What are the direct and indirect subsidies provided to farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies. (250 words) (UPSC GS 3 2023/15 marks)
India's farm sector is heavily subsidized, aiming to support the livelihoods of millions of farmers and ensure food security. However, these subsidies have been a topic of dispute within the WTO. Addressing the issues effectively is essential to promote a fair and equitable global agricultural trade system.
Introduction
| Direct Farm Subsidies | Indirect Farm Subsidies | |
|---|---|---|
| Definition | Given directly to farmers or agricultural producers. | Provided indirectly through policies affecting input costs, market prices, or credit availability. |
| Beneficiary | Farmers or agricultural producers directly receive monetary benefits. | Beneficiaries include consumers, agribusinesses, and other related industries. |
| Nature of Subsidy | Explicit and easily quantifiable. | Implicit and often harder to quantify. |
| Examples | Cash transfers, price support programs, input subsidies, and insurance premium support. | Trade policies, transportation subsidies, and research and development support. |
Direct Subsidies to the Farm Sector in India:
1. Minimum Support Price (MSP) Subsidy:
- The government provides a price guarantee to farmers for certain crops, such as wheat, rice, and sugarcane, by purchasing their produce at a fixed minimum support price.
- Example: The MSP for wheat is set at Rs. 2,015 per quintal (as of September 2021).
2. Fertilizer Subsidy:
- Subsidies are granted to make fertilizers more affordable for farmers, promoting the use of essential nutrients in agriculture.
- Example: The government subsidizes urea fertilizer to ensure its affordability for farmers.
3. Irrigation Subsidy:
- Farmers receive subsidies for the installation of irrigation systems like drip irrigation, sprinklers, and canals to enhance water efficiency in agriculture.
- Example: The Pradhan Mantri Krishi Sinchai Yojana (PMKSY) provides subsidies for irrigation projects.
4. Credit Subsidy:
- Low-interest rate loans and credit facilities are provided to farmers to support their agricultural activities.
- Example: The Kisan Credit Card scheme offers affordable credit to farmers.
5. Crop Insurance Subsidy:
- Subsidies are given to reduce the premium cost for crop insurance, protecting farmers from losses due to adverse weather or other factors.
- Example: Pradhan Mantri Fasal Bima Yojana (PMFBY) offers subsidized crop insurance to Indian farmers.
Indirect Subsidies to the Farm Sector in India:
1. Electricity Subsidy:
- Farmers receive subsidized electricity rates for agricultural operations, including irrigation and crop processing.
- Example: Lower electricity tariffs for agricultural use.
2. Water Subsidy:
- Subsidies are provided for the supply of water for irrigation purposes, helping farmers access water resources at reduced costs.
- Example: Subsidized water rates for agriculture in many states.
3. Transportation Subsidy:
- Subsidies are granted on the transportation of agricultural inputs and produce, reducing logistics costs.
- Example: Freight subsidies for transporting grains and perishables.
4. Research and Development (R&D) Subsidy:
- Investments in agricultural research and development are supported by the government to improve farming practices.
- Example: Funding for agricultural universities and research institutions.
5. Infrastructure Subsidy:
- Subsidies are allocated for the construction and maintenance of rural infrastructure like roads, cold storage facilities, and market yards.
- Example: Subsidized loans for setting up cold storage units.
Issues Raised by the World Trade Organization (WTO) Regarding Agricultural Subsidies:
1. Market Distortion: WTO raises concerns that heavy agricultural subsidies can distort global agricultural markets by artificially inflating production and trade in subsidized products.
2. Export Subsidies: WTO opposes export subsidies that encourage the dumping of surplus agricultural products on international markets, undermining the competitiveness of farmers in other countries.
3. Domestic Support Limits: The WTO establishes limits on the total value of domestic support that member countries can provide to their agricultural sectors to prevent unfair trade practices.
4. Negotiations on Agriculture (AoA): The WTO's Agreement on Agriculture (AoA) seeks to address these issues and promote fair trade practices in agriculture through negotiations among member countries.
5. Developing Country Concerns: Developing countries often argue that the subsidies provided by developed nations harm their agricultural sectors and make it difficult for them to compete on a global scale.
6. Special and Differential Treatment: WTO recognizes the need for special and differential treatment for developing countries in agricultural trade negotiations to address their unique challenges.
7. Transparency and Reporting: WTO emphasizes the importance of transparent reporting of agricultural subsidies by member countries to monitor compliance with established rules and limits.
Conclusion
India's farm sector is heavily subsidized, aiming to support the livelihoods of millions of farmers and ensure food security. However, these subsidies have been a topic of dispute within the WTO. Addressing the issues effectively is essential to promote a fair and equitable global agricultural trade system.