Agricultural Subsidies in India

Types of Agricultural Subsidies in India

• • Direct Benefit Transfer (DBT): It provides direct benefit support in form of cash transfers to farmers. E.g., PM KISAN, Rythu Bandhu (Telangana), KALIA (Odisha). 

• Input Subsidies: 

• • • Fertilizer Subsidy: It makes fertilizers like urea low cost by paying the distinction between manufacturing value and selling price. E.g., Di-Ammonium Phosphate (DAP) fertiliser, Nutrient-Based Subsidy (NBS) scheme for non-urea fertilizers. 
    • Seed Subsidy: It gives high-yielding, ailment-resistant seeds at sponsored costs, e.g., Seed Village Program, Seed Bank, Mukhyamantri Beej Swavalamban Yojana in Rajasthan. 
    • Irrigation Subsidy: The irrigation subsidy, underneath PM Krishi Sinchai Yojana (PMKSY), gives as much as 55% aid for drip and sprinkler structures to sell water conservation. 
    • Power Subsidy: It gives free or subsidised energy for agricultural pumps, with states like Punjab providing free electricity to tubewell irrigation, even though this has raised concerns about groundwater depletion. 

• Credit & Insurance Subsidies: 

• • • Pradhan Mantri Fasal Bima Yojna (PMFBY): PMFBY protects farmers from crop failure by requiring them to pay a 1.5-5% high price, with the government overlaying the last price. 
    • Interest Subvention Scheme: Under the Modified Interest Subvention Scheme, farmers get short-term loans as much as Rs 3 lakh by Kisan Credit Card at a 7% subsidised interest rate, with a 1.5% subvention to eligible lending institutions. 

• Output Subsidies (Price Support): 

• • • Minimum Support Price (MSP): MSP guarantees minimum costs for 22 plants like wheat, rice, pulses, and oilseeds, and fair and remunerative price (FRP) for sugarcane, procured by organisations including Food Corporation of India (FCI) and NAFED. 

• Infrastructure & Post-Harvest Subsidies: 

• • Warehouse & Cold Storage Subsidy: The National Horticulture Board (NHB) gives a capital funding subsidy scheme presenting a credit score-connected returned-ended subsidy of 35% in central regions and 50% in North East, hilly, and scheduled areas for constructing or modernizing cold storage facilities with capacities between 5,000 and 10,000 million tonnes.  

Consequences of Agricultural Subsidies in India

• Fiscal Burden on Government: The Union Budget 2025–26 has allotted Rs 3.71 lakh crore for food and fertiliser subsidies and as of January 2025, over Rs 3.46 lakh crore has been disbursed to more than 11 crore PM-KISAN beneficiary farmers. 
  • It strains public finances and get worse the debt disaster for fiscally pressured states like Punjab. 
• Soil Degradation: India’s consumption ratio of nitrogen, phosphorus and potassium (NPK) is 6.7:2.4:1 (only of 4:2:1), leading to soil toxicity & declining yields. 
  • Punjab & Haryana have the highest urea consumption, inflicting groundwater pollution & cancer clusters. 
• Groundwater Depletion: Free electricity encourages high tube-well use, depleting groundwater table. 
  • Agriculture consumes 87% of India’s groundwater, with extraction exceeding 100% in states like Punjab, Rajasthan, Haryana, and Delhi in 2024. 
• Market Distortions: The Shanta Kumar Committee (2015) stated that most effective 6% of farmers—mainly in Punjab, Haryana, and Andhra Pradesh—virtually gain from MSP. This skewed procurement has brought about overproduction of rice and wheat while pulses and oilseeds continue to be underproduced.  
  • In 2024, the FCI had to take away 18 million tonnes of rotting grains, causing a waste of taxpayer cash. 
• Hurt Export Competitiveness: World Trade Organization (WTO) rules restrict India’s farm export subsidies, affecting trade.  
  • Developed countries, led by the USA, accuse India of providing up to 93.9% subsidy to rice farmers in 2020–21, breaching the 10% restriction set under WTO policies.

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