Accepting the report of the Nandan Nilekani-headed Task Force, the UPA Government on Friday announced a rollout of nationwide mobile-based Fertilizer Management System (mFMS) providing a roadmap for putting in place a gradual direct transfer of subsidy regime for farmers.

The mFMS, to be launched this year, is designed to provide end-to-end information on the movement of fertilizers and subsidies, from the manufacturer to the retail level. “Direct transfer of subsidy to the retailer and eventually the farmer will be implemented in subsequent phases. This will benefit 12 crore farmers, while reducing the leakages and expenditure on subsidies by curtailing the misuse of fertilizers,” Finance Minister Pranab Mukherjee said during this budget speech in Parliament.

Noting that the government would endeavour to bring down central subsidies to 1.75 per cent of GDP over the next three years, Mr. Mukherjee said the focus would now be on targeting subsidies better and in a leakage-proof way. The Nandan Nilekani Task Force had been set up by the Government on IT strategy for direct transfer of subsidy.

The Finance Minister said that in to reduce import dependence on urea, the government is finalising the pricing and investment policies for the key nitrogenous fertiliser. ``It is expected that with the implementation of the investment policy, country will become self sufficient in manufacturing urea in the next five years. In case of the P&K fertiliser, use of SSP will be encouraged through greater extension work. This fertiliser is manufactured entirely in the domestic sector. Enhanced production would bring down our dependence on imports in the P&K sector,’’ Mr. Mukherjee added.

Mr. Mukherjee also outlined some tax incentives for the fertiliser sector. To boost inflow of low cost funds in the fertiliser sector, the government has proposed to reduce the rate of withholding tax on external commercial borrowings. “In order to provide low cost funds to some stressed infrastructure sectors, the rate of withholding tax on interest payments on external commercial borrowings is proposed to be reduced from 20 per cent to 5 per cent for three years,” he added.

Similarly, investment linked deduction of capital expenditure incurred in the fertiliser sector is proposed to be provided at the enhanced rate of 150 per cent, as against the current rate of 100 per cent. Likewise, the government has also proposed exemption of basic customs duty on import of equipments for setting up or expansion of fertiliser plants. “Imports of equipment for initial setting up or substantial expansion of fertiliser projects are being fully exempted from basic customs duty of 5 per cent for a period of three years up to March 31, 2015,” he remarked.