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Agricultural Subsidies in India

Why Do We Need Agricultural Subsidies?

Agricultural Subsidies are kind of incentives given by the government with the aim of the well-being of farmers and agribusiness holders. It strengthens the agriculture segment in the national economy. With the focus on rapid population growth, every government in every country tried to increase food production and introduced high yielding varieties. Food production has now increased but farmers are not receiving any relief from the government. Farmers do not get a fair price for their produce. Therefore, they will not be able to purchase inputs for the next season. Taking all these factors into consideration, the government has decided to provide subsidies mainly for input, export, and credit needs.

Source: Mint

Fertilizer Subsidy

It is a kind of input subsidy that spends a large amount as a subsidy. Under this, the subsidy is mainly given to urea, potash, and phosphorus. Urea is subsidized up to 75% of the cost of production while potash and phosphorus are subsidized up to 35%. This subsidy ensures the availability of fertilizers for their cultivations in adequate quantities. Due to the fertilizer subsidy, farmers can get fertilizers at a lower price while fertilizer manufacturers also get a reasonable return.

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Power Subsidy

Source: The Indian Express

Electricity subsidy and irrigation subsidy comes under this subsidy. India has been recognized as a country that electricity consumption is quite exceptional for agriculture. This may be due to India highly depends on groundwater for the cultivations. Electricity prices as well as subsidies vary from state to state. Therefore, the subsidy for each state in India is decided by the state governments.

Under the irrigation subsidy, irrigation facilities are given to farmers at a cheaper rate as compared to the market rate. The difference between the operation and maintenance cost of irrigation infrastructure can be identified as the irrigation subsidy. Also, micro-irrigation subsidies such as drip irrigation subsidy have been introduced to promote micro-irrigation techniques through a heavier subsidy.


Credit Subsidy

The central government of India gives the credit subsidy as a short-term credit through the banking system for farmers at a lower interest rate. Also, postharvest credits are given to small and marginal farmers to enable postharvest storage. These credit subsidies allow poor farmers to buy farm equipment that they could not afford due to a lack of funds.

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Agriculture Infrastructure Subsidy

This subsidy focuses on infrastructure facilities that required for agriculture such as good roads, storage facilities, port facilities, etc. Therefore the government has decided to provide these facilities at an affordable price as farmers are not able to avail of these facilities due to lack of funds.

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Seed Subsidy

Source: Mother Earth News

Seed subsidy is given to both farmers and seed producers. For cultivations, it is recommended to use certified seeds always. Also, farmers are always looking for seeds from high yielding varieties. These are somewhat costly for poor farmers since this seed production requires higher effort. So both farmers and producers suffer from a lack of money to buy certified high yielding seeds and produce such seeds. In India, we can identify several seed subsidy schemes such as Rashtriya Krishi Yojana Vikas Yojana, Integrated schemes for oilseeds, pulses, oil palms, and maize (ISOPOM), Technological subsidies for cotton, and National Food Security Mission. Especially for Hybrid rice seed production is given a subsidy as Rs. 2000 (per quintal) for seed production and Rs. 2500 (per quintal) for seed distribution.

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Export Subsidy

This subsidy is given for farmers who are interesting in export their produce but suffer from a lack of money to enter the export market. With this, the government aims to increase export earnings by encouraging farmers to export their products. Merchandise Exports from India Scheme (MEIS) gives incentives to encourage exporters. Transport and Marketing Assistant Scheme will assist you in the International export. India’s Agriculture Export Policy improves export and international trade opportunities in the global market.

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