Fertilizer Subsidy in India: Who are the Beneficiaries?

Abstract

One of the most contentious issues surrounding input subsidies in general and fertilizer in particular in India is how much of what is paid out actually finds its way into the pocket of the farmer, and how much is siphoned away by input companies. There has also been a debate about the issue of real beneficiaries of fertilizer subsidy like small vs. large farmers, well-developed vs. less developed regions, etc. There is need to understand the fertilizer subsidy distribution pattern to assess whether the subsidy benefits the target group(s), an argument often made while giving any farm subsidy. This paper examines trends in fertilizer subsidy and the issue of distribution of fertilizer subsidies between farmers and fertilizer industry, across regions/states, crops and different farm sizes. It justifies fertilizer subsidies and questions the rationale for direct transfer of subsidy to farmers.