New Delhi: Aiming to shift towards direct transfer of fertiliser subsidy to farmers, the government Wednesday hiked retail price of urea marginally by Rs 50 to Rs 5,360 per tonne for incentivising retailers to provide receipt of fertilisers stock received by them for sale.
The hike, which was approved Thursday by the Cabinet Committee on Economic Affairs (CCEA), would be effective from next month. For farmers, urea will now become costlier by Rs 2.50 per bag of 50 kg.
"The CCEA decision to increase the maximum retail price (MRP) of urea by Rs 2.50 per bag or Rs 50 per tonne is to provide an incentive to the retailer to give acknowledgement of fertilisers that he has received from the manufacturer/ importer or wholeseller," an official statement said.
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, it said.
The Fertiliser Ministry explained that retailers are supposed to acknowledge the receipt of the fertilisers either through the SMS-based application or through the web application.
"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.
The maximum retail price (MRP) of urea was last increased by 10 percent to Rs 5,310 per tonne in April, 2010.
The urea production in the country is around 22 million tonnes and 7-8 million tonnes is met through imports.
In case of urea, the government fixes the MRP and the difference between the MRP and production cost is reimbursed by the government in form of subsidy to fertiliser companies.
Fertiliser subsidy stood at Rs 67,000 crore last fiscal, of which urea accounts for Rs 24,500 crore.
Currently, the government gives 85-90 percent of urea subsidy to companies after the statutory auditor certifies the sale of the crop nutrient.
The remaining 10-15 percent of subsidy is given to them only after the state government acknowledges the sales.
With CCEA's approval, the government will pay remaining subsidy upon sale receipt of fertiliers from retailers also.
To ensure that the government gets accurate figures of fertilisers stock in the open market, experts said, "Retailers are encouraged to send the sale details of fertilisers via mobile SMS to the Fertiliser Ministry. Hence the incentive."
At present, ministry tracks the movement of fertilisers at district and state level through a website called Fertiliser Monitoring System (FMS). Now, this will be tracked through mobile as well.
To check the feasibility of the proposed model of direct transfer of the fertiliser subsidy in cash to farmers, the CCEA also approved carrying out of a pilot project by the Department of Fertilisers in 10 districts and for information visibility on sale of fertilisers to the farmers.
The project, to be started by the end of 2012, would also be tracked through ICT enabled tools. Farmers will be identified through the Kisan Credit Card or Aadhaar number or bank account number or any other identification.
A model to transfer fertiliser subsidy in cash directly to farmers in three phases was suggested by a task force, headed by Nandan Nilekani.
It recommended setting up a software to track the sale of fertiliser till the retail level in the first stage, payment of subsidy to retailers in the second stage and covering farmers with Unique Identification cards in the final stage.