The Direct Benefit Transfer of Fertiliser Subsidy, though good on paper, is emerging as a mechanism to transfer benefits exclusively to the industry; not the farmer.

Agnotology is the name of the game. Stanford historian, Robert Proctor, coined this remarkable term to describe a state of affairs where ignorance is so deliberately and effectively induced into discourse that indisputable facts do not win arguments. This is how the hapless Indian farmer feels about the government strategy with fertiliser subsidy.

The goings on in the fertiliser industry are reminiscent of the classic tobacco industry response to the cancer-causing charges – that were levelled against it since 1954 – akin to the current “Direct Benefit Transfer of Fertiliser Subsidy” plot. This is being piloted on the specious plea that it will generate point-of-sale farmer traceability, stop leakages and ensure timely payments to the industry.

An excellent notion but it is hardly illustrative of what obtains in real life, where DBT emerges as a mechanism to transfer benefits exclusively to the industry. Realising the enormous opportunity in fertiliser DBT, large international fertiliser companies, like Yara International, have started buying Indian urea plants to get a toehold into the lucrative market. 

The fertiliser subsidy DBT pilot project in 17 districts is a well-planned deception; like the proverbial Trojan horse, ushered into the countryside to secure the farmer’s buy- in. The pilot is misleading as it does not incorporate all the draconian measures that will eventually be a part of the full roll out. Ultimately, DBT will allow industry to price fertilisers at will and the burden of collecting the subsidy, now with the government, will be transferred to the farmers. The DBT ploy  is very similar to what happened with the U.S. sugar industry in 1960, when it paid off scientists and academics to delink sugar from heart disease by diverting attention to saturated fat.

The fertiliser price has two components; the fixed retail price and the variable subsidy component. Today, irrespective of international urea price fluctuations, the farmers can buy a bag of urea at a fixed cost of ₹284. With the DBT regime, the arrangement will be turned on its head. The cost of a bag of urea will become variable while the subsidy component will be constant. In 2008, the international urea price breached $500 per tonne mark. In India though, the urea retail price was ₹239 per bag. International prices, about half currently, are perking up. Should the international price rise to 2008 levels in the DBT regime, the farmer could have to shell out ₹1,200 per bag. 

A perfect analogy to explain the final version of DBT of the fertiliser subsidy regime is the LPG gas cylinder cost borne by the consumers. Before the DBT on LPG, consumers paid ₹450 for the gas cylinder. After the regime change, the gas cylinder price has risen to ₹805. The consumer purchases the cylinder at full cost first and is reimbursed the subsidy component, if applicable. 

Currently, farmers just pay the subsidised retail price and take home the bag of urea. In the new regime, the farmer will have to register for the subsidy with land documents (difficult to procure) and pay the full price upfront for a future reimbursement of subsidy. This implies a capital expenditure that will increase the farmers’ credit requirement by a third for no fault of theirs. It must be borne in mind that the most common cause of farmer suicides is credit.

Tim Harford’s ‘distort, dispute, distract’ idea in ‘The problem with facts” may well have been based on the Indian DBT drama. First the fertiliser industry appeared to engage, next it sowed doubt around prioritising farmer needs over fertiliser industry profitability and, in the third stage, employing its enormous resources, it is using amenable experts to undermine farmers’ concerns and the genuine experts.

The new DBT regime will also limit the quantity of subsidised fertiliser that a farmer will be allowed to purchase. Wheat, rice, potatoes, pulses or millets and such others require different nutrients in varying quantities, depending on soil and crop selection. The policy negates this and reverts to the old bureaucratic generalisation of Indian agriculture, which has failed the nation repeatedly. Things get worse for a 100 million tenant farmers, who currently buy subsidised fertilisers. In the new regime, this category will not be entitled to subsidised fertilisers because land records will not reflect their names.

The DBT of fertiliser subsidy can be good if tweaked to protect farmer support. Farmers, with their backs to the wall, have no option but to pray for parliamentary guarantee of safeguards because mere words are not legally binding. For the farmers this is absolute betrayal, especially because the issue of livelihood is no longer the primary concern of even farmer fertiliser co-operatives. The last bulwarks of farmer hope and resistance against the international fertiliser mafia have fallen. 

The government’s grand vision for a ‘New India’ is at variance with its narrow economic policies. Officials only wish to rein in the fertiliser subsidy expenditure with sycophantic economists cheering them on. Sadly, alongside, ‘doubling farmer income’ is becoming a parody against the establishment. Even so, the disempowered farmer’s voice is being drowned in the din generated by the fertiliser industry and the small farmers are in danger of getting even more deeply trapped by their circumstances.