Agri Business

Farming on subsidies

Our Bureau | Updated on May 27, 2013 Published on May 27, 2013



After taking over as Chief Minister of Karnataka recently, the first thing that Siddaramaiah did was to enhance the subsidy for milk producers from Rs 2 to Rs 4 a litre.

The move, to benefit about 7.5 lakh milk producers, will cost the exchequer about Rs 496 crore a year.

There was nothing unusual in what Siddaramaiah did as the move to enhance subsidy was one of the promises made by the Congress in the election manifesto in the run-up to the Assembly elections.

Perhaps, Siddaramaiah’s move exemplifies how those who have come to power — in the States or at the Centre — have showered largesse on the farmers.

The move to subsidise farmers is largely seen as a political decision, as a significant chunk of rural livelihoods continue to depend on agriculture, though Undoubtedly, the trend in subsidies will continue in some form or the other and farmers — the majority of whom are small and marginal and whose average landholdings continue to dwindle perhaps — need such support from the Government.

Agriculture continues to be highly subsidised and the amount of subsidies targeted at the sector has seen a significant jump over the years.

While the Centre continues to provide subsidy at the macro-level, the States also have been doing their bit, as agriculture is a State subject.

Among the direct farm subsidies provided by the Centre, fertiliser tops the chart. Though food subsidy — another major initiative — is aimed at ensuring food security by providing foodgrains to a large section of the masses at affordable rates, the interests of the farmers are also served with the Government ensuring a minimum support price for their produce.

In fact, the Centre is the largest buyer, stockist and distributor of agri-produce, mainly foodgrains. Food and fertiliser subsidies account for a chunk of the total subsidies provided by the Government and in the past two decades, this component has seen a quantum jump.

This is mainly because of the costs of fertilisers. India is a big importer of urea and non-urea complexes; fertiliser imports have soared even as the rupee dipped.

Also the volumes of foodgrains — rice and wheat — procured from farmers and distributed among the poor people has risen over the years. With the Government planning to widen the ambit by bringing in more people under the programme through the proposed Food Security Bill, the volumes are set to rise further.

Food and fertiliser subsidies have no doubt helped the country achieve food security, but they have put a considerable strain on the exchequer.

Further, the huge price differential between the heavily subsidised urea and other non-urea complexes is leading to indiscriminate use and may create long-term issues relating to soil health.

States also continue to do their bit for the food subsidy programme by either providing the power needed for irrigation either free or at abysmally low tariff.

States such as Punjab among those that provide free power to farmers; they also do not charge for the water used for irrigation.

There is then interest and farm debt waiver that happens every now and then for reasons usually political.

Food and fertiliser subsidy accounts for a chunk of the Centre’s total subsidies, adding up to almost 2 per cent of GDP. The Government this year had talked about keeping the subsidies under 2 per cent of GDP.

But, going forward, will it will be able to achieve this?

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Published on May 27, 2013
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