The Centre’s renewed push to implement Direct Benefit Transfer (DBT) of fertiliser subsidy directly into farmers’ bank accounts has triggered a major debate across agricultural states — particularly in Punjab, which consumes nearly 9-10% of India’s total fertilisers and plays a crucial role in contributing to the central food grain pool.Union Agriculture Minister Shivraj Singh Chouhan, speaking at the Pusa Krishi Vigyan Mela held at the Indian Agricultural Research Institute in New Delhi on Wednesday (February 25), reiterated the Centre’s proposal to transfer the Rs 1.7 trillion annual fertiliser subsidy directly into farmers’ bank accounts through a DBT system. He said the move would empower farmers by giving them the freedom to decide which fertilisers to purchase and in what quantities.While the government argues that the reform will increase transparency, plug leakages, stop diversion and black marketing, encourage balanced fertiliser use, and strengthen financial inclusion, farmer unions and agricultural economists in Punjab fear that the move could gradually weaken or withdraw subsidy support in the long run. The proposal carries far-reaching implications for small and marginal farmers, who constitute 86% of the farming population in the country. We explain.Current fertiliser subsidy system, and change proposedAt present, the government of India provides fertiliser subsidy directly to manufacturing and marketing companies. Farmers purchase fertilisers like urea at government-controlled subsidised rates — for instance, Chouhan had highlighted that a 45-kg bag of urea is available to the farmer at about Rs 265-270, though it costs the government nearly Rs 2,400. This is because the Central government bears the bulk of the cost as subsidy.Also read | Once united, why Punjab’s farmers are facing a test as protests widen beyond MSPExperts say that under the proposed “true DBT” model, farmers may be required to pay the full market price upfront (around Rs 2,400 per 45-kg bag of urea). The subsidy amount would later be credited directly into their bank accounts as it happens in a few other DBT schemes. This would shift the subsidy transfer mechanism from companies to farmers.Why is Punjab concerned?Punjab is one of India’s most fertiliser-intensive states due to its paddy-wheat cropping cycle and high productivity levels. On average, farmers use two 45-kg bags of urea per acre. Under the current system, cost per acre for urea is approximately Rs 540. Under the proposed system, upfront cost per acre would be approximately Rs 4,800. If a small farmer cultivates 5 acres, he may need Rs 24,000 upfront just for urea in one season.Chairman of the Punjab State Farmers’ and Farm Workers’ Commission, Sukhpal Singh, questioned how small (up to 5 acres) and marginal (up to 2.5 acres) farmers — who form the majority of India’s farming population — will arrange such liquidity at sowing time, when expenses on diesel, seeds, labour, and pesticides are already high.Story continues below this ad“Even farmers with slightly above 5 acres of land cannot easily afford such upfront expenditure,” he argued, warning that it may increase dependence on commission agents and informal credit sources.He added that in the long run, it may push small farmers out of agriculture and gradually reduce subsidy support under fiscal or global trade pressure.There are also concerns that international trade frameworks, including World Trade Organization commitments, may push India to rationalise or reduce agricultural input subsidies over time. Given the massive fertiliser subsidy outlay, critics believe fiscal pressures could drive long-term reduction rather than reform.Also read | One investment, multiple incomes: How Punjab’s new-age farmers are using integrated farming for year-round incomeFarmer unions argued that similar reforms in the past — such as the cooking gas subsidy — initially promised direct transfers but gradually saw reductions in subsidy coverage.Story continues below this adThey feared that once farmers get accustomed to paying the full market price first, subsidy payments may be delayed: The amount may be reduced or capped and eventually leading to gradual curtailment of subsidy.Possible problems for tenant and flood-affected farmers“Requiring upfront payment at market price could increase the debt burden, as many farmers may have to borrow from commission agents to purchase fertilisers at the beginning of the season,” said Bharti Kisan Union (Dakaunda) general secretary Jagmohan Singh.Punjab has a large number of tenant farmers cultivating leased land. In many cases, land ownership records remain in the landlord’s name.“The actual cultivator’s name does not appear in official land records. If subsidy is linked strictly to land records, tenant farmers may not receive subsidy directly. Landowners may receive it instead,” he said.Story continues below this adAlso, many farmers whose land was eroded during floods may face eligibility complications.Farmer leaders argued that without a robust mechanism to identify actual cultivators, the DBT model could exclude genuine beneficiaries. Jagmohan also questioned reports that the government may fix fertiliser consumption per acre, stating that soil requirements differ from field to field and uniform caps could harm productivity.On whether the current system was already a form of DBT, Jagmohan argued that it was effectively direct because subsidy is released to the companies and reduces the price for farmers at the point of purchase. But he raised concerns over whether the mechanism would empower farmers through transparency or mark the beginning of long-term subsidy withdrawal.