of banks, state firmans, bids and outcomes. part two: jharkhand

about a month ago, i wrote about a controversial plan by the finance ministry to split the country into 20 clusters, and to appoint a common banking correspondent company for all public sector banks in each. to understand the attendant implications, please click here. yesterday, the second tender in this series was awarded. it went to fino. which is now the common BC for all of jharkhand and parts of bihar. as with the first tender, the bid surprised industry folks. the whole story here.

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Today’s Economic Times carries this story about an unexpectedly large change that is sweeping across the Bank-BC model. The Department of Financial Services, the part of the Finance Ministry which looks after the banking sector, has decided to split the country into 20 clusters and get all public sector banks in that region to work through a common Banking Correspondent company. This radical makeover of the sector is making a bunch of people, including banks, very nervous. They fear this could result in the rise of monopolistic tendencies amongst BC companies. Click here to read more.

fazed out. india’s fertiliser ministry and phase two in fert cash transfers

and now, another update on how india’s journey towards fertiliser cash transfers is unfolding. see it here.

some thoughts on this, though. this january, ET had reported that companies, wholesalers and retailers alike were nervous about the fertiliser ministry’s plans to reroute subsidy from companies to retailers. You can read about that, with context and all, here. well, the ministry has finally decided to scrap this intermediate phase, which was slated to start this kharif. this means the existing subsidy regime — where companies get the subsidy — will continue till it is possible to transfer the subsidy to farmers directly. for that to happen, they will all need to have UID numbers.

that said, this decision to scrap this intermediate phase is going to offer little more than short term relief to farmers and retailers. partly because once cash transfers start flowing to farmers — retailers/wholesalers/farmers will have to buy at full price anyway. also, more tangibly, cash transfers or no cash transfers, in the last few years, fertiliser prices have risen precipitously. see the point made by JNU professor himanshu in the last paragraph.

“While the price of urea has more or less stayed around Rs 500 over the past 6-7 years, that of DAP, for instance, has climbed from Rs 1,050 in 2010-11 to Rs 1,500 by June 2011 and is currently at Rs 1,900. It will definitely increase further.”

this precipitous rise in fert prices means we are using more urea than anything else. which takes us back to the crisis in indian agricultural soils. another thing the fert ministry continues to turn a nelson’s eye to.