Targeted urea subsidy can rein in costs and boost efficiency

The government has been deploying technology to check pilferage in welfare schemes. It weeded out millions of ineligible beneficiaries from the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) by using data-driven verification, e-KYC, and Aadhaar-based payments.

Now, it is reportedly working on a plan to integrate the sale of urea through the Agristack platform in a phased manner. This has become possible because the distribution of unique farmer identity documents (IDs) has touched “a critical mass,” according to a news report.

Agristack is a digital platform that provides access to a federated database of farmers, exclusively for government use. The core concept of “India Digital Ecosystem of Agriculture (IDEA)” lays down a framework for Agristack.

This is a welcome move, especially in the context of the soaring fertiliser subsidy bill. The fertiliser subsidy is projected to exceed Rs 1.91 lakh crore in 2025-26, well above the Budget Estimate of Rs 1.68 lakh crore. In the first three quarters of the current fiscal year, urea consumption stood at about 31.15 million tonnes, nearly 4 per cent higher than in the corresponding period of 2024-25.

The government must expedite this initiative. The officials concerned can surely benefit from the experience of eliminating schemes. It weeded out millions of ineligible beneficiaries of PM-Kisan and the MGNREGS. By March last year, the government had recovered Rs 416 crore from ineligible beneficiaries under PM-Kisan and MGNREGS.

In just over a month between October 10 and November 14 this year, around 27 lakh names were removed from the MGNREGS database, compared with 10.5 lakh deletions during the same period last year. The sharp increase was largely due to the implementation of electronic know-your-customer (e-KYC).

The Centre’s focus on better targeting of welfare schemes is commendable and can significantly reduce expenditure in both the short and long term. While short-term fiscal gains will become evident quickly, the long-term benefits will accrue as assistance helps intended beneficiaries escape poverty.

It will preclude the perpetuation of benefits; there won’t be ‘once a beneficiary, always a beneficiary’ syndrome if the weeding out is fair and thorough. After all, welfare schemes are meant to be ladders out of deprivation, not permanent crutches.

Improved targeting also enhances the credibility of the state. When taxpayers see subsidies and transfers reaching genuine beneficiaries rather than being siphoned off by middlemen or claimed by the ineligible, public trust in government programmes increases. Such trust is vital for sustaining political and social support for welfare spending.

That said, the process must be handled with care. Exclusion errors—where genuine beneficiaries are wrongly denied benefits—can be as damaging as inclusion errors. Technology must therefore be complemented by robust grievance redress mechanisms, offline alternatives and periodic audits. The objective should not be to reduce beneficiary numbers for their own sake, but to ensure fairness, accuracy and efficiency.

Integrating Agristack with fertiliser distribution could mark a significant step towards smarter subsidies. Over time, such reforms can help shift welfare spending from mere disbursement to outcome-based support. By preventing the perpetuation of benefits, the government can transform welfare from a system of entitlement into a genuine instrument of empowerment.