Union Government to introduce Direct Transfer of Fertilizer Subsidy

November 30, 2016

The Union Government has decided to introduce Direct Benefit Transfer (DBT) system for fertilizer subsidy payments.
Under the proposed system, 100% subsidy on various fertilizer grades will be released to the manufacturers and importers on basis of actual sales made by the retailer to the beneficiaries.
Key facts

  • Initially, the modified subsidy procedure under DBT system will be introduced on pilot basis in 16 select districts.
  • In the second phase, the new payment system will be rolled out in all states only after its due stabilization in first phase.
  • The proposed DBT will address the issues relating to diversion and smuggling of urea.

How DBT system for fertilizer subsidy is different?

  • The DBT in fertilizer sector being implemented is slightly different from the normal DBT implemented in LPG subsidy.
  • Under it, the subsidy will be released to the fertilizer companies instead of the beneficiaries, after the sale is made by the retailers to the beneficiaries.
  • The subsidy will be released on submission of claims generated in the web-based online Integrated Fertilizer Monitoring System (iFMS) by fertilizer companies.

Potential benefits

  • It will reduce diversion and smuggling of fertilizers to a large extent. Thus, it will help Government to save subsidy to the some extent.
  • The fertilizers will be available to all on ‘no denial’ basis and release fertilizer subsidy to fertilizer companies has no direct relation with landholding of the farmers.
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