Government, Farmers Wasting Rs 8,500 Crore of Funds on Urea: Economic Survey

Lamenting that a distorted policy has led to stagnation of investment in the fertiliser sector and increase in imports, a government document has said that government and farmers are together wasting funds of about more than Rs 8,500 crore on urea.

"Purchase of urea, beyond what is required, works out to roughly 50 lakh tonnes. Farmers and the government are wastefully spending Rs 2,680 and Rs 5,860 crore respectively for this. These costs are ultimately paid by the consumers as higher food prices and higher taxes, in return for a zero or negative impact on agriculture output," said the Economic Survey 2013-14, tabled in Parliament by Finance Minister Arun Jaitley on Wednesday.

The survey has also pitched for bringing urea under the Nutrient Based Subsidy (NBS) regime and paying subsidy directly to farmers and said the fertiliser's highly subsidised price leads to its unbalanced use, which is also a reason for higher food prices and taxes.

For every tonne of urea farmers pay maximum fixed price of Rs 5,360 per tonne, whereas government pays about Rs 11,760 per tonne as subsidy for the same quantity, resulting in wastage of funds on government account.

As the urea price, which is the main source of nitrogen (N), is highly subsidised, farmers are using it in place of phosphorous (P) and potassic (K) leading to unbalanced fertilisation in soil.

Whereas, subsidies on P and K fertilisers were capped since 2010 after they brought under the NBS regime, and at present farmers pay 61 to 75 per cent of its delivered cost while rest is subsidised by government.

Therefore the survey has is batting for bringing urea under NBS and direct subsidy payments to farmers for balanced use of fertilisers.

"The issue is soil degradation due to declining fertiliser-use efficency while urea needs to be brought under the purview of NBS policy, the recommendation of the task force for direct transfer of subsidy under the chairmanship of Nandan Nilekani, for phased shifting to direct transfer of fertiliser subsidy to farmers, merits consideration on priority," the survey stated.

The economic document pointed that distorted policy has resulted in stagnation of private investment in the sector and increased reliance on imports, and added," the fertilizer subsidy hurts everyone, farmers, firms, taxpayers and consumers."