July 9, 2013

Agriculture Subsidies

Agriculture Subsidies     – Do we need it ?

Importance of Subsidies
Agriculture contribute 15% to our GDP and 60% of total employment beside it we know that our economy is agriculture dependent.

Features of Indian Agriculture
•       Indian farmers have less land and are basically illiterate or less educated.
•       Poor technology application.
•       Gambling  in monsoon.
•       Poor post production/harvest infrastructure of Storing Crop
•       Small Land holding - 95%  Under small land holdings.

What is agriculture subsidy?
  • Subsidies are grants given to a specified public especially small famers to get a desired action from their side.
  • For instance, when government is feeling that the yield per hectare is low which can be increased by using fertilizers, then government gives fertilizers subsidies so that small farmers can purchase the fertilizer. 
Agriculture Subsidies of India

When/Why agriculture subsidies are given?
•       Food Subsidy & Minimum Support Pricing (1964 LK Jha Committee)
•       Fertilizer subsidy
•       Irrigation.
•       Power subsidy to farmers.
•       Subsidized Priority lending

Problems of Agriculture subsidy
•       Cant distinguish the needy and non –needy. Much reach the rich.
•       Theories against subsidies: Joseph Stiglitz, a Nobel laureate in economics, argued that farm subsidies in long term can effect of raising global food prices, which in fact harms the poor, increases malnutrition, etc.
•       Subsidies and Vote Bank Politics:
–      The timing of Agriculture subsidies, generally given keeping in view of elections or declared in election manifesto.
–      The Agricultural Debt Waiver and Debt Relief Scheme – 2008 ( Before General Elections)
–      New Chief Minister of Karnataka Siddaramaiah enhanced the subsidy for milk producers from Rs 2 to Rs 4 a litre - one of the promises made by the Congress in the Karnataka election manifesto 2013.
•       Inadequate targeting of subsidies, corruption and black markets leading subsidy to reach less than  50 paisa out of 1 rupee to genuine poor farmers.

Agriculture subsidies - do we need it? - Before answering this question lets answer the below questions:

1.Are subsidies not given to any other sector in the economy?
      Petroleum Technology sector, Aviation sector, Industrial Sector through SEZ's, Parks  etc.

2. Is India the only country giving Agriculture Subsidies?
             In 2009, the EU gave $988 per hectare as farm subsidy and the US gave $190  while India its just $149 .

3. Most part of the Agriculture subsidies in India go to fertilizers? Are we applying excess fertilizers?
 In 2010, China used 400 kg per hectare of NPK to produce 5,399 kg per hectare of food grain while India used only 166 kg per hectare of NPK to produce 2,237 kg/ hectare of food grain. Bangladesh, meanwhile, used 224 kg per hectare and Pakistan used 185 kg.

4.What will be the impact if Agriculture subsidies alone are removed?
  A report  says - A reduction in farm subsidies will lead to a fall in consumption and complete removal will cause an 18 per cent drop in farm production.

Subsidies can deliver well....
•       Providing higher rate of subsidies to the marginal farmers and lower rate to the rich farmers.
•       Providing appropriate teaching of innovative methods to every farmer.
•       Growth of Canal and Tank Irrigation.
•       Prevent corruption and Black markets.
•       Govt should inspect the Proper Distribution of Subsidy.


No comments: