Union Cabinet approved a ₹1.08 lakh crore subsidy for the ongoing kharif or monsoon season.

Key Points:

• In 2022, the total fertiliser subsidy was about ₹2.56 lakh crore.
• With fertiliser prices continuing to remain high due to global factors — such as a fall in production and hiked logistics costs, especially due to the Ukraine situation — the Centre expects this year’s fertiliser subsidy to cross ₹2.25 lakh crore.

About Fertiliser Subsidy:

• Farmers buy fertilisers at MRPs (maximum retail price) below their normal supply-and-demand-based market rates or what it costs to produce/import them.
• Urea:
  • The MRP of neem-coated urea, for instance, is fixed by the government, whereas its average cost-plus price payable to domestic manufacturers and importers is around 4 to 5 times of the MRP. 
  • The difference, which varies according to plant-wise production cost and import price, is footed by the Centre as subsidy.

• Non-Urea Fertilisers:
  • The MRPs of non-urea fertilisers are decontrolled or fixed by the companies.
  • The Centre, however, pays a flat per-tonne subsidy on these nutrients to ensure they are priced at reasonable levels.

How is the subsidy paid and who gets it?

• The subsidy goes to fertiliser companies, although its ultimate beneficiary is the farmer who pays MRPs less than the market-determined rates. 
• Companies, until recently, were paid after their bagged material had been dispatched and received at a district’s railhead point or approved godown.
• From 2018, a new so-called direct benefit transfer (DBT) system was introduced, wherein subsidy payment to the companies would happen only after actual sales to farmers by retailers.
• DBT in Fertiliser: 
  • Each retailer now has a point-of-sale (PoS) machine linked to the Department of Fertilisers’ e-Urvarak DBT portal. 
  • Anybody buying subsidised fertilisers is required to furnish his/her Aadhaar unique identity or Kisan Credit Card number. 
  • The quantities of the individual fertilisers purchased, along with the buyer’s name and biometric authentication, have to be captured on the PoS device. 
  • Only upon the sale getting registered on the e-Urvarak platform can a company claim subsidy.                                                                                                                   

News Source: The Hindu