03 November 2022

DAILY CURRENT AFFAIRS ANALYSIS

1 – Inflation: GS III – Topic Indian Economy

Context:

• While the inflation trend has changed, any fast tightening of policy may have had a severe impact on the Indian economy and its people, according to RBI Governor Shaktikanta Das. This was said the day before the government received a letter from the central bank detailing its ongoing inability to control inflation at or below the permitted level of 6%.

About:

• The degradation of consumer purchasing power and the value of cash assets in a specific economy are both impacted by an increase in the cost of goods and services.
• In India, inflation is calculated by the Ministry of Statistics and Programme Implementation (MoSPI).
• Rising input costs, diminishing output, the demand-supply imbalance, excessive money circulation, rising demand, pay increases, and currency devaluation are a few factors that contribute to inflation.

How exactly is inflation calculated?

• The wholesale pricing index (WPI) and the consumer price index (CPI), which track increases in wholesale and retail prices, respectively, are the two main indices used to measure inflation in India.
• The CPI establishes price differences for goods and services that Indian consumers purchase for their own use, including food, healthcare, education, and technology.
• While the WPI evaluates the products or services that larger companies offer to smaller ones in order to resell them.
• The WPI (Wholesale Price Index) and the CPI are the two different inflation indicators used in India (Consumer Price Index).

Reflation:

• Reflation is the process of restoring the economy after a downturn or contraction. The objective is to increase output, encourage spending, and stop the trend toward deflation. Policies can be things like tax cuts, money supply growth, infrastructure upgrades, and interest rate decreases.

Stagflation:

• Stagflation is a condition marked by rising costs, declining employment, and sluggish economic expansion. Inflation and economic contraction.

Source The Hindu

 2 – Urea Import in India: GS III – Topic Agriculture

Context:

• India plans to stop importing urea as of 2025, according to Mansukh Mandaviya, the minister for fertilizers, as the country’s potential for domestic production rises as a result of the opening of new facilities.
• The largest urea importer, India, imports almost 30% of its average yearly consumption of 35 million tonnes.

What is nano-liquid urea?

• In the form of a nanoparticle, it is urea. It is a nutrient (liquid) that can be used in place of regular urea to give plants nitrogen.
• The white chemical fertilizer urea artificially supplies nitrogen, a crucial ingredient needed by plants.
• It was created to replace traditional urea, and it can reduce the need for it by at least 50%.
• It has the same amount of nitrogen (40,000 mg/L) and the same nutritional impact in a 500 ml bottle as it does in one bag of regular urea.
• Global farmers were first made aware of indigenous urea by the Indian Farmers Fertilizer Cooperative Limited (IFFCO).
• In Kalol, Gujarat, the first Liquid Nano Urea (LNU) facility is formally opened.

What does it mean to produce enough urea:

• India has been importing urea for many years to fill the gap in the supply chain. India is one of the main countries that imports urea, hence the demand there has an impact on the price of urea globally.
• The world’s largest user of urea and di-ammonium phosphate is India (DAP).
• After urea, DAP is the second most popular fertiliser in India.
• Because it contains a lot of phosphorus (P), which encourages the growth of roots, farmers frequently use this fertiliser just before or at the beginning of sowing.
• Due to supply interruptions, prices for urea and DAP have increased significantly across the board in 2022.
• About 70% of our population relies on agriculture as their main source of income, so any shortages or price increases for vital inputs like fertiliser will surely have a negative effect on the overall economic performance of our rural sector.
• It was never wise to rely only on urea imports because it is highly unlikely that urea demand will fall off in the near future.
• The choice to construct many brownfield urea plants in the public sector in 2016 was wise in this regard.
• The government will be able to save almost Rs 40,000 crore if there is enough urea.

 What is the status of fertilizers in India?

• Over the previous ten years, India has utilised more than 500 LMT of fertiliser annually.
• The Center estimates that its planned budget for fertiliser subsidies will rise by 62% to Rs. 1.3 lakh crore in FY21.
• Due to the more expensive cost of non-urea (MoP, DAP, complex) cultivars, many farmers choose to use more urea than is actually necessary.
• To decrease the usage of urea, the government has implemented a number of measures. To stop urea from being illegally diverted for non-agricultural uses, neem-coated urea was developed. Additionally, it improved the promotion of low-cost, organic farming.
• India imported 20.33 million tonnes of fertilizer during 2018–19 and 2020–21, up from 18.84 million tonnes, or roughly 8%.
• Moreover, one-fourth of the required urea supply in FY21 came from imports.
• Needs for Significant Fertilizer:
• India’s annual food production has expanded along with the demand for the nation’s fertilizers.
• Even with imports, there are still gaps between supply and demand because domestic production goals weren’t attained.

Which government initiatives are involved with this?

• Eight brand-new, centrally managed nano urea facilities will begin operating by November 2025.
• These exist among others in states like Assam, Uttar Pradesh, and Karnataka.
• Neem Coating of Urea: In order to increase soil health, reduce the use of plant protection chemicals, and accomplish other goals, the Department of Fertilizers (DoF) has mandated that all domestic producers must produce 100% of urea as Neem Coated Urea (NCU).

2015’s new urea policy (NUP):

The policy’s objectives are:

• to increase domestic urea production.
• to encourage the use of urea units that are energy-efficient.
• to clarify the Indian government’s subsidy burden.
• 2012’s new investment strategy:
• The New Investment Policy (NIP)-2012 was introduced by the government in January 2013 and changes were made in 2014. In order to make India self-sufficient in the urea sector and to encourage fresh investment in the urea business, this was done.
• The DoF unveiled a municipal compost promotion strategy in 2016, and the Indian government subsequently approved it. This initiative offers Rs. 1500 in market development assistance to boost municipal compost production and consumption.
• The Department of Defense (DoD) hired the National Remote Sensing Center of ISRO to conduct a three-year Pilot Study on “Resource Mapping of Rock Phosphate Using Reflectance Spectroscopy and Earth Observations Data” in cooperation with the Geological Survey of India (GSI) and the Atomic Mineral Directorate (AMD).
• The Department of Fertilizers of the Ministry of Chemicals and Fertilizers has been using it since April 2010.
• According to the NBS, a certain level of subsidy is assigned to each grade of subsidised phosphoric and potassium (P&K) fertilisers based on the quantity of nutrients it contains.

Source The Hindu

3 – Fertilizer Subsidy in India: GS III – Topic Agriculture

Context:

• In response to the steep rise in fertilizer costs on the global market, the Center “doubled” the fertilizer subsidy for this rabi season. The Union Cabinet approved a subsidy for phosphoric and potassium fertilizers (P&K) for the current rabi season in the sum of 51,875 crores for nitrogen (N), phosphorus (P), potash (K), and sulphur during a meeting held here on Wednesday (S).

What is a fertilizer subsidy?

• Farmers buy fertilisers at MRPs (maximum retail prices), which are less expensive than market pricing based on supply and demand, the cost of manufacturing, or imports.
• For instance, local manufacturers and importers typically charge between Rs 17,000 and Rs 23,000 per tonne for neem-coated urea, which has a government-set MRP of Rs 5,922.22 per tonne.
• The Center offers a subsidy to make up the shortfall; the amount varies based on the price of imports and the cost of output per plant.
• The companies decontrol or fix the MRPs of fertilisers without urea.
• The Center instead offers a set per-tonne subsidy to ensure that these nutrients are priced at “appropriate levels.”
• Because of this, urea is funded less and retails for far less than decontrolled fertilizers.

How is the subsidy dispersed and who receives it?

• Even though fertilizer manufacturers receive the subsidy, the farmer is ultimately the one who benefits from it because they pay MRPs that are less than the market-determined prices.
• In March 2018, a procedure known as direct benefit transfer (DBT) was developed. Under this plan, companies would only get subsidies after actually selling to farmers.
• Each store has a point of sale (PoS) system linked to the e-Urvarak DBT website for the Department of Fertilizers.
• You must enter your Aadhaar or Kisan Credit Card number while buying fertilizers on a subsidized basis.

The Issues with Fertilizer Subsidization in India:

• India is only second to China in terms of global fertilizer consumption. The purpose of fertilizer subsidies, which have been in place for more than 40 years, is to reduce the cost of fertilizers for farmers and, ultimately, to guarantee the safety of the country’s food supply.
• The cost of the subsidies has significantly increased over time. From just $700 million in 1990–1991 to over $11 billion in 2017–2018, it increased. The second-highest subsidy payout in the country, after food, is for fertilizers.
• However, this increase in spending hasn’t necessarily been advantageous for farmers. Government statistics show that around 65% of the fertilizer produced for small and marginal farmers is not distributed to them.
• The main form of fertilizer used in India is urea, which accounts for 70% of total usage.
• Customers (farmers) purchase urea at an artificially low price set by the government for each quintal (100 lb) (i.e.: fertilizer shops).

Action carried out:

• While keeping these leaks in mind, the Indian government has been utilizing technology to enhance the system.
• It chose the Mobile Fertilizer Management System to digitize the network for delivering fertilizer.
• The Direct Benefit Transfer (DBT) system it used to disperse the subsidies in 2016 was its primary innovation. Following the test, a deployment was carried out across the entirety of India in March 2018.
• Under the new DBT system, manufacturers are only compensated when the retailer sells the fertilizer to “authenticated” clients. This implies that a fertilizer purchaser is required to present identification. with an Aadhaar, ideally.
• Additionally, a customer’s fingerprint needs to be entered on a merchant-owned Point of Sale device.
• When the Point of Sale gadget verifies the customer’s identity, the store sells the consumer the fertilizer at a discounted price. The manufacturer then receives the required subsidy after the sale is recorded in the fertilizer management system.

Additional changes:

• The government is already thinking about switching to a new procedure where the subsidy is credited straight to the farmers’ bank accounts since there is a prospect for improved efficiency.
• The government already uses such direct transfers for items like pension payments and fuel subsidies.
• In these cases, a predetermined amount of money is instantly credited to the beneficiary’s bank account.

Solutions for Direct Subsidy Access for Farmers:

• To ensure the best fertilizer subsidy distribution, the first step would be to create a list of benefits farmers, including tenant farmers (who farm land owned by others, paying the rent with cash or with a portion of the produce). Existing databases, like the PM Kisan list (which comprises the farmers registered in the Indian government’s PM Kisan cash transfer program), can be a wonderful place to start.

Source The Hindu

4 – Uniform Civil Code: GS II – Topic Government Policies and Interventions

Context:

• In response to the steep rise in fertiliser costs on the global market, the Center “doubled” the fertiliser subsidy for this rabi season. The Union Cabinet approved a subsidy for phosphoric and potassium fertilisers (P&K) for the current rabi season in the sum of 51,875 crores for nitrogen (N), phosphorus (P), potash (K), and sulphur during a meeting held here on Wednesday (S).

What is a fertilizer subsidy?

• Farmers buy fertilizers at MRPs (maximum retail prices), which are less expensive than market pricing based on supply and demand, the cost of manufacturing, or imports.
• For instance, local manufacturers and importers typically charge between Rs 17,000 and Rs 23,000 per tonne for neem-coated urea, which has a government-set MRP of Rs 5,922.22 per tonne.
• The Center offers a subsidy to make up for the shortfall; the amount varies based on the price of imports and the cost of output per plant.
• The companies decontrol or fix the MRPs of fertilizers without urea.
• The Center instead offers a set per-tonne subsidy to ensure that these nutrients are priced at “appropriate levels.”
• Because of this, urea is funded less and retails for far less than decontrolled fertilizers.

How is the subsidy dispersed and who receives it?

• Even though fertilizer manufacturers receive the subsidy, the farmer is ultimately the one who benefits from it because they pay MRPs that are less than the market-determined prices.
• In March 2018, a procedure known as direct benefit transfer (DBT) was developed. Under this plan, companies would only get subsidies after actually selling to farmers.
• Each store has a point of sale (PoS) system linked to the e-Urvarak DBT website for the Department of Fertilizers.
• You must enter your Aadhaar or Kisan Credit Card number while buying fertilizers on a subsidized basis.

The Issues with Fertilizer Subsidization in India:

• India is only second to China in terms of global fertiliser consumption. The purpose of fertiliser subsidies, which have been in place for more than 40 years, is to reduce the cost of fertilisers for farmers and, ultimately, to guarantee the safety of the country’s food supply.
• The cost of the subsidies has significantly increased over time. From just $700 million in 1990–1991 to over $11 billion in 2017–2018, it increased. The second-highest subsidy payout in the country, after food, is for fertilizers.
• However, this increase in spending hasn’t necessarily been advantageous for farmers. Government statistics show that around 65% of the fertilizer produced for small and marginal farmers is not distributed to them.
• The main form of fertilizer used in India is urea, which accounts for 70% of total usage.
• Customers (farmers) purchase urea at an artificially low price set by the government for each quintal (100 lb) (i.e.: fertilizer shops).

 Action carried out:

• While keeping these leaks in mind, the Indian government has been utilizing technology to enhance the system.
• It chose the Mobile Fertilizer Management System to digitize the network for delivering fertilizer.
• The Direct Benefit Transfer (DBT) system it used to disperse the subsidies in 2016 was its primary innovation. Following the test, a deployment was carried out across the entirety of India in March 2018.
• Under the new DBT system, manufacturers are only compensated when the retailer sells the fertilizer to “authenticated” clients. This implies that a fertilizer purchaser is required to present identification. with an Aadhaar, ideally.
• Additionally, a customer’s fingerprint needs to be entered on a merchant-owned Point of Sale device.
• When the Point of Sale gadget verifies the customer’s identity, the store sells the consumer the fertilizer at a discounted price. The manufacturer then receives the required subsidy after the sale is recorded in the fertilizer management system.

Additional changes:

• The government is already thinking about switching to a new procedure where the subsidy is credited straight to the farmers’ bank accounts since there is a prospect for improved efficiency.
• The government already uses such direct transfers for items like pension payments and fuel subsidies.
• In these cases, a predetermined amount of money is instantly credited to the beneficiary’s bank account.

 Solutions for Direct Subsidy Access for Farmers:

• To ensure the best fertilizer subsidy distribution, the first step would be to create a list of benefits for farmers, including tenant farmers (who farm land owned by others, paying the rent with cash or with a portion of the produce). Existing databases, like the PM Kisan list (which comprises the farmers registered in the Indian government’s PM Kisan cash transfer program), can be a wonderful place to start.

Source The Hindu