What are the different types of agriculture subsidies given to farmers at the national and at state…

Question

What are the different types of agriculture subsidies given to farmers at the national and at state levels? Critically analyse the agricultural subsidy regime with reference to the distortions created by it.

Ghissu Editorial · Accepted Answer

India's farm subsidies run from central fertiliser, MSP, credit and PM-KISAN support to state free power and loan waivers, and in their present form they distort input use, cropping patterns, equity and public spending. Only about 6% of farmers sell at MSP to procurement agencies, per the Shanta Kumar Committee (2015).

**Introduction**

Food and fertiliser account for more than 70% of central subsidies (16th Finance Commission study, 2024-25). The regime underwrote the Green Revolution and record harvests, but it now distorts what farmers grow, how they use inputs and how the state spends.

**Types of Farm Subsidies: Centre and States**

SKETCH: tree | Farm Subsidy Regime
- Centre
  - Fertiliser (urea, NBS)
  - MSP procurement
  - PM-KISAN income
  - Credit and insurance
- States
  - Free farm power
  - Cheap canal water
  - Income support, waivers

1. **Central support**: The Centre fixes urea prices, pays Nutrient Based Subsidy (2010) on P and K, procures at MSP, and funds interest subvention, PMFBY (2016) and PM-KISAN's ₹6,000 a year (2019).
2. **State support**: Free farm power in Punjab (since 1997) and Telangana, Rythu Bandhu (2018), KALIA and repeated loan waivers.

**Distortions Created by the Subsidy Regime**

1. **Skewed input use**: Cheap urea against costlier P and K has pushed the NPK ratio far from the 4:2:1 norm, degrading soils, and urea leaks to industry and across borders.
2. **Water and cropping pattern**: Free power and assured paddy procurement lock Punjab into rice-wheat, leaving most blocks groundwater over-exploited (CGWB), while India imported 56% of its edible oil in 2023-24.
3. **Inequity**: The Shanta Kumar Committee (2015) found only about 6% of farmers sell at MSP to procurement agencies.
4. **Fiscal and trade cost**: Subsidies crowd out irrigation and research spending, and rice support reached 15.22% of output value in 2021-22 against the WTO's 10% limit.

**Conclusion**

The regime secured food self-sufficiency, but in its present form it rewards the wrong crops, inputs and farmers. Crop-neutral income support and public investment would better serve farm incomes and sustainable agriculture.

What are the different types of agriculture subsidies given to farmers at the national and at state levels? Critically analyse the agricultural subsidy regime with reference to the distortions created by it.

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Farm Subsidies and Minimum Support Prices8 questions

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