Directorate of Economics and Statistics, Department of Agriculture and Cooperation, Ministry of Agriculture and Farmers Welfare, Government of India, New Delhi
Punjab Agricultural University, Ludhiana,India
 Sponsored by
Directorate of Economics and Statistics, Department of Agriculture and Cooperation, Ministry of Agriculture and Farmers Welfare, Government of India, New Delhi
Research Content
Status and Utilization Pattern of Input Subsidies in Punjab Agriculture

Subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public. Subsidies in Indian agriculture can be classified into two broad categories viz., direct and indirect subsidies. Direct subsidies are implemented through various schemes in agricultural sector by the Government and indirect subsidies confine itself to three major inputs viz., fertilizer, irrigation and power. Keeping the importance of subsidies in Indian agriculture, the present study was designed to study the trends and utilization pattern of input subsidies in Punjab agriculture along with quantum of subsidy intensity benefit realized by various farmers’ categories. The data were collected from 180 farm households representing all the farm categories from three districts representing different agro-climatic zones while the reference year of the study was 2014-15. The economic analysis of the data collected from farm households regarding crops grown namely; paddy, paddy-basmati, cotton, maize, sugarcane wheat and potato, revealed that the total variable cost on per hectare basis was found to vary between Rs. 82780 for sugarcane to Rs. 25651 for wheat crop. Also, the returns over variable cost fetched from sugarcane (Rs. 103734) were the highest on per hectare basis and the lowest for maize (Rs. 16294). The direct subsidy scenario based upon secondary data collected revealed that the input subsidy provided by Department of Agriculture was on wheat seed was to the tune of Rs. 500 per quintal for the years 2012-13 and 2013-14, which increased to Rs. 700 per quintal during 2014-15. The amount of subsidy provided for agricultural machinery increased from Rs. 0.74 crore during 2002-03 to Rs. 62.74 crore during 2014-15. The amount of subsidy disbursed by the Department of Horticulture in Punjab under NHMS amounted to Rs. 5.39 crores during 1990-91, peaked at Rs. 76.88 crores during 2012-13 and then declined to Rs. 44.24 crores during 2014-15. The subsidies under RKVY peaked at Rs. 12.95 crores during 2013-14 and then declined to Rs. 8 crores during 2014-15. As far as indirect subsidies are concerned, the fertilizer subsidy in Punjab has followed a decreasing trend from 2010-11 to 2014-15; it decreased from Rs. 4581 crore to Rs. 3492 crore. The total cost of supply of electricity to agriculture increased from Rs. 900 crore in 2002-03 to Rs. 4454 crore during 2014-15.The electricity supply to agriculture sector is free. The per unit cost/subsidy in agriculture has also been continuously increasing from Rs. 1.55 in 2002-03 to Rs. 4.19 in 2014-15. The level of direct subsidies availed by large and medium farms were the highest for farm machinery, while the marginal, small and semi-medium farms availed highest subsidy on the wheat seed. Crop-wise input subsidy analysis based upon primary data collected from selected farm households revealed that without subsidy there was increase in cost of growing paddy by 24.18 per cent followed by wheat (22.78%), basmati-paddy (18.60%), potato (14.56%), maize (14.06%) sugarcane (12.04% ) and cotton (10.36%). On the contrary, the net returns in potato growing declined by 52.44 per cent followed by maize (27.70%), cotton (14.37%), paddy (13.06%), wheat (11.13%) sugarcane (9.60%) and paddy (13.06%). In overall crop production (including fodder), it was found that without subsidies there was an overall increase in the cost of crops by 19.24 per cent while net returns declined by 12.66 per cent. On large farms there was highest increase in total cost per hectare without availing the benefit of subsidy followed by other farm categories The per cent increase in cost without subsidy for growing all the crops was highest on large farms (24.38%) followed by medium, semi-medium, small and marginal farms. This shows the higher subsidy benefit accrued by the large, medium and semi-medium category farmers in crop cultivation as compared to small and marginal farmers. As far as fertilizer subsidy is concerned, larger share in fertilizer subsidy benefit was enjoyed by large farmers as compared to farmers from other farm categories. Per hectare crop-wise fertilizer subsidy revealed that biggest chunk of fertilizer subsidy worked out in case of potato (Rs.8990) followed by sugarcane, wheat, paddy, cotton, maize and basmati crop. The crop-wise difference in fertilizer use attributed to higher fertilizer subsidy in case of potato and sugarcane crops. Farm category- wise analysis showed higher benefit realized by medium and large farmers in majority of the crops. The crop-wise fertilizer subsidies on per farm basis revealed that the quantum of fertilizer subsidy was highest in case of wheat crop followed by other crops. Thus, nearly 70 per cent of the total subsidy on fertilizers attributed to cultivation of wheat and paddy crops due to higher area under these crops. The crop-wise per hectare power subsidy revealed that power subsidy in case of paddy crop, worked out at Rs.4289 per hectare followed by sugarcane, basmati, potato, maize, wheat and cotton. Thus, the crops requiring higher number of irrigations accrued higher proportion of power subsidy realized by the agricultural sector. On per hectare basis, the maximum benefit of power subsidy was realized by large and medium category farmers as compared to other farmer categories. As far as diesel subsidy is concerned, it was Rs. 391 per hectare in sugarcane crop followed by paddy, basmati, maize and cotton. Farm category wise analysis revealed that diesel subsidy benefit was highest on semi-medium, medium and large farms as compared to marginal and small farms. The extent of diesel subsidy was higher for sugarcane and paddy crops due to higher generator/ diesel engine use for irrigating these crops particularly in hot summer months. Thus, higher benefit of diesel subsidy was enjoyed by large and medium farmers as compared to farmers from other farm categories due to higher area under crop cultivation. The quantum of total direct subsidy received per hectare in aggregate was highest on medium category farms followed by marginal, small, semi-medium and large farms. On per farm basis also it was highest on medium farms followed by large, semi-medium, small and marginal farms. This shows the disparity in disbursement of direct subsidies. The benefit of indirect subsidies availed by the farmers revealed that per hectare indirect subsidy realized by the large farmers was highest being Rs.8531 per hectare followed by medium, semi-medium, small and marginal farmers. Therefore, indirect subsidies benefits were largely accrued by large and medium category farmers as compared to small and marginal farmers. In order to see the quantum of subsidy intensity availed farm households were categorized into three groups i.e. low, medium and high by using cube-root cumulative frequency method. The distribution of sample households on the basis of total agricultural subsidy availed per hectare revealed that 36.67 per cent of the households fell in the low subsidy group of up to Rs. 5818 followed by 33.33 per cent in Rs. 5819-7572 group and remaining 30 per cent in > Rs.7572 group . It was seen that higher number of households fell in low subsidy group as compared to medium and high subsidy groups. Majority of the marginal and small farmers fell in low subsidy farm group while semi-medium farmers fell in both low and medium subsidy groups and large and medium category farmers in medium and high subsidy groups. The crop-wise analysis revealed that there was higher subsidy benefit realized by high subsidy intensity farms comprising large and medium farm categories. Also, quantum of fertilizer, power and diesel subsidy benefit was higher on high subsidy intensity farms as compared to medium and low subsidy intensity farms. Major policy recommendations included that the direct subsidy benefit should be target group based especially for small and marginal farmers since major chunk of direct subsidies are taken by medium and large category farmers and hence should be totally discontinued for this group. The resultant savings by way of withdrawal of direct subsidies, this benefit should be given to marginal and small farmers to improve their economic lot. In case of indirect subsidies, especially fertilizer and power subsidies, these should be continued for marginal and small farmers in the present form and it should be given to the medium and large farmers with a rider. Nominal charges for power usage by medium and large category farmers in agricultural sector can be one of the options. These policy issues can be helpful in rational use of agricultural subsidies and bridge the farm category gap and disparity in agricultural sector.