The Bharatiya Janata Party-led National Democratic Alliance government announced in March that it had completed the nationwide rollout of its scheme to deliver fertiliser subsidies to farmers using Aadhaar, the 12-digit biometrics-based unique identification number. The idea was that Aadhaar would accurately identify beneficiaries and help plug leakages in fertiliser subsidies, worth Rs 70,000 crore annually, given to farmers.

But a government-commissioned study of the pilot phases of the scheme – submitted to the Centre last month – has found that the use of Aadhaar has not entirely worked on the ground. According to the study, in one of every five transactions in the 14 districts where the scheme was implemented last year, sales of fertilisers were not registered against the buyers’ Aadhaar numbers. Traders instead used their own or someone else’s Aadhaar numbers to register the sales.

The study said this was because farmers did not have their Aadhaar numbers at the time of the sale, or their biometrics did not match, or the traders manually sold fertilisers to manage large crowds during peak seasons. While the adjustments may have been made to accommodate ground realities, the findings show the scheme is still open to pilferage. Sales can be made against any Aadhaar number and no one can verify whether the buyer is a farmer.

The study was conducted by the consulting firm MicroSave on behalf of the government think tank NITI Aayog.

It was conducted in three rounds: first in September 2016 when the scheme was launched in two districts, then in January 2017 when the scheme was extended to six districts, and then in July-September 2017 when the scheme was extended to 14 districts.

The ratio of these “adjusted transactions” doubled from 10% of total transactions during the winter cropping season in January last year, when the scheme was implemented in six districts, to 21% in the summer cropping season in July-September, when the scheme covered 14 districts.

Using Aadhaar to identify the correct beneficiaries of the government's subsidised fertilisers has not entirely worked on the ground. (Credit: Kumar Sambhav Shrivastava)

Chinks in soil health card scheme

The government had originally thought of linking the scheme to three databases of Indian citizens to ensure only needy farmers received the subsidies – Aadhaar to identify buyers, digitised land records to confirm they were farmers, and soil health cards to determine what quantity of fertiliser should be sold to them. But as it experimented with the scheme in selected districts since 2016, it quietly abandoned the use of land records and the soil health cards in the face of ground realities.

The study also found chinks in the soil health card scheme. The government launched the scheme in 2015 and plans to issue soil health cards to all 14 crore farmers in the country by March 2019. The cards contain information and recommendations on the soil nutrient status of each agricultural plot and are an important component of the government’s much-hyped target of doubling farmers’ incomes by 2022.

Under the fertiliser subsidy scheme, the government planned to use the soil health card database to end the indiscriminate use of fertilisers by farmers by recommending the quantity of fertilisers required for their crops. India has been supplying its farmers with cheap fertilisers on a large scale since 1977. But in many parts of the country, excessive use of fertilisers has led to subsidies being wasted and has ended up degrading soil health and polluting water.

In July, the government claimed to have issued soil health cards to 10 crore farmers, or more than 70% of India’s farmers. But the MicroSave study said that in the 14 districts where it studied the pilot of Aadhaar-based direct benefit transfers in fertiliser subsidies, only 30% of the surveyed farmers were aware of the soil health cards. Less than 9% had the cards and only 6% followed the crop recommendations on the cards. Many farmers did not know the use and purpose of the cards.

The department of fertilisers, which is implementing the fertiliser subsidy reforms, and the Ministry of Agriculture, responsible for the soil health card scheme, did not respond to email queries sent by

Reform attempts

India spends 1% of its gross domestic product (the value of all goods and services produced in a year) on fertiliser subsidies. According to the Economic Survey of India of 2015-2016, only 35% of this annual outlay on subsidised fertilisers reaches the small and marginal farmers for whom it is intended. The rest is diverted to industries such as plywood and paint manufacturers that use similar chemicals, is illegally exported across the border to Bangladesh and Nepal, where urea is far more expensive, or is siphoned off by rich landowners.

The problem is structural: fertiliser subsidies are routed to the manufacturing companies and not farmers. Unlike in other welfare schemes, such as the public distribution system of subsidised food in which the government has started transferring subsidies directly in the bank accounts of the poor, it was difficult for the government to identify beneficiaries of fertiliser subsidies and their entitlements. Besides, it was of the belief that even if the subsidies were transferred directly into the accounts of farmers, many of them would not be able to buy fertilisers at the much higher market rates.

And so the only way to stop the leakages was to fix the supply chain between the manufacturers and the farmers.

The first few steps in this direction were taken by the Congress-led United Progressive Alliance government. It rolled out an online tracking system that made it compulsory for manufacturing companies to upload data showing sales to wholesalers, which helped track the availability of fertilisers in a district. It then launched a mobile-based Fertiliser Management System, which required retailers to send updates by text message to confirm the receipt of fertilisers from wholesalers. Fertiliser companies received their payments from the government on the basis of these text messages.

After coming to power in 2014, the BJP government decided to take the final step of fixing the last mile of the supply chain between the retailer and the farmer by using the Aadhaar, land records and soil health card databases. It launched a pilot project in the Krishna and West Godavari districts of Andhra Pradesh in June 2016.

The retailers were given point-of-sale machines through which they could authenticate the biometrics of the buyer against their Aadhaar number. The machines also fetched land record and soil health card information and recommended to the buyer how much fertiliser they should buy.

India spends 1% of its GDP on fertiliser subsidies. (Credit: Kumar Sambhav Shrivastava)

Scaling down

The idea looked good on paper. It seemed to ensure that only genuine farmers bought the fertilisers and in the quantity they required. The identification of beneficiaries and their entitlements through this scheme paved the way for the possibility of direct transfer of subsidies to farmers’ bank accounts in future.

But as the government experimented with the scheme, two of its three pillars collapsed in face of the ground realities. In this four-part series in October, reported how and why the government delinked the land records and soil health card databases from the scheme.

The government soon realised land titles were in a mess in most parts of the country and that land records were rarely digitised. Also, farmers were not using their soil health cards as they were either not aware of their use or did not trust the information on them. Experts, on their part, questioned the quality of information on the cards and the methodology followed to issue them.

The authorities behind the fertiliser subsidy scheme complained that coordinating with three databases was increasing transaction time and decided to delink from two of them. This meant the government could no longer detect whether the person asking for fertilisers was a farmer. Nor could it rationalise the amount of fertiliser sold to him.

The government claimed it did not insist on land records or soil health cards so that no genuine farmer was left out because of a technical error. Farmers could purchase any quantity of subsidised fertiliser regardless of land size. The government, however, maintained the use of Aadhaar to identify buyers. Subsidies to fertiliser companies were issued only after sales were authenticated through Aadhaar.

How the Aadhaar-based system worked

The scaled-down version of the scheme was expanded to six districts in the second round of the pilot scheme and to 14 districts in the third. According to the MicroSave study, transaction time came down from 10 minutes to five minutes after the delinking of the land records and soil health card databases.

Successful Aadhaar authentications on the first attempt also increased to 62% in the third round from 35% in the second. Overall, successful Aadhaar authentications on three attempts increased to 97% in phase three from 93% in the second phase and 41% in the first.

However, this did not result in better verification of buyers. The study showed that adjusted transactions – in which fertiliser sales are not registered against the buyers’ Aadhaar numbers – increased from 10% in the second round to 21% in the third.

The study also pointed out that the scheme does not have an effective grievance redressal mechanism for farmers.

The government now says soil health card data will eventually be linked to the fertiliser subsidy scheme again, despite the MicroSave study pointing out that awareness of these cards among farmers is abysmally low. But then, the government did not wait for the findings of the study before going ahead with its nationwide rollout of the fertiliser subsidy scheme.