Incoming: India’s Direct Benefit Transfer Scheme for Fertiliser Subsidies

India’s Direct Benefit Transfer (DBT) scheme was conceptualised and launched around 2013, and aims to facilitate targeted subsidy payments to the end user for domestic fuel and fertilisers. DBT for fertilisers is being implemented in phases. The government ultimately aims to use DBT to directly transfer fertiliser subsidies to 120 million farmers, which for more than 30 years have gone through the fertiliser companies.

DBT is still evolving...

The Indian Government has been exploring the use of DBT for fertiliser subsidies for more than five years now, and the scheme keeps evolving. The government did make some headway when it comes to domestic fuel distribution, as subsidies for Liquefied Petroleum Gas (LPG)—which is used for household cooking—have successfully been transferred to the end user. In the last couple of years, the time of subsidy payment changed from the moment that fertiliser was dispatched to the moment the receipt is received by the district warehouses. On top of that, the payment of balance subsidy—so not the bulk of the subsidy payment, but the remaining balance of 5% to 10%—used to happen after acknowledgement by the retailers.

The current phase is a pilot project for DBT for fertilisers in 16 districts, but that still does not include DBT to the farmers. The payment of subsidy is being moved forward, from the moment the receipt is received in the district to the moment the farmer purchases the fertiliser. Still, the current phase is not yet an implementation of DBT for fertilisers in its truest sense, but it could mean that the Indian government is in the process of collecting farm-level information before actual benefits can be transferred directly to the farmer.

…and the tech is changing too…

Historically, the Mobile Fertiliser Monitoring System (mFMS) was used to capture the sales flow of fertilisers from the district warehouse to the wholesalers and retailers. mFMS has a web and mobile interface for entering and accessing information and has been used to generating data for balance subsidy. From 2016 onwards, the mFMS has been upgraded to the Integrated Fertiliser Monitoring System (iFMS), which provides a single-window interface for subsidy payments, tracking movement of the fertiliser from plant or port to buyer, and ultimately also for DBT once the system becomes more sophisticated. The iFMS has a web, mobile and Point of Sale (POS) interface for data entry and uses technologies like electronic signatures and biometric authentication for security and verification. As per the government’s plan, the mobile interface of FMS will be phased out and will be replaced by the POS interface from the beginning of the financial year 2017. The POS-based solution ultimately aims to capture the sale of fertiliser by the retailer to the buyer, which is the final target for subsidy payment.

...but what happens next?

The government now plans to roll out the current DBT scheme, which is being carried out in the 16 pilot districts, on a national scale starting at the beginning of this year. The actual implementation may happen with a lag of four to six months.

There is one thorny issue: DBT could put undue responsibility on retailers. Retailers are likely to have trouble correctly recording all details of the sale transaction, which may cause subsidy payments to be delayed or even cancelled. A detailed road map for the implementation of DBT to farmers is a must for the fertiliser industry to fully support DBT given the expected issues during the transition period.

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