The government of India provides a variety of subsidies, including fertilizer, irrigation, equipment, finance, seed, and export, among others. Farm subsidies form about 2% of India’s GDP & the total subsidy to farmers form about 21% of their farm income. In this article, we have compiled a total of eight different subsidies that are given to farmers in India!
Different Types of Agriculture Subsidy In India
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Seed Subsidy
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Irrigation Subsidy
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Export Subsidy
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Credit Subsidy
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Agriculture Infrastructure Subsidy
Seed Subsidy
The government can give high-yielding seeds at reasonable prices with future payment alternatives. The government also undertakes the research and development activities required to generate such prolific seeds; the cost of these activities is a form of subsidy provided to farmers.
Fertilizer Subsidy
The distribution of low-cost chemical or non-chemical fertilizers to farmers. It is the difference between the price paid to fertilizer manufacturers (local or international) and the price received from farmers; the government bears the rest of the burden. This subsidy ensures the following:
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Cheap Inputs to farmers.
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Stability in Fertilizer Prices.
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Reasonable Returns to manufacture
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Availability of Fertilizers to farmers in Adequate Quantity at the Requirement.
Irrigation Subsidy
Under this, umbrella government provides irrigation services at a lower cost than the market rate. It's the difference between the state's operation and maintenance costs for irrigation infrastructure and the irrigation fees paid by farmers.
This could be accomplished by the government constructing public goods such as canals, dams, tube wells, and other such infrastructure and charging farmers little or no fees for their usage (in some situations). It could also be through the use of low-cost private irrigation equipment like pumping sets.
Power Subsidy
The power subsidies indicate that the government charges farmers a cheap rate for the electricity they receive. Farmers primarily use electricity for irrigation purposes. It's the difference between the cost of producing and distributing energy to farmers and the price paid to them.
The State Electricity Boards (SEBs) may generate their own power or buy it from companies like NTPC and NHPC. The power subsidy "incentivizes farmers to invest in pumping sets, bore-wells, tube wells, and other irrigation systems."
Export Subsidy
This subsidy is granted to farmers in order to help them compete on a global scale. When a farmer or exporter sells agricultural products in a foreign market, he makes money for himself and the government earns foreign exchange.
As a result, agricultural exports are generally promoted as long as they do not have a negative impact on the home economy. Export subsidies are financial incentives provided to stimulate exports.
Credit Subsidy
It's the gap between the interest charged to farmers and the actual cost of providing credit, plus other expenses like bad loan write-offs. Credit availability is a key issue for disadvantaged farmers. They lack the funds to purchase agricultural equipment and are unable to access the credit market because they lack the necessary collateral. They approach local money lenders to carry out production activities.
Lenders take advantage of the impoverished farmers' weakness by charging exorbitant loan rates. Many times, even farmers with collateral are unable to obtain loans because banking organizations are primarily urban-based and do not frequently engage in agricultural lending operations, which are deemed hazardous.
Agriculture Equipment Subsidy
Subsidies are provided to farmers through State Governments under various schemes such as the Sub-Mission on Agricultural Mechanization (SMAM), Rashtriya Krishi Vikas Yojana (RKVY) for the purchase of various agricultural equipment and machines, National Food Security Mission (NFSM), Mission for Integrated Development of Horticulture (MIDH), and National Mission on Oilseeds and Oil Palm (NMOOP).
Agriculture Infrastructure Subsidy
In many cases, private efforts are insufficient to boost agricultural production. For production and selling operations, good roads, storage facilities, power, market intelligence, transportation to ports, and so on are essential. These facilities are under the category of public goods, whose prices are high but whose advantages are shared by all cultivators in a given area.
Because of their bulkiness and accompanying revenue collection issues, no individual farmer will volunteer to supply these facilities (no one can be excluded from its benefit on the ground of non-payment). As a result, the government assumes responsibility for their provision, and given the plight of Indian farmers, a lower price can be paid to the poorer farmers.
