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Digital Readiness of States for Direct Benefit Transfer of Fertiliser Subsidy
In the case of fertilisers, unlike other forms of subsidy, the government provides subsidy to the manufacturers and not the farmers, allowing inefficient production units to thrive in the system. The Standing Committee on Chemicals and Fertilizers convened in March 2020 to recognise these challenges and called for a framework to adopt direct cash transfer into farmers’ accounts. This policy change will require the states to prepare against three key parameters—physical infrastructure, financial inclusion, and farmer identification—to target the beneficiaries. Using secondary institutional data, this paper explores the digital readiness of various states to transition to DCT and the challenges they face.
India is the world’s second-largest consumer of fertiliser (ICFA nd). The agricultural sector is huge, and farmers comprise most of India’s workforce. The Government of India (GoI) provides subsidy on fertiliser to support them at a budget of approximately $19 billion (`1,537 billion), as of 2021–22 (Ministry of Finance 2021). The GoI started providing farmers with subsidies to purchase fertiliser in 1977 (IndiaAgroNet.com nd). In subsequent years, it introduced several fertiliser subsidies to ensure stable prices and efficient distribution of fertilisers to the farmers. Everyone in the country, irrespective of wealth or landholding, has access to fertiliser subsidies, and the government compensates the respective manufacturers.
The subsidy on fertiliser is unlike domestic cooking gas subsidy (liquified petroleum gas–Pratyaksh Hanstantrit Labh [LPG-PAHAL]) and food subsidy, which reach targeted beneficiaries directly. The government wants to introduce a similar change in fertiliser subsidies, as it currently provides subsidies to the manufacturers, and it plans to link farmers’ bank accounts to allow them to receive subsidies directly. The government has estimated a saving of over `44,000 crore in fiscal 2020–21 with the help of the direct benefit transfer (DBT) mechanism. With this, total savings till 31 March 2021 have crossed `2,200 billion (Sinha 2021).
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