The government gives different types of subsidies to farmers like fertilizer, irrigation, equipment, credit subsidy, seed subsidy, export subsidy, etc. The current subsidy bill of the government stands at 2.57 lac cr. in 2015-16 which was 2.58 lac cr. in 2014-15.
For more information please visit Pritish Kumar Halder’s blogs.
Introduction of the High Yielding Varieties (HYV) seeds program in the 1960s demanded a high priority in supplying irrigation water and fertilizers to the farmers, the government tried to ensure that they were accessible and affordable. Subsidy on fertilizers is provided by the Central government whereas subsidy on water is provided by the State governments. The government gives different types of subsidies to farmers like fertilizer, irrigation, equipment, credit subsidy, seed subsidy, export subsidy, etc. The current subsidy bill of the government stands at 2, 60, 128 cr. in 2013-14 which was 2, 39,551 cr. in 2012-13.
Types of Subsidy in India
- Fertilizer subsidy
- Power subsidy
- Agricultural Equipment subsidy
- Irrigation subsidy
- Seed subsidy
- Export subsidy
- Credit subsidy
- Infrastructure subsidy
All these subsidies are discussed below:
Disbursement of cheap chemical or non-chemical fertilizers among the farmers. It amounts to the difference between the price paid to the manufacturer of fertilizer (domestic or foreign) and the price, received from farmers, the rest of the burden is bear by the government. This subsidy ensures:
(i) Cheap inputs to farmers,
(ii) Reasonable returns to the manufacturer,
(iii) Stability in fertilizer prices, and
(iv) Availability of fertilizers to farmers in adequate quantity at the requirement.
In some cases, these kinds of subsidies are granted through lifting the tariff on the import of fertilizers, which otherwise would have been imposed.
The electricity subsidies imply that the government charges low rates for the electricity supplied to the farmers. Power is primarily used by farmers for irrigation objectives. It is the difference between the cost of generating and distributing electricity to farmers and the price received from farmers.
(SEBs) either generate the power themselves or purchase it from other producers such as NTPC and NHPC. Power subsidy “acts as an incentive to farmers to invest in pumping sets, bore-wells, tube wells, etc. Irrigations subsidy: under this umbrella government provides irrigation facilities at cheaper rates as compared to the market rates.
It is the difference between the operating and maintenance costs of irrigation infrastructure in the state and irrigation charges recovered from farmers. This may work through provisions of public goods such as canals, dams, tube wells, etc. which the government constructs and charges low prices or no prices at all (in special cases)for their use from the farmers. It may also be through cheap private irrigation equipment such as pumping sets.
High-yielding seeds can be provided by the government at low prices, and future payment options. The research and development activities needed to produce such productive seeds are also undertaken by the government, the expenditure on these is a sort of subsidy granted to the farmers.
This subsidy is given to the farmers to face international completion. When a farmer or exporter sells agricultural products in a foreign market, he earns money for himself, as well as foreign exchange for the country. Therefore, agricultural exports are generally encouraged as long as these do not harm the domestic economy. Subsidies provided to encourage exports are referred to as export subsidies.
The difference between interest charged from farmers, and the actual cost of providing credit, plus other costs such as write-offs of bad loans. Availability of credit is a major problem for poor farmers. They do not have sufficient cash to purchase agricultural equipment and cannot approach the credit market because they do not have the collateral needed for loans. To carry out production activities they approach the local money lenders.
Taking advantage of the helplessness of the poor farmers the lenders charge very high rates of interest. Many times even the farmers who have some collateral cannot avail of loans because banking institutions are mainly urban-based and many times they do not indulge in agricultural credit operations, which is considered to be risky. To tackle these problems the government has provided the following provisions:
(1) More banking operations in rural areas-which will advance agricultural loans, and
(2) The interest rates can be maintained low through subsidization schemes, and
(3) The terms of credit (such as collateral requirements) can be relaxed for the poor.
Private efforts in many areas do not prove to be sufficient to improve agricultural production. Good roads, storage facilities, power, information about the market, transportation to the ports, etc. are vital for production and sale operations. These facilities are in the domain of public goods, the costs of which are huge and whose benefits accrue to all the cultivators in an area.
No individual farmer will come forward to provide these facilities because of their bulkiness and inherent problems related to revenue collections (no one can be excluded from its benefit on the ground of non-payment). Therefore the government takes the responsibility of providing these and given the condition of Indian farmers a lower price can be charged to the poorer farmers.
It is defined as the annual monetary value of gross transfers to agriculture from consumers and taxpayers arising from government policies that support agriculture, regardless of their objectives and economic impacts. This indicator includes the total support estimate (TSE), measured as a percentage of GDP, the producer support estimate (PSE), measured as a percentage of gross farm receipts, the consumer support estimate (CSE), measured as a percentage of agricultural consumption, and the general services support estimate (GSSE), measured as a percentage of total support.
TSE represent the total support granted to the agricultural sector, and consist of producer support (PSE), consumer support (CSE), and general services support (GSSE). PSE transfers to agricultural producers are measured at the farm gate level and comprise market price support, budgetary payments, and the cost of revenue foregone. For more information about agriculture subsidies please visit Pritish Kumar Halder
CSE from consumers of agricultural commodities are measured at the farm gate level. If negative, measures the burden (implicit tax) on consumers through market price support (higher prices), which more than offsets consumer subsidies that lower prices for consumers. GSSE transfers are linked to measures creating enabling conditions for the primary agricultural sector through the development of private or public services, institutions, and infrastructure. GSSE includes policies where primary agriculture is the main beneficiary, but does not include any payments to individual producers. GSSE transfers do not directly alter producer receipts or costs or consumption expenditure.