The agricultural sector is one of the most important sectors in any economy. It provides food for the population and raw materials for various industries. In India, the agricultural sector employs more than 50% of the population and contributes significantly to the country’s GDP. However, the sector has been facing several challenges, including low productivity, lack of modernization, and inadequate infrastructure. One of the most pressing issues that have been affecting the sector is the unresolved FERT tax.
The FERT tax is a tax on fertilizers that was introduced in 2008 to fund the Nutrient-Based Subsidy (NBS) scheme. The NBS scheme was introduced to provide subsidies to farmers for fertilizers based on the nutrient content of the fertilizers. The FERT tax was supposed to be a temporary measure, but it has been extended several times since its introduction. The tax is currently set at 5% and is levied on all fertilizers except for urea.
The FERT tax has been a contentious issue for the agricultural sector, with farmers and industry stakeholders calling for its removal. They argue that the tax increases the cost of fertilizers, which in turn affects the profitability of farming. The high cost of fertilizers also discourages farmers from using them, leading to low productivity and poor crop yields.
The government, on the other hand, has defended the tax, stating that it is necessary to fund the NBS scheme. The scheme provides subsidies to farmers for fertilizers based on the nutrient content of the fertilizers, which is aimed at promoting balanced use of fertilizers and improving soil health. The government has also argued that the tax is necessary to reduce the subsidy burden on the exchequer.
However, the government’s patience with the agricultural sector over the FERT tax issue seems to be wearing thin. In recent years, there have been several instances where the government has threatened to withdraw subsidies if the industry does not agree to the tax. The government has also been pushing for the adoption of alternative fertilizers, such as organic and bio-fertilizers, which are not subject to the FERT tax.
The unresolved FERT tax issue has become a major concern for the agricultural sector, with farmers and industry stakeholders calling for its removal. The high cost of fertilizers is affecting the profitability of farming and discouraging farmers from using them, leading to low productivity and poor crop yields. The government needs to find a solution to the issue that is acceptable to all stakeholders. It is essential to strike a balance between funding the NBS scheme and ensuring the profitability of farming. The government should also consider promoting the use of alternative fertilizers, which are not subject to the FERT tax, to reduce the burden on farmers.
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- Source: Plato Data Intelligence.