‘One Nation, One Fertilizer’ Scheme

In News

• Recently the ‘One Nation, One Fertiliser’ scheme was launched. 

More about the ‘One Nation, One Fertilizer’ scheme

• About:
  • Under the scheme, all fertiliser companies, State Trading Entities (STEs) and Fertiliser Marketing Entities (FMEs) will be required to use a single “Bharat” brand for fertilisers and logo under the PMBJP.
    • The new “Bharat” brand name and PMBJP logo will cover two-thirds of the front of the fertiliser packet.
    • The manufacturing brands can only display their name, logo, and other information on the remaining one-third space.
• Significance of the scheme:
  • Standardisation:
    • This will standardise fertiliser brands across the nation irrespective of the company that manufactures it.
  • Affordability:
    • Scheme will ensure affordable quality fertiliser of Bharat brand to the farmers.
    • This scheme will result in reduction of the cost of fertilisers and increase their availability.
  • Single branding:
    • Competition among companies that push their brands will get reduced with this single branding, which will ensure sufficient supply of fertilisers across the country.
  • Reduced freight charges:
    • A single brand name will help in the reduction of freight charges due to stopping of crisscross movement of fertilizers this will help in reducing the transit time
  • Stopping urea diversion:
    • It will also stop the diversion of urea for industrial purposes.

Major Issues/ Challenges associated with the fertiliser sector 

• Supply-side constraints:
  • India is facing a tight supply position in fertilisers, especially of phosphatic and potassic nutrients.
    • Retail food inflation has hit a 7.68 per cent mark.
  • The challenges include securing supply from new sources, costlier raw material, and logistics.
  • The pandemic has impacted fertilizer production, import and transportation across the world.
• Global issues:
  • Major fertiliser exporters such as China have gradually reduced their exports in view of a dip in production.
    • This has impacted countries such as India, which sources 40–45% of its phosphatic imports from China.
  • There has been a surge in demand in regions like Europe, America, Brazil and Southeast Asia.
  • While the demand has increased, the supply side has faced constraints.
• Other:
  • There has been a steady increase in prices of raw material as well as logistics and freight costs.            
  • The disruption in the logistics chain during COVID has caused the average freight rates for ships to jump up to four times.
  • Besides, prices of fertilisers such as DAP and urea, and raw materials such as ammonia and phosphatic acid, have risen up to 250–300%.
  • The total fertiliser subsidy bill is expected to reach Rs 2.5 lakh crore this financial year, up from Rs 1.62 crore in the revised estimates for the previous fiscal.

Criticisms

• Major criticisms:
  • Critics argue that completely commoditising fertilisers could 
    • impact their quality, 
    • discourage manufacturers from bringingnewer and more efficient products into the market if there is less scope for building a unique brand identity.
    • It may also leave them as mere importers or contractors of fertilisers.
• Brands not owned:
  • Many manufacturers have also expressed reluctance to spend on a brand they do not own. 
  • Once in a while, some companies may bear the expense, but it will be difficult to spend continuously on advertisements where brand value for that company is zero.
• Regulation:
  • A government brand will add another layer of regulation to the fertiliser manufacturing sector where almost every aspect- from product pricing to cost structure to geographical distribution and sale- is controlled by the government.

Government’s rationale on One Nation, One Fertilizer scheme

• Subsidy and MRP
  • The maximum retail price of urea is currently fixed by the government, which compensates companies for the higher cost of manufacturing or imports incurred by them. 
  • The MRPs of non-urea fertilisers are on paper decontrolled. 
  • But companies cannot avail of subsidy if they sell at MRPs higher than that informally indicated by the government. 
    • Simply put, there are some 26 fertilizers (inclusive of urea), on which the government bears subsidy and also effectively decides the MRPs. 
• Supply plan
  • Apart from subsidising and deciding at what price companies can sell, the government also decides where they can sell. 
    • This is done through the Fertiliser (Movement) Control Order, 1973. 
  • Under this, the department of fertilisers draws an agreed monthly supply plan on all subsidised fertilisers in consultation with manufacturers and importers. 
• Taking Credit
  • When the government is spending vast sums of money on fertiliser subsidy plus deciding where and at what price companies can sell, it would obviously want to take credit and send that message to farmers.