Tuesday, December 16, 2014

Make in India - Do we need to keep making it and wasting it?

Prime Minster Mister Narendra Modi has been calling for world businesses to Make in India to encourage them to manufacture in India. This is good to attract investment from foreign businesses in India. However I wonder if this is is really that beneficial to India when much of what is made in India is wasted. A case in point is the subsidies given to rural areas without much thought to the logistics of how these subsidies are used. An article recently in Krishi Jagaran has highlighted that over 8500 crore rupees of money is being wasted in subsidies. I can tell you that the cost is much more than that. Why? Let us look at Urea itself. Urea is one of the few fertilizers that is manufactured and it consumes fuel to manufacture Urea. This means cost of fuel needs to be included in the waste. Next the cost of transportation needs to be included too. However major waste occurs due to the excessive and inappropriate placement of Urea due to broadcast method of distribution of urea on soils. Studies have shown that depending on the soil types over 30-40% of urea runoff into waterways without benefitting the plants/crops in anyway. However this runoff causes pollution of the precious waterways and cause algal blooms and create problems for microfauna and organisms in the water. This also breeds undesirable bacteria. When cattle or humans consume this water, they get sick too. So the cost of excessive use of Urea does not stop to just 8500 crore at all.
Government also has asked for Urea consumption to be brought down. It would be good to do that but increasing prices will stop the subsistence farmer from using Urea. Therefore the only way to reduce consumption is by conducting soil test each year, assessing how much urea is required for the crop the farmer intends to sow and deciding on how much Urea subsidy the farmer requires. This will reduce consumption, save government lot of money and things made in India will not go to waste but can be exported to earn revenue for the government. There is no magic wand.
India need to urgently stop wasting food and all the agricultural commodities. Only then Make in India will turn into Made In India becoming much more useful and much more productive. 

Government And Farmers Are Together ‘Wastefully’ Spending Over Rs 8,500 Crore On Urea: Economic Survey

December 8, 2014
KJ News: Fertiliser subsidy paid to the companies has declined by about 41 per cent to Rs 21,300 crore as against Rs 36,000 crore paid in the corresponding period the previous financial year. It may be noted that the government had increased the total fertiliser subsidy in the July budget at Rs 72,970.30 crore for the entire 2014-15 fiscal from Rs 67,970 crore proposed in the Interim Budget.
While the subsidy is fixed by the government in case of phosphate and potassic (P&K) fertilisers like Muriate of Potash (MoP) and Di-ammonia phosphate (DAP), companies are free to decide prices for others. In case of urea, a controlled commodity, the retail price is fixed at Rs 5,360 per tonne, and the difference between the cost of production/imported price is paid as subsidy to the companies.
The Department of Fertilizers (DoF)  had enough funds in the subsidy account but the payments were delayed as it took time to evaluate the fairness of P&K fertiliser prices.
The Economic Survey 2013-14 pointed out that the government and farmers are together ‘wastefully’ spending over Rs 8,500 crore on urea, as it is highly subsidised soil nutrient and therefore used instead of P&K fertilisers. MRP of urea and NPK fertilisers was to be so fixed as to promote balanced fertiliser use. Urea MRP was to be re-determined every six months, and those of NPK fertilisers adjusted to provide the NPK balance. Post decontrol, subsidy was to be given only to small and marginal farmers.
Following, which the government had asked the industry to suggest ways to bring down urea consumption that has resulted into a huge subsidy bill besides affecting soil health.
Subsidies on Fertilizer 
(In carores of Rupees)
Indigenous(urea) Fertilise
Imported (urea) Fertilise
Sales of decontrolled fertilizer with concession to farmers
Total Fertilizer Subsidy


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