Farm subsidies

Farm subsidies are an essential aspect of agricultural policy in India, aimed at ensuring food security, supporting farmer incomes, and promoting agricultural development. For the UPSC examination, a comprehensive understanding of farm subsidies, their types, impact, and relevant data/statistics is crucial.

Definition and Purpose of Farm Subsidies

Farm subsidies are financial aids provided by the government to the agricultural sector to support farmers' income, reduce the cost of production, stabilize food prices, and ensure food security. These subsidies can take various forms, such as direct payments, input subsidies (for seeds, fertilizers, electricity, irrigation), price supports, and crop insurance.

Types of Farm Subsidies in India

• a. Input Subsidies
  • Fertilizer Subsidy: The Government of India provides substantial subsidies on chemical fertilizers to ensure that they are available to farmers at affordable rates.
  • Electricity Subsidy: Many states provide free or heavily subsidized electricity for agricultural purposes.
  • Irrigation Subsidy: Includes subsidies for irrigation infrastructure, such as canals and drip irrigation systems.
  • Seed Subsidy: Subsidies for high-yielding and hybrid seeds to enhance productivity.
• b. Price Support Measures
  • Minimum Support Price (MSP): The MSP is a guaranteed price set by the government at which it purchases crops from farmers, thus ensuring a minimum profit for their harvest. It covers several crops, including wheat, rice, pulses, and oilseeds.
• c. Credit Subsidies
  • Interest Subvention Scheme: Provides subsidized interest rates on short-term crop loans to farmers.
• d. Insurance Subsidies
  • Pradhan Mantri Fasal Bima Yojana (PMFBY): A crop insurance scheme with subsidized premiums for farmers to protect against crop losses due to natural calamities.

Impact of Farm Subsidies

• a. Positive Impacts
  • Income Support: Helps in stabilizing and enhancing the income of farmers.
  • Input Cost Reduction: Reduces the cost of critical inputs like fertilizers, seeds, and electricity, making farming more affordable.
  • Food Security: Ensures a stable supply of food grains, aiding in national food security.
  • Risk Mitigation: Crop insurance schemes mitigate risks from unpredictable weather and market conditions.
• b. Negative Impacts
  • Fiscal Burden: High subsidy expenditure can strain government finances.
  • Environmental Degradation: Overuse of fertilizers and free electricity can lead to soil degradation and depletion of groundwater.
  • Inefficiency: MSP and other subsidies can lead to market distortions and inefficiency in resource allocation.