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Direct Transfer of Subsidies in Fertilizers: Issues and Challenges for Supply Chain

Year 2015
Volume/Issue/Review Month Vol. - VIII | Issue I | January - June
Title Direct Transfer of Subsidies in Fertilizers: Issues and Challenges for Supply Chain
Authors Gangadhar Mishra
Broad area Direct Transfer of Subsidies in Fertilizers: Issues and Challenges for Supply Chain
Abstract
Subsidies are necessary evils in our economy and more so in fertilizers. In the present scenario, the Government
subsidizes manufacturers of fertilizers to ensure that the end product is affordable for farmers. The quantum of
subsidy that manufacturers receive is the difference between their normative cost of production/ Import and the
subsidized Maximum Retail Price (MRP)that fertilizers are sold at. India is the 3rd largest producer and consumer of
fertilizers in the world and fertilizer contributes to 40-50 percent of agricultural productivity. At Rs 70,967 Cr during
FY 2014-15 (RE),fertilizer subsidy is the second major subsidy element after Food subsidy followed by Petroleum
subsidy. A subsidy, by its very nature, introduces two or more prices for the same good, and createsincentives for
pilferage and diversion. As a result, the underprivileged suffer the most. Ensuringthat goods move in the supply
chain at market prices can minimize the incentives for diversion
Description Agriculture accounts for about one seventh of India’s GDP, provides sustenance to nearly 65% of our Population. Besides, it provides crucial backward and forward linkages to the rest of the economy. Successive fiveyear plans have laid emphasis on self-s
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