Chapter 12Agriculture Subsidy Culture in India • The need of subsidy started in mid 1960 when the use of High Yield Variety of crops was brought into picture. • That program actually required the supply of high quality inputs like irrigation , electricity , fertilizers. • To ensure the successful implementation of program the government start providing the subsidies to the farmers. Two types of Subsidy Culture in India • Government provides the support in the form of paying higher prices for the agricultural products • Second is in the form of providing inputs like seeds , fertilizers at a low cost. Rationale for providing subsidies • It helps in stimulating agri production, which in turn would generate employment. • These are provided to encourage farmers to use new inputs and advanced technology . • This is also way or method of redistribution of Income • Input subsidy is essential for the poor farmers to have access to better facilities and to upgrade their status. • To provide a base to a sector so as to encourage private participation going forward. Types of subsidies • Food subsidy – to provide essential eatable items to the large section • Export Subsidy – Make exports attractive and competitive. • Fertilizer subsidy – is to provide material at discounted prices • Irrigation Subsidy – to provide irrigation facilities at the lower price as compared to market rates. It is usually the difference between the maintenance and the operating cost minus the prices recovered from the farmers. • Power Subsidy – to charge the low rate of electricity . Issues related to subsidies • Heavy Fiscal Burden • Excessive use of Natural resources • Have deterrent effect on environment also • Sometime the benefits does not reach the targeted group • Inclination towards growing some particular crops only. WTO and Subsidies • WTO always aimed for reducing all kinds of trade distorting barriers . • In this regard Agreement on Agriculture was introduced by the countries to phase down the agri subsidies going forward. • The agreement asked for reduction commitments from the member countries • Covers all agricultural products with the exception of forestry and fishing products. WTO Subsidies Boxes Way Forward • India could look forward to learning from Brazil which implements “Conditional Subsidy Model” called “Bolsa Familia which off late Bangladesh has also adopted. • Subsides distribution can definitely enhance the quanititatve growth of the country which is called GDP but when we talk about the qualitative aspect , that is where the concerns arise with respect to rationalization of subsidies.
