| dc.description.abstract | While fertiliser subsidy has probably been one of the most hotly debated issues in the
country over the past two decades, the debate reached a new height follow ing a
recommendation by the Prime Minister's Economic Advisory Council (PMEAC) in its
latest Economic Outlook 2012113 that "subsidies are progressively losing their relevance
and are becoming unbearable fiscal burden so a beginning can be made in dismantling
fertiliser subsidy". In view of this, the present paper analyses the fertiliser subsidy
from two different aspects, both important for policy planners in the country. First, who
is benefiting from the current system of fertiliser subsidies and secondly what is the
impact of recent policy changes on fertiliser consumption and prices and proposed removal
of fertiliser subsidies on farm income. Fertiliser subsidies account for a significant share
of the total support to agriculture and have increased by about 560 per cent between
triennium ending (TE) 2003-04 and TE 2010-11 m ainly due to steep increase in
international prices of fertilisers and feedstocks/raw materials, increased consumption
and unchanged farm gate prices. The findings suggest that all farmers benefit from
subsidies, however, small and marginal farmers receive about 53 per cent of the subsidy,
higher than their share in total cropped area (44.3%), The partial decontrol of fertiliser
sector which has led to unprecedented increase in prices of phosphatic (P) and potassic
(K) fertilisers (about 160% in DAP and 280% in MOP) and relatively cheaper nitrogenous
(N) fertilisers, led to sharp fall in consumption of P and K fertilisers, thereby imbalance
in use of N, P and K nutrients. Moreover, dependence on expensive imports has
significantly increased during the last 6-7 years. The results show that removal of fertiliser
subsidy will make farming unprofitable in many states and therefore removal of fertiliser
subsidies will not be in the interest of farming community, particularly, small and marginal
farmers and less developed states/regions. The paper argues for containing subsidy but
without hurting interest of millions of small and marginal farmers including tenant
cultivators. As radical reforms like dismantling of subsidy and deregulation of fertiliser
industry in one go are neither economically desirable nor politically feasible, a case can
be made for continuation of fertiliser subsidy with better targeting and rationing to
achieve socio-economic objectives of national food security, poverty alleviation and
farmers' welfare as well as subsidy reduction. | |
