A subsidy is a benefit given to an individual, business or an institution, usually by the government. An agricultural subsidy is a government incentive paid to agribusinesses, agricultural organizations and farma to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities. Agricultural subsidies like, fertilizer, irrigation, equipment, credit subsidy, seed subsidy, export subsidy, etc.
Subsidy in fertilizers is provided by the Central Government whereas subsidy on water and irrigation is provy by local state governments. Agricultural subsidies were introduced to stabilize markets , help low income farmers, and air rural development.
Types of agricultural subsidy in India are as follows:-
● Fertilizer subsidy
● Power subsidy
● Agricultural equipment subsidy
● Irrigation subsidy
● Seed subsidy
● Export subsidy
● Credit subsidy
● Agricultural infrastructure subsidy
Fertilizer subsidy is paid to fertilizer companies as compensation for selling their products to farmers below market prices. This subsidy is provided by central government to fertilizers and manufacturers and importers that farmers can buy purchase them at affordable price.
This subsidy ensures the following:
● Cheap Inputs to farmers.
● Stability in Fertilizer Prices.
● Reasonable Returns to manufacture
● Availability of Fertilizers to farmers in Adequate Quantity at the Requirement
Power subsidy is paid to farmers. Firstly, farmers will have to pay the bill of power consumption for agriculture purposes. After that, farmers will get subsidy in their bank account.
The State Electricity Boards (SEBs) may generate their own power or buy it from companies like NTPC and NHPC. The power subsidy "incentivizes farmers to invest in pumping sets, bore-wells, tube wells, and other irrigation systems."
Agricultural equipment subsidy
This subsidy is provided by state and central government. It is paid to agribusinesses, agricultural organization and farma to supplement their income, manage the supply agricultural commodities and influence the cost and supply such commodities.Subsidies are provided to farmers through State Governments under various schemes such as the Sub-Mission on Agricultural Mechanization (SMAM), Rashtriya Krishi Vikas Yojana (RKVY) for the purchase of various agricultural equipment and machines, National Food Security Mission (NFSM), Mission for Integrated Development of Horticulture (MIDH), and National Mission on Oilseeds and Oil Palm (NMOOP).
Irrigation subsidy is the subsidy provided in the usage of government provided canal water.
This could be accomplished by the government constructing public goods such as canals, dams, tube wells, and other such infrastructure and charging farmers little or no fees for their usage (in some situations). It could also be through the use of low-cost private irrigation equipment like pumping sets.
It aims to provide capital investment subsidy for boosting seed production in India.
The government can give high-yielding seeds at reasonable prices with future payment alternatives. The government also undertakes the research and development activities required to generate such prolific seeds; the cost of these activities is a form of subsidy provided to farmers.
It is a government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low-cost loans, tax relief for exporters, or government- financed international advertising.
As a result, agricultural exports are generally promoted as long as they do not have a negative impact on the home economy. Export subsidies are financial incentives provided to stimulate exports.
It is the difference between interest charged from farmers, and actual cost of providing credit, plus other costs such as write-offs bad loans. Availability of credit is a major problem for poor farmers.
Lenders take advantage of the impoverished farmers' weakness by charging exorbitant loan rates. Many times, even farmers with collateral are unable to obtain loans because banking organizations are primarily urban-based and do not frequently engage in agricultural lending operations, which are deemed hazardous.
Agricultural infrastructure subsidy
It provide a medium - long term debt financing facility for investment in viable projects for post-harvest management Infrastructure and community farming assets through interest subvention and financial support.
Because of their bulkiness and accompanying revenue collection issues, no individual farmer will volunteer to supply these facilities (no one can be excluded from its benefit on the ground of non-payment). As a result, the government assumes responsibility for their provision, and given the plight of Indian farmers, a lower price can be paid to the poorer farmers.