What is the government’s logical reasoning behind the ‘One Nation, One Fertilizer’ Scheme?
The government controls the price of the most commonly used fertilizer, urea, which means that all manufacturing companies sell at a fixed MRP, which is just 10-20% of production costs. The government subsidizes manufacturers to the tune of 80-90 percent of their production costs.
The government’s fertilizer subsidy cost is enormous each year (estimated to be over ₹ 2 lakh crore in 2022-23), trailing only the food subsidy in terms of expense.
While prices for other fertilizers, such as diammonium phosphate (DAP) and muriate of potash (MOP), are not formally set by the government, they are subject to a subsidy system, which means that manufacturers sell around a tacitly fixed MRP. However, corporations were previously selling the goods under their own brand identification rather than the government’s.
Also Read: Why Govt the launch the ‘One Nation, One Fertilizer’ single ‘Bharat’ brand?
According to industry analysts, the government may have believed that farmers should be aware of the financial burden that comes with giving cheaper fertilizers.
Aside from subsidizing the cost of production, the government also gives firms freight subsidies or the cost of transporting their products to the end customer. Another reason for the introduction of single-brand fertilizers is to eliminate transportation subsidies, which are projected to be worth over ₹6,000 crores per year.
While the government regulates where manufacturers can sell their products under the Fertiliser (Movement) Control Order, 1973, producers do not hesitate to sell across wider distances due to the freight subsidies offered.
One of the causes for this migration is brand-specific demand for fertilizers in specific areas. One argument is that if producers quit selling urea under unique brands, there will be no need for the Indian Farmers Fertiliser Cooperative (IFFCO) to distribute fertilizers across states, hence reducing fertilizer subsidy expenditure.