Farmers Dislike Direct Cash Transfer Fertilizer Subsidy

The Direct Cash Transfer Subsidy has not been well received by the farmers. According to NITI Aayog, 64% of farmers don’t favour the Direct Cash Transfer (DCT) policy for fertilizer subsidy. Farmers in India prefer Direct Benefit Transfer (DBT) over DCT.

Direct Cash Transfer (DCT) Subsidy Policy

In this scheme, farmers have to pay the decontrolled market price to buy fertilizers. The subsidy will be credited into their registered bank account of farmers later. Earlier, farmers used to buy fertilizers at subsidised rates.

For the purchase of fertilizer, farmers are identified through their Adhaar number in the PoS machine. machine is installed at the retailer’s shop

Direct Benefit Transfer (DBT)

The DBT is aimed to track the real buyer and monitor the price offered by retailers for fertilizers. It also provides a more efficient and rapid way through PoS machines. In this system the subsidies are paid to the companies after the receipt is generated. The survey conducted by MicroSave Consulting across 18 states and 15 districts, covering around 11,281 farmers and 1,182 retailers between July and September 2018, found that 76.5% farmers supported this scheme because of the sound authentication technique employed by it.

Fear of delayed payment or no payment

The DCT scheme for fertilizers is similar to DCT for subsidised LPG cylinders. Farmers had bitter experience with Direct Cash Transfer for LPG. They reported that the subsidy was delayed and sometimes they didn’t even receive it. They fear the same would happen DCT for fertilizers.


Farmers claim that they might have to borrow money from lenders in order to purchase fertilizers. Buying fertilizers at market rate will increase their financial stress. Explaining how DCT may increase the financial burden of farmers, the study refers to an example of a farmer who buys 25 bags of urea at the subsidised price of Rs 266 per bag and would have to pay Rs 6650 for the same. But under the DBT scheme, he would have to pay the decontrolled market price, which is Rs 1,100 for each such bag. Hence the total money the farmer has to pay initially increases to Rs 27,500 from Rs 6500, to buy the same quantity of fertilizer. Although the money would be transferred to the account of farmer later, initially the farmer may have to borrow money from informal lenders at higher interest rates to buy fertilizers.

Technology Flaw

The study also found that 79.8% of fertilizer sale transactions occurred through Adhaar identification and 6.4% through voter Id or KCC numbers. Rest 13.8% of the transctions happened through manual distributions because of the technical problems in PoS machine and authentication problems.

The government is working on the process to implement e-wallet for fertilizer subsidy to reduce the problems faced in DCT. A top official said, “The e-wallet may be used only for purchase of fertilizer through PoS machines. The money transferred would be non-lapsable; the unspent amounts can be taken forward to the next season”.

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