• UGI USER
  • Nov 01, 2023
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Agriculture Subsidies

Q. What are the different types of agriculture subsidies given to farmers at the national and state levels? Critically analyze the agriculture subsidy regime with the reference to the distortions created by it.

Structure of Answer

Introduction

  • Define meaning of agriculture subsidies and its relevance to farmers

Body

  • Mention the types of central and state government agricultural subsidies
  • Mention different state and central agricultural subsidies like Soil Health Card
  • Mention Distortions created by agriculture subsidies, give examples

Conclusion

  • Mention well-balanced approach is required to target subsidies to the most vulnerable farmers.

Answer:

Agricultural Subsidies are financial aids provided by the government to support agricultural activities, reducing the burden on farmers for inputs or supporting their income through price support for their produce.

Types of agriculture subsidies

  • Input Subsidies: These subsidies aim to reduce the cost of agricultural inputs, like Power,Fertilizer subsidies such as Nutrient-Based Subsidy (NBS) and Soil Health Card Scheme support the purchase of fertilizers and improve soil quality.
  • Price Subsidies: Government assures farmers a minimum price for their crops, protecting them from market price fluctuations, like Minimum Support Price (MSP), Bhavantar Bhugtan Yojana (Madhya Pradesh).
  • Irrigation Subsidy: Various central schemes like Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) provide subsidies on irrigation equipment and infrastructure.
  • Credit Subsidies: It lowers the interest rate on agricultural loans, aiding farmers, like Interest Subvention Scheme , Bihar’s Zero Interest Loan Scheme
  • Income Support Subsidies: States like Telangana have Rythu Bandhu, providing direct investment support to farmers for each acre of land they own, regardless of the crop they cultivate.
  • Crop Insurance Subsidies: offer crop insurance schemes with subsidies to protect farmers from losses due to natural calamities or price fluctuations, like Pradhan Mantri Fasal Bima Yojana.

Distortions created by agriculture subsidies

  • Overproduction: Agriculture subsidies lead to overproduction, causing surpluses that strain storage and finances.
  • Inefficiency: According to World Bank Report 2021 Indian farmers use excessive water and fertilizer but have lower yields than global averages.
  • Environmental Damage: Unregulated fertilizer and pesticide use results in soil degradation and water pollution. A 2022 study by the Central Pollution Control Board found that 40% of India’s groundwater contains nitrates due to fertilizer use.
  • Inequity: Agriculture subsidies disproportionately benefit large landowners. NABARD reported that the top 10% of landowners received 52% of subsidies in 2019.
  • Market Price Distortion: Subsidies keep food prices artificially low, reducing farmer profitability.
  • Discouragement of Innovation: Subsidies deter farmers from adopting modern technologies.

While agriculture subsidies have been crucial in ensuring food security and supporting farmers, they also create distortions that can undermine sustainable development. A well-balanced approach is required, focusing on reducing market distortions, targeting subsidies to the most vulnerable farmers, and promoting sustainable agricultural practices.