chapter ii agricultural subsidies in india – an...

CHAPTER II

AGRICULTURAL SUBSIDIES IN INDIA – AN OVERVIEW

2.1 INTRODUCTION

Agriculture plays an important role in the economic growth

of our country. Almost all the activities revolve round agriculture. It

provides employment to around 60 per cent of the total workforce in the

country (Swaminathan, 2009).1 Extremity in climate and variety of soil

condition have made possible the cultivation of every item. Introduction of

new high yielding varieties after the spread of Green Revolution in the late

sixties resulted in record of food grains production. For stimulating

agriculture production and attaining self-sufficiency the government

provides various incentives together with price supporting schemes.

Among the agriculture production incentives, subsidies are considered to

be the most powerful instruments for accelerating the growth of

agricultural production. Most of the subsidies provided are designed to

��

1 Swaminathan, M.S., (2009), “Drought Management for Rural Livelihood Security”, The Hindu,

August 17, p.7.

62

compensate the high cost of production and to stimulate the use of modern

inputs.

2.2 AGRICULTURAL SUBSIDIES IN INDIA

Major items of agricultural subsidies are food, fertilizer,

irrigation, power and credit. While food and fertilizer subsidies are borne

by the Centre, power and irrigation subsidies are borne by the respective

state government. Credit subsidies are given through the banking system.

Food subsidy is the difference between the price at which the Food

Corporation of India (FCI) procures from farmers and sells through the

Public Distribution System (PDS). The food subsidy in India was Rs.12060

crores in 2000-01 and it increased to Rs.56002 crores in 2009-10.2

For fertilizer inputs, subsidy is the difference between the

price paid to fertilizer manufacturers and price received from the farmers.

For other inputs, it is the difference between economic cost of input and

issue price to the farmers, which is paid by the government. Credit subsidy

is applicable for short term loans provided for production purpose for a

period of one year. It is the difference between cost of credit and the actual

interest paid by the farmers. Credit subsidy includes interest subvention

and interest subsidy. In the case of Nationalised Banks interest subvention

is only applicable and it is provided by the Government of India through

��2 Government of India, (2010), Union Budget 2009-2010, Expenditure Budget, Vol.1, p.15.

63

the RBI. For the Co-operative Banks both the interest subvention and the

interest subsidy is applicable and it is given through the NABARD.

To augment the agricultural production, in addition to the

above the Government of India is providing some other subsidies to the

farmers, through the Farmers’ Co-operative Societies in the form of seeds,

development of oil seeds, pulses, cotton, rice, maize, crop insurance

schemes and price support schemes. The total agricultural subsidies for the

past ten years from 2000-01 to 2009-10 and the agricultural subsidies per

hectare of GCA in India is presented in Table 2.1.

TABLE 2.1

AGRICULTURAL SUBSIDIES IN PER HECTARE OF GROSS

CROPPED AREA IN INDIA

Year Total Agricultural

Subsidies (in crores)

GCA in India

(million ha)

Subsidy per

hectare (in Rs.)

(1) (2) (3) (4)

2000-01 50440 185.34 2658

2001-02 56747 188.29 3062

2002-03 59679 175.58 3399

2003-04 66625 190.08* 3506

2004-05 75635 191.55* 3948

2005-06 82967 193.05* 4297

2006-07 91737 193.23* 4748

2007-08 119036 195.83* 6078

2008-09 204668 195.83* 10451

2009-10 108982 195.83* 5565

Source: (2) Central Statistical Organisation, New Delhi.

(3) Agricultural Statistics at a glance – 2010

(4) As per calculation

Note: 2009-10 includes only fertilizer and food subsidy * Provisional

2008-09 and 2009-10 GCA pertains to 2007-08

64

It is noted from Table 2.1 that the total agricultural subsidies

include fertilizer, irrigation, other subsidies and electricity. During 2000-01

the total subsidies in Indian agriculture accounted for Rs.50440 crores and

Rs.108982 crores in 2009-10. The amount of subsidy is increasing at a

considerably higher rate year after year. The increase in total subsidy may

be due to the increase in the consumption of fertilizers, increase in the use

of electricity for irrigation purpose and easy availability of credit at a

subsidized rate. The subsidy amount per hectare of GCA was Rs.2658

during 2000-01 and it was Rs.10,451 per hectare during 2008-09.

2.2.1 Fertilizer Subsidy in India

Fertilizer plays a major role in increasing agricultural

production and productivity. The fertilizer prices both at producer and farm

level are determined by the government in most of the countries and such

government interventions generally have the basic objectives (i) to provide

fertilizers to farmers at stable and affordable prices in order to encourage

higher consumption of fertilizer and to increase agricultural production

thereby and (ii) to encourage domestic production. To make fertilizers

available to farmers at affordable prices and ensuring adequate returns on

investments to the entrepreneurs, the Government of India introduced the

Retention Price-cum-Subsidy Scheme (RPS), a cost-plus approach, for

nitrogenous fertilizers in November 1977 and extends to complex

65

fertilizers in February 1979. The RPS scheme also aimed at assuring a

reasonable return on investment and to attract further investment in the

fertilizer sector.

Under RPS, the difference between the retention price

(normative cost of production of the urea is determined by the government

plus 12 per cent post tax return on net worth) and the notified sale price

minus the distribution margin is paid as subsidy to the individual

manufacturing units. A freight subsidy is also paid to the individual units to

cover the cost of transportation of fertilizers from the production points to

the consumption centres. Since there is a uniform issue price both for

indigenous and imported controlled fertilizers, the difference between the

delivery cost of imported fertilizer and the issue price (reduced by

distribution margin) is borne by the government as subsidy.3

Introduction of high yielding variety of seeds in mid-sixties

and pragmatic policies adopted in mid-seventies and eighties led to the

growth in consumption of fertilizers and agricultural production over the

years. However, decontrol of complex fertilizers such as Di-Ammonium

Phosphate (DAP) and Muriate of Potash (MoP) in August 1992 decelerate

the growth in consumption. The government extended a flat rate

concession on these fertilizers. But urea imports continue to be restricted

and canalized. Based on the recommendations of various committees, a

��3 Government of India, Economic Survey 2000-2001, p.162.

66

New Pricing Scheme (NPS) for urea units was implemented in a phased

manner from April 2003 with an objective to bring transparency,

uniformity and efficiency and thereby reduce cost of production.

From 1st April,2010 the Government of India fixed subsidy

on the fertilizer nutrients ‘N’-Nitrogen, ‘P’-Phosphorous, ‘K’-Potash and

‘S’-Sulphur contents present in the fertilizer which is known as Nutrient

Based Fertilizer Subsidy (NBS). The NBS regime is applicable to

Di Ammonium Phosphate, Mono Ammonium Phosphate, Triple Super

Phosphate and 12 grades of complex fertilizers and Ammonium Sulphate.

Under the NBS scheme, the subsidy on the nutrients shall remain fixed, the

selling price of fertilizers at farm gate level will be decontrolled and

determined by market forces and the retail price of the subsidized fertilizer

will be decided by the companies. NBS would promote balanced use of

plant nutrients and thereby reduce the demand and increase agricultural

production.

While considering the fertilizer subsidy, government is

providing subsidy both for the indigenous and imported fertilizers. A

sizeable portion is allotted to this in the budget. Table 2.2 presents the

details of expenditure met by the government in order to subsidize

fertilizers during the period 2000-01 to 2009-10.

67

TABLE 2.2

DETAILS OF EXPENDITURE ON SUBSIDY/CONCESSION

DURING THE YEAR 2000-01 TO 2009-10

(in crores)

Period

Amount of Concession Disbursed on

Decontrolled Fertilizers

(Indigenous + Imported)

Amount of Subsidy Disbursed on

Urea Total for

all

Fertilizers Indigenous

P & K

Imported

P & K Total

Indigenous

Urea

Imported

Urea

Total

Urea

2000-01 3595.00 724.00 4319 9480 1.00 9481 13800.00

2001-02 3759.52 744.00 4503.52 8044.00 147.50 8191.50 12695.02

2002-03 2487.94 736.8 3324.52 7790.00 1.16 7791.16 11015.68

2003-04 2606.00 720.00 3326.00 8521.00 0.82 8521.82 11847.82

2004-05 3977.00 1165.18 5142.18 10243.15 742.37 10985.52 16127.70

2005-06 4499.20 2096.99 6596.19 10652.57 2140.37 12793.45 19389.64

2006-07 6648.17 3649.95 10298.12 12650.37 5071.06 17721.43 28019.55

2007-08 10333.80 6600.00 16933.80 16450.37 9934.99 26385.36 43319.16

2008-09 32957.10 32597.69 65554.79 20968.74 12971.18 33939.92 99494.71

2009-10 16000.00 23452.06 39452.06 17580.25 6999.98 24580.23 64032.29

Source: Central Statistical Organisation, National Account Statistics,

Government of India (2010).

It is noted from Table 2.1 that the amount of subsidy

disbursed during the year 2000-01 was Rs.9481 crores and it was

Rs.24580.23 crores for the year 2009-10.The amount of subsidy provided

for domestic (indigenous) production is more than that of imported

fertilizer except the year 2009-10.

2.2.2 Consumption of Fertilizers

While considering the consumption of fertilizers there is a lot

of variation from state to state. The consumption pattern of fertilizers has

direct relevance to output pattern of crops i.e. states consuming more

nutrients is producing more grains. States like Punjab, Haryana,

68

Tamilnadu, Andhra Pradesh and Uttar Pradesh have higher consumption,

while states like Assam, Madhya Pradesh and Rajasthan have very low

consumption. Even though such states are consuming very low volume of

fertilizers, India is not self-sufficient in fertilizer production and about 30

per cent of the need is met by imports. Even after subsiding fertilizers to a

very great extent, the consumption of certain states are very low, if there

was no subsidy at all, the consumption pattern of fertilizer would have

been still very low.4 Table 2.3 exhibits the data regarding the fertilizer

consumption per hectare of GCA in India for the years 1991-92 and

2001-02.

TABLE 2.3

FERTILIZER CONSUMPTION PER HECTARE OF

GCA (KG) IN INDIA

Farm Size 1991-92 2001-02

Marginal (Below 1 hectare) 72.2 126.2

Small (1-2 Hectare) 65.5 100.6

Semi-medium (2-4 hectare) 61.7 88.8

Medium (4-10 hectare) 56.3 75.8

Large (Above 10 hectare) 46 55.9

Overall 60.7 92.6

Source: All India Report on Input Survey, Ministry of Agriculture,

Government of India (2007-08).

It is clear from Table 2.3 that the fertilizer consumption per

hectare of gross cropped area by size of holding reveals that the fertilizer

��4 Badi, R.V., and Badi, N.V., (2002), Rural Marketing, Himalaya Publishing House, p.225.

69

use was significantly higher in the case of marginal and small farmers

when compared to large farmers. During the year 1991-92 the average

consumption was higher on marginal farmers, than the small and the lowest

on large farmers which was recorded as 46 kg. Smaller the farm size,

higher the fertilizer consumption. Similar trend was established in the year

2001-02 also.

Those states whose consumption is more than one percent to

the total consumption of fertilizer is considered and is presented in

Table 2.4 for the year 2008-09.

TABLE 2.4

STATE-WISE CONSUMPTION OF CHEMICAL FERTILIZERS

Sl.

No. State

Total

Consumption

NPK

(in ‘000 tonnes)

%

Share

Consumption

per hectare

(in kgs)

Fertilizer

Subsidy per

ha (in Rs.)

Rank

1. Andhra Pradesh 3.070.88 12.32 239.71 9732.22 1

2. Bihar 1,37.02 5.44 178.98 7266.59 5

3. Gujarat 1,716.98 6.89 140.71 5712.42 9

4. Haryana 1,289.17 5.17 201.62 8184. 96 4

5. Karnataka 1,831.83 7.35 147.28 5979.57 8

6. Kerala 260.91 1.05 89.41 3630.05 11

7. Madhya Pradesh 1,423.40 5.71 70.77 2874.00 13

8. Chattisgarh 462.82 1.88 80.74 3278.04 12

9. Maharashtra 2.566.11 10.3 113.69 4615.81 10

10. Orissa 534.87 2.15 61.64 2502.58 14

11. Punjab 1,767.56 7.09 221.42 8989.65 2

12. Rajasthan 1,052.02 4.22 48.85 1983.31 15

13. Tamilnadu 1,265.22 5.08 216.54 8791.52 3

14. Uttar Pradesh 4,032.76 16.18 156.31 6346.19 7

15. West Bengal 1,519.31 6.09 157.69 6402.21 6

16. Others 730.54 2.93 64.26 2608.96

Source: Statistical Abstract, AP – 2010, Directorate of Economics and

Statistics, Hyderabad.

70

From the Table 2.4 it is clear that there is large variation in

the shares of states in total fertilizers consumption and this is because of

the variation in total cropped area among states. Therefore, it would be

appropriate to examine inter-state equity in terms of average consumption

per hectare of cropped area. That is, larger the fertilizer consumption per

hectare greater would be the fertilizer subsidy enjoyed. As per the table,

Andhra Pradesh, Punjab, Tamilnadu, Haryana, Bihar, West Bengal and

Uttar Pradesh are the main beneficiaries of fertilizer subsidy on per hectare

basis. The fertilizer consumption per hectare is significantly higher than the

average in those states. States like Chattisgarh, Madhya Pradesh, Orissa

and Rajasthan had less than the average subsidy. The state Andhra Pradesh

ranks first in fertilizer consumption per hectare as well as fertilizer subsidy

and it was more than four times when compared with the state Rajasthan

(Rs.1983).

2.2.3 Availability and Amount of Fertilizer Subsidy

Out of the total amount of subsidies, agricultural subsidies

contribute the major portion and that too fertilizer subsidy. In order to

achieve self-sufficiency in fertilizer production, subsidies are being

provided and it is observed that India has to import fertilizer from other

countries to meet its demand. The rate of fertilizer subsidy for domestic

production as well as import is given in Table 2.5 from the year 2000-01 to

2009-10.

71

TABLE 2.5

AVAILABILITY AND AMOUNT OF SUBSIDIES ON

FERTILIZERS IN INDIA (2001-2010)

Year

Availability of

Fertilizer ('000 tonnes)

(1)

Fertilizer Subsidy

(Rs. crores)

(2)

Rate of Fertilizers subsidy

(Rs. per tonne)

(3)

Dom

esti

c

Pro

du

ctio

n

Imp

ort

s

Tota

l

Dom

esti

c

Pro

du

ctio

n

Imp

ort

s

Tota

l

Dom

esti

c

Pro

du

ctio

n

Imp

ort

s

Tota

l

2000-01 14704 2091 16795 13075 725 13800 8892 3467.24 8216.73

2001-02 14628 2399 17027 11803.52 8991.5 12695.02 8069.13 3716.13 7455.82

2002-03 14474 1674 16148 10277.94 737.74 11015.68 7100.97 4407.05 6821.70

2003-04 14266 2018 16284 11127 720.82 11847.82 7799.66 371.95 7275.74

2004-05 15405 2750 18155 14220.15 1907.55 16127.7 9230.87 6936.55 8883.34

2005-06 15575 5253 20828 15151.57 4237.87 19389.44 9728.13 8067.52 9309.31

2006-07 16095 6080 22175 19298.54 8721.01 28019.55 11990.39 14343.77 126.35.65

2007-08 14707 7583 22290 26784.17 16534.99 43319.16 18211.85 21805.34 19434.35

2008-09 14334 10151 24485 53925.84 45568.87 99494.71 37620.93 44891.02 40634.96

2009-10 16320 8123 24443 33580.25 30452.04 64032.29 20576.13 37488.66 26196.58

Source: (1) and (2) Government of India, (3) as per calculation.

It is clear from Table 2.5 that the total availability of

fertilizer, that is, both the domestic production and imported fertilizer

shows an increasing trend except for two years, 2002-03 and 2009-10. The

availability of domestic fertilizer from 2001-02 was showing a declining

trend. Only after 2005, it shows an increasing trend and in 2009-10 it

reaches 16,320 thousand tonnes. It is inferred that in 2000-01 the subsidy

paid for imports was Rs.725 crores and in 2009-10 the subsidy amount

raised to Rs.30,452.04 crores.

72

2.2.4 Credit Subsidy

Credit is the most important input that controls the growth of

agricultural production. Till the end of 1966, credit for agriculture was

considered to be synonymous with co-operative credit. Only after the

nationalization of Commercial Banks in 1969 and establishment of RRB’s

in 1975 these banks entered in the field of agricultural financing. The most

important development in the field of agricultural credit is the setting up of

the National Bank for Agricultural and Rural Development (NABARD) in

July 1982. It is guiding all the major agencies operating in the rural credit

market namely the Commercial Banks, the Regional Rural Bank and the

Co-operative Credit Institution.

The present agricultural credit system in the country has

already a functional bias, that Co-operative Credit Society’s extent only

short term and medium term loans. Commercial and Regional Rural Banks

extended all types of agricultural credit-short, medium and long term. The

Reserve Bank of India directly or indirectly subsidies these agencies to

make them more effective.

According to the Rural Credit Survey Committee, loans are

classified under three heads depending on the duration of the loans.

Short term or seasonal credit is one which provides farmers

with the working capital to run their farms efficiently, to obtain the crop in

73

the best possible circumstances and to hold credit until the harvest can be

sold. The period of credit of this type does not exceed 15 months.

Medium term credit is one which provides capital to farmers

to purchase live-stock and farm machinery and also to carry out

improvement of an average duration e.g. the conversion of the system of

cultivation. These credits are for a period longer than fifteen months, but

not more than 5 years.

Long-term credit is one which offers farmers the means

required for purchasing holdings or to effect permanent improvement e.g.

drainage, construction of wells, embankments and the erection of live-

stock sheds, stock houses and other farm buildings, litigation and

repayment of old debts. The period of sub debts varies from country and

place to place.5

Credit system in rural India can be classified as institution

credit sources and non-institution sources. Institution credit sources include

Co-operatives, Commercial Bank and RRB’s. The Non-institution sources

comprises of professional money lender, commission agents, friends and

relatives. The flow of institutional credit to agriculture sector from

2000-2001 to 2009-10 is given in Table 2.6.

��5 Banarjee, P.K., (1985), Indian Agricultural Economy: Financing Small Farmers, Chetana

Publication, New Delhi, pp.83-84.

74

TABLE 2.6

FLOW OF INSTITUTIONAL CREDIT TO AGRICULTURE

SECTOR IN INDIA

(in crores)

Year Co-operative

Banks RRBs

Commercial

Banks

Other

Agencies

2000-01 20718 4219 27807 83

2001-02 23524 4854 33587 80

2002-03 23636 6070 39774 80

2003-04 26875 7581 52441 84

2004-05 31231 12404 81481 193

2005-06 39403 15223 125477 382

2006-07 42480 20435 166485 0

2007-08 48258 25312 181088 0

2008-09 46192 26765 228951 0

2009-10 34363 22132 139733 0

Source: Department of Agriculture and Co-operative, Credit Division.

It is noted from Table 2.6 that the credit flow to agriculture

sector through the Co-operative Banks is showing an increasing trend from

2000-01 to 2007-08. Only in the last two years it shows a decreasing trend.

2.2.5 Subsidised Amount of Interest

Since 2006-07, Government of India is providing interest

subvention to all Public Sector Banks, Regional Rural Banks and

Co-operative Banks for short term crop loans upto Rs.3 lakhs, so as to

ensure that short term agriculture credit is available at 7 per cent p.a. to

farmers.

75

From the year 2010-11, an additional 2 per cent interest

subvention is being provided to those farmers, who repay their short term

crop loans in time under this scheme. Thus, the short term crop credit is

available to farmers at the rate of 5 per cent per annum in 2010-11. The

government has also proposed to further incentivize the farmers who make

prompt repayment by providing a further incentive of 3 per cent additional

interest subvention for the year 2011-12. That is, loans will be available to

farmers who pay in time at the rate of 4 per cent per annum. Thereby the

interest rate recommended by the National Commission for Farmers has

been decided to implement. Table 2.7 shows the details of interest

subvention provided by the government.

TABLE 2.7

SUBSIDY ON AGRICULTURE CREDIT IN INDIA

Year Interest Subsidy

(in crores)

2005-06 1701.00

2006-07 2534.13

2007-08 1737.26

2008-09 640.00

2009-10 2011.00

Source: Government of India, Union Budget, various issues

It is clear from Table 2.7 that in the year 2006-07, the

government has provided Rs.1100 crores as interest subvention for

providing short term credit to farmers and Rs.1359.13 crores as waiver of

76

interest on overdue loans in debt stressed states. Then in the year 2007-08,

an additional amount of Rs.1737.26 crores was provided and in 2009-10,

Rs.2011 crores was allotted. The agricultural credit subsidy includes

interest subsidy and interest subvention.

2.3 AGRICULTURAL SUBSIDIES IN TAMILNADU

Though the four subsidies namely fertilizer, power, irrigation

and credit have direct or indirect implications on the state exchequer, this

strategy has been followed to augment the production of agricultural

commodities by assuring remunerative prices to the farmers and at the

same time provide food grains to the consumers at reasonable prices. The

fertilizer subsidies are borne by the central government and power

subsidies at the state government. In addition to this indirect subsidies, the

Tamilnadu state government through the Agriculture Department

concerned, provide direct subsidies on different items such as seeds,

sprinkler set, micro-nutrients, pesticides, tractors, spray pumps and many

other implements. In this chapter an attempt has been made to analyze the

growth and distribution of direct and indirect subsidies provided to the

farmers of Tamilnadu state. The indirect subsidies analyzed are restricted

to three major inputs namely, fertilizer, power and credit.

Direct Subsidies

The Tamilnadu State Government, through the Department

of Agriculture provides subsidies directly to the farmers in order to achieve

77

higher productivity. The state government individually and together with

the central government provides various facilities and subsidies through

various schemes such as ISOPOM (Integrated Scheme for Oilseeds Pulses

Oilpalm and Maize), ICDP (Integrated Cereals Development Programme)

and NFSM (National Food Security Mission). Subsidies directly paid to the

farmers on different items such as seeds, micro nutrients, pesticides,

tractor, gypsum, and spray pumps are discussed in the following

paragraphs.

Seeds

Seed, which is the carrier of new technology for crop

production and higher crop yields, is a critical input for sustained growth of

agriculture. In India, more than four-fifths of the farmers rely on farm-

saved seed leading to a low seed-replacement rate.6 The Department of

Agriculture in Tamilnadu provides improved varieties of seed under

various programmes such as Intensive Cereal Development Programme,

Seed-Village Programme and National Pulses Development Programme.

Under these schemes, seeds of paddy, oilseeds, cotton and pulses are

provided to the farmers in packing ranging from 0.5 kg to 15 kg. In

addition to the state agencies, the private sector also plays a significant role

in production and distributing of seed, after the introduction of the Seed

Policy of 1988 particularly for food crops and cereals. The Department of

��6 Government of India, Economic Survey, 2006-07, p.174.

78

Agriculture provides subsidy on seeds at differential rates for different

period. For the period 2009-10, the rate of subsidy on seeds of paddy was

Rs.300 per quintal.

Sprinkler Sets

To encourage the participation of farmers in irrigation

purpose the government of Tamilnadu provides subsidy on sprinkler sets. It

is most useful for those districts where irrigation facilities are limited.

Under the state scheme for sprinkler irrigation, government grants Rs.7500

and Rs.12500 per set to general category of farmers. Under the Intensive

Cotton Development Programme (ICDP), government provides 50 per cent

of cost to SC/ST, small, marginal and women farmers limited to Rs.15,000

per hectare and to the general category of farmers 33 per cent of cost

limiting to Rs.10,000 per hectare.

Gypsum

Gypsum is a mineral chalk like substance used as a fertilizer

to reclaim the saline and alkaline lands and converts them into cultivable

pieces. The rate of subsidy on gypsum was 50 per cent of the cost incurred

for the reclamation of saline and alkaline land as per the soil test results.

The rate of subsidy on zinc sulphate was also 50 per cent of the cost

incurred. Since most of the land do not require any reclamation this scheme

was not utilized by the beneficiaries in the study area.

79

Implements

The government of Tamilnadu is sanctioning various

proposals of Tamilnadu Agricultural University for implementation of

Agricultural Mechanization in Tamilnadu. Distribution and Introduction of

agricultural machinery is carried through incentives by the Agriculture

Department. Subsidies is provided on agricultural implements like Mini

Combined Harvester, Shredder, Maize Husker and Chisel Plough. On

these items government grants 50 per cent of the cost as subsidy. In order

to popularize agricultural mechanization through conventional equipments

like Power Tiller, Rotovator, Cultivator, Disc Plough, government grants

subsidy.

Tractor

To promote mechanization in agriculture, the government of

Tamilnadu offers subsidy to the farmers. The subsidy on tractor to the

general category was 30 per cent of the cost or Rs.30,000 whichever was

less. A special subsidy was provided to small tractors.

Bio-Fertilizers

In order to promote a balanced use of NPK fertilizers in

addition to organic, green manure, compost and bio-fertilizers were added

with emphasis on the use of micro nutrients in almost all the regions where

intensive cultivation is practiced. Azospirillum is being distributed to the

farmers under the state schemes and central and state shared schemes such

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as ISOPOM and ICDP. The subsidy on bio-fertilizers such as

Azospirillum, Rhizobium and Phospho bacterium was Rs.6 per 200gm

packets.

2.3.1 Pattern of Direct Subsidies to Farmers in Tamilnadu

The pattern of direct subsidies on various components

available to the farmers in Tamilnadu during 2009-10 has been furnished in

Table 2.8. These are available to the farmers during the respective year

based on the decisions of Government of India and State Government at

the same level or with some modifications.

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TABLE 2.8

DIRECT SUBSIDIES ON VARIOUS COMPONENTS TO THE

FARMERS IN TAMILNADU (2009-2010)

Sl.

No Subsidy schemes Rate of subsidy

1. Green manure seed distribution 25 % subsidy

2. Reclamation of Saline and Alkaline lands as per soil test results

For Gypsum 50 % subsidy

Zinc Sulphate 50% subsidy

3. Minikit of Rice 90 % subsidy

4. Integrated farming in coconut holding for productivity improvement

(Coconut Development Scheme)

a) Cut and removal of snile and

diseased tree

Rs. 250 per tree

b) Laying of Demonstration Rs.17500/ha/year

c) Establishment of organic

manure unit

One number(Rs.20000)

5. Integrated Cereals Development Programme Rice.

a) Hybrid Rice demonstrations Rs.1000/acre

b) Distribution of Bio-fertilizer 25 % subsidy

c) Distribution of Micro-nutrient

Mixture

25 % subsidy

d) IPM Demonstrations Rs.6000 Demonstration

e) System of Rice Intensification

Demonstrations

Rs.2000/acre

f) Subsidy on paddy seed Rs.2 Per Kg

6. Intensive Cotton Development Programme

a) Certified seed distribution 50% of the cost limited to Rs.1000/Qtl

b) Supply of breeder seed Full cost on reimbursement basis

c) Field Demonstrations Rs.2500/ha.

�

Contd…

82

Sl.


d) Distribution of Sprinkler 50% if cost to SC/ST, Small,

Marginal and Women farmer limited

to Rs.15000/ha and 33% of cost to

other farmers limiting to Rs.1000/ha

d) Pheromone trap distribution 50% of the cost limited to Rs.500/ha

e) Supply of Bio-agents 50% of the cost limited to Rs.300/ha

f) Supply of sprayers and dusters 50% of the cost limited to

Rs.700(Manually operated) 50% of

the cost limited to Rs.1500(Power

operator)

7. Oil Seed Production Programme

a) Distribution of RC Packet Rs.50/ha

b) IPM Demonstration Rs.1500/ha

c) PP Equipment Rs.420/equipment

d) Distribution of Gypsum Rs.350/ha

e) Distribution of MN Mixture Rs.138/ha

8. Sugarcane Development Scheme

a) Release of parasite Rs.10/ha

9. National Pulses Development Project

a) Breeder seed procurement

subsidy

100% subsidy

b) Foundation seed production

subsidy

Rs.500/Qtl

c) Certified seed procurement

subsidy

Rs.500/Qtl

d) Compact Block demonstration Rs.15000/10ha

e) IPM Demonstration Rs.1500/ha

f) Distribution of RC Packet Rs.200/ha

g) PP equipment distribution 50% of cost or Rs.800/ equipment

(hand operator) 50% of cost or

Rs.2000/ equipment (power operator)

h) Distribution of Gypsum 50% of cost of chemical + Transport

changes limited to Rs.500/ha

Contd…

83

Sl.


10. Oil Palm Development Project

a) Distribution of seedling 50% of the cost of the seed

b) Cultivation Maintenance Rs.7490 in three installments

Other Services Installation of drip irrigation

11. Supply of coconut seedlings

Tall Rs.12/ seedling

Tall × Dwarf Rs.20/ seedling

12. Bio-fertilizer

a) Azospirillum Rs.6/200gm packets

b) Rhizobium Rs.6/200gm packets

c) Phospho bacterium Rs.6/200gm packets

Source: Agriculture Department, Government of Tamilnadu

Indirect Subsidies

After discussing in detail the various direct subsidy provided

to farmers by the Tamilnadu Agricultural Department to enhance

agricultural production in the state, the indirect subsidies have been

analyzed for the state Tamilnadu and Kanyakumari district. The indirect

subsidies analyzed are restricted to three major subsidies namely power,

fertilizer and credit. The reason for not considering irrigation subsidy is

due to its low impact as reported by the Tamilnadu Agricultural

Development and World Bank. The study conducted by the Tamilnadu

Agricultural Development revealed that majority of the rural households in

Tamilnadu do not benefit directly from canal irrigation subsidies and only

7 per cent of rural households (15 per cent of households cultivating crops)

84

enjoys these implicit subsidies.7 Moreover, the World Bank has stated that

the distribution of canal irrigation subsidies among households that use

canal irrigation is less regressive than in other major Indian states (World

Bank, 2003a).

2.3.2 Fertilizer Subsidy in Tamilnadu

Since data on state-wise fertilizer subsidies is not available,

an indirect method was used to compute state level subsidies. The rate of

subsidies for NPK per tonne at All-India level is multiplied with the

fertilizer consumption in the state in order to arrive at the fertilizer subsidy.

Table 2.9 shows the details regarding fertilizer subsidy for the state of

Tamilnadu.

TABLE 2.9

FERTILIZER SUBSIDY IN TAMILNADU

Year Fertilizer Consumption (L.M.T) Fertilizer Subsidy

(in crores) N P K Total

2000-01 5.47 2.08 2.08 9.63 791.27

2001-02 5.05 2.05 2.28 9.38 699.36

2002-03 4.20 1.51 1.72 7.43 506.85

2003-04 3.78 1.59 1.76 7.13 518.76

2004-05 4.83 2.11 2.8 9.52 845.69

2005-06 5.59 2.6 2.84 10.99 1022.43

2006-07 5.86 2.69 2.70 11.25 1421.51

2007-08 5.43 2.28 3.04 10.76 2091.14

2008-09 6.47 2.55 3.63 12.65 5140.32

2009-10 6.32 2.54 3.72 13.11 3434.27

Source: Agrostat, 2010.

��7 Tamilnadu Agricultural Development, Executive Summary 2001-02, p.30.

85

It was noted from Table 2.9, that the consumption of

fertilizer in terms of nutrients (NPK) in Tamilnadu has increased from 9.63

lakh metric tonnes in 2000-01 to 13.11 lakh metric tonnes in 2009-10.

Subsidy given by central government is calculated as Rs.791.27 crores

during 2000-01 and an amount of Rs.3434.27 crores during 2009-10 under

fertilizer subsidy.

2.3.3 Fertilizer Subsidy in Kanyakumari District

Chemical fertilizer, one of the major inputs, play a vital role

in crop production in Kanyakumari District. The dosage of fertilizer to be

applied to each crop is recommended to the farmers based on soil test. In

the absence of soil test result the blanket recommendations are made to

each crop by the Agriculture Department officials. Table 2.10 shows the

details regarding the fertilizer consumption and subsidy in the district.

TABLE 2.10

FERTILIZER SUBSIDY IN KANYAKUMARI DISTRICT

Year Fertilizer Consumption (L.M.T) Fertilizer Subsidy

Total (in crores) N P K Total

2000-01 0.07 0.03 0.04 0.14 11.50

2001-02 0.06 0.04 0.04 0.14 10.43

2002-03 0.06 0.02 0.04 0.12 8.18

2003-04 0.05 0.03 0.04 0.12 8.73

2004-05 0.06 0.03 0.06 0.15 13.32

2005-06 0.07 0.05 0.07 0.19 17.68

2006-07 0.06 0.02 0.04 0.12 15.16

2007-08 0.04 0.02 0.03 0.09 17.49

2008-09 0.05 0.03 0.04 0.12 48.76

2009-10 0.06 0.02 0.04 0.12 31.43

Source: Statistical Hand Book of Tamilnadu, Department of Economics

and Statistics, Chennai.

86

From the Table 2.10 it is noted that the consumption of

fertilizers in Kanyakumari District recorded 0.14 lakh metric tonnes in

2000-01 and 2001-02. During the subsequent years there is decelaration in

the growth of consumption of fertilizers except 2004-05 and 2005-06. The

consumption of fertilizer was reasonably good in the year 2005-06 and

again there is decline in growth rate. The entire decade continued with

slow growth rate.

2.3.4 Electricity Subsidy

Electricity is one of the major inputs in agricultural activities

and which inturn has a direct impact on the process of economic

development. As stated earlier, power subsidy is provided by the concerned

state government as electricity fall within their domain. Generally the

electricity consumed by agricultural sector is unmetered and it is

consequently difficult to know the actual energy consumption by the

agricultural sector. Moreover agricultural consumption of power is broadly

estimated on residual basis, that is, after deducting the metered

consumption of other sectors from the total supplied. As such there is the

possibility of adding units of leakage or transmission loss (line loss) and

theft. As far as the question of actual beneficiaries for power subsidies is

concerned, it is necessary to note the farmers who are benefitted more and

the water-intensive crops which account for a significant portion of the

subsidies.

87

2.3.5 Agricultural Power Tariffs

Electricity is provided to the farming community at a

subsidized rate by the SEB’s on the direction of the state government. The

Tamilnadu government introduced free supply of electricity to marginal

farmer in the state from 1984-85 and to small farmers from 1.8.99.8 In

addition to Tamilnadu, the state of Punjab was also providing free power to

the farmers from 2000-01. Some of the other states were using only a pure

flat rate system irrespective of the capacity of pump sets.

The Electricity Act, 2003 enacted by the central government

had a provision for mandatory metering of supply of electricity and put

pressure on states to meter agriculture consumers’. The TNEB had started

metering new agriculture connections since July 1, 2003. The TN

Electricity Regulatory Commission (TNERC) notified its first tariff order,

reducing the cross-subsidy on electricity with the introduction of an

agricultural tariff. After 12 years of free supply of power to farmers, the

new tariff order has introduced a flat rate for unmetered connection of

Rs.250/HP per annum and a charge of Rs.0.20/kwh for metered

connections.9 The reintroduction of agriculture power tariff became a

highly contentious issue in Tamilnadu during the national election. The

��8 Government of Tamilnadu, Economic Appraisal 2005-2006, p.43.

9 Tamilnadu Agricultural Development, Executive Summary, 2001-2002, p.29.

88

Table 2.11 shows the tariff system of electricity prevailing in the state

Tamilnadu.

TABLE 2.11

TARIFF SYSTEM OF ELECTRICITY IN TAMILNADU

(rate in paise per kwh)

Small farmers Other farmers

With effect from 1-5-79 13.84 15.84

15-9-84 Free Rs.75/hp

1-4-90 Free Rs.50* Rs.75

*

1-4-91 onwards Free Free

16-3-03 Free 20 paise/kwh

Source: Narayana Moorthy, A., “Electric Pumpsets and Ground water

Management: Macro and Micro Evidence”, The Asian Economic

Review, The Journal of the Indian Institute of Economics, April,

1995, p.96.

Note: *Rs.50/hp/annum up to 10 hp and Rs.75/hp for > 10h

From the Table 2.11 it is noted that the input power is

provided to the small farmers at free rate. The Tamilnadu Electricity

Regulatory Commission (TNERC) in its tariff order stated that during

2009-10, the subsidy received from the government was Rs.263 crores as

against Rs.5828 crores. This is the reason for the poor financial health of

the TNEB.

2.3.6 Energy Consumption in Tamilnadu

Electricity subsidy is not paid to the individual directly. The

government directs the concerned SEB’s to supply electricity at a lower

rate than that of generation, transmission and distribution. The loss

89

incurred due to the lower rate realised that is, the difference is paid as

subsidy by the respective government to the SEB’s. Most of the researchers

in their study defined power subsidy per unit as the difference between the

unit cost of power supplied to the state and the average tariff charged from

farmers. Gulati and Narayanan have estimated that the average revenue-

tariff from power supply to agricultural consumer in 2000-01 was only

28.42 paise per kwh whereas the estimated average cost of supply of power

to all sector combined was as high as 303.86 paise per kwh. This implies a

subsidy of 275.44 paise on every Kilowatt-hour supplied to agriculture.

They have estimated that in 2000-01, SEB’s were recovering from

agriculture only 9.35 percent of the average unit cost of power supply. In

2009-10 the average cost of supplying power by the TNEB to the farmers

was 489 paise per kwh and the cost of realization was only 20 paise per

unit. SEB was recovering only 4.17 per cent cost of the average unit cost of

power supply. The actual amount of tariff subsidy paid by the government

of Tamilnadu on behalf of the farmers is shown in Table 2.12.

90

TABLE 2.12

POWER SUPPLY IN TAMILNADU

Year

Power

sold

(in M.U)

Power

consumed

by Agri.

Sector

(in M.U)

Per unit

cost of

supply

(paise/kwh)

Per unit

realization

from

Agriculture

Sector

Amount

of subsidy

(in crores)

2000-01 33,418 9,181 285 16 250

2001-02 35,202 9,495 305 18 322.50

2002-03 36,347 9,030 318 22 250.00

2003-04 38,697 9,588 325 22 139.86

2004-05 41,200 9,764 337 22 200.85

2005-06 44,592 9,804 352 24 201.18

2006-07 50,159 10,610 345 23 243.85

2007-08 52,831 10,716 396 23 249.79

2008-09 53,506 10,528 460 24 258.25

2009-10 55,185 11,918 489 20 263.00

Source: TNEB, Chennai.

It is noted from Table 2.12 that over the period under study,

the per unit cost of supply of electricity by the SEB’s is going at an

increasing rate whereas the per unit realization from agriculture sector is

more or less constant. It is clear that throughout, per unit cost of supply of

electricity has remained quite high as compared to per unit realisation from

agriculture sector.

2.3.7 Energisation of Pumpsets

As per the final report of the Tamilnadu Agricultural

Development submitted during the year 2001-02, the power subsidies

91

reaches only 16 per cent Tamilnadu farmers who own pump sets. The vast

majority of rural households have not been benefitted directly from

agricultural power subsidy because they do not own electric pump sets.

The majority of electric pump set owners are large farmers. The study

revealed that medium and large farmers representing 21 percent of all

agricultural pump set owners receive a disproportionately large share of the

total agricultural power subsidy compared to their representation in the

population. Since the introduction of free electricity for agriculture in 1984,

the number of connection has increased by 50 per cent and the annual

electricity consumption per pump set has doubled.10

Upto 2008-09 total

pump sets energized in Tamilnadu is 18,72,734. Agricultural pump sets

energized in Kanyakumari district as on 31-03-2011 is 7051. The details

regarding the number of pumpsets energised in Tamilnadu as a whole and

especially Kanyakumari district is shown in the Table 2.13.

��10

Mats Lannerstad & David Molden, (2002), “Pumped out: Basin Closure and Farmer

Adaptations in the Bhavani Basin in Southern India”, International Water Management

Institute, Sri Lanka, pp.259-260.

92

TABLE 2.13

ENERGISATION OF AGRICULTURAL PUMPSETS

Year No. of Pump sets in

Tamilnadu Kanyakumari

2000-01 42,548 NA

2001-02 40,307 NA

2002-03 29,863 NA

2003-04 27,484 96

2004-05 33,039 139

2005-06 31,786 215

2006-07 34,325 172

2007-08 34,642 170

2008-09 35,145 148

2009-10 NA 180

Source: Statistics at a Glance, TNEB.

From the Table 2.13 it is noted that there were 35,145 farm

connections in Tamilnadu during the year 2008-09. But there were 42,548

farm connections for the year 2000-01. More number of connections were

noticed in 2000-01 for the state but in the case of the district more

connections were noticed in the year 2005-06.

2.3.8 Electricity Subsidy in Kanyakumari District

Power subsidy in the district played an important role in

improving the agricultural production. The power consumed by the

agriculture sector and the calculated amount of subsidy pertaining to it is

given in the Table 2.14.

93

TABLE 2.14

POWER SUPPLY IN KANYAKUMARI DISTRICT

Year Power sold

(in M.U)

Power Consumed by

Agri. Sector

(in M.U)

Amount of Subsidy

(in crores)

2000-01 5120 48.25 12.98

2001-02 5483 51.60 14.81

2002-03 5632 52.86 15.65

2003-04 5930 53.83 16.31

2004-05 6026 54.01 17.01

2005-06 6165 54.69 17.94

2006-07 6383 55.74 17.63

2007-08 6552 56.92 21.23

2008-09 6722 57.80 25.20

2009-10 6871 58.00 27.20

Source: TNEB, Parvathipuram.

From the Table 2.14 it is clear that the amount of electricity

subsidy is showing an increasing trend throughout the study period. The

highest amount of power subsidy in the district is recorded in the year

2009-10.

2.3.9 Credit Subsidy in Tamilnadu

Gulati and Sharma pointed out that the credit subsidy may be

looked under two alternative ways-from the lender's point of view. The

first one consists of two components.

a) Interest subsidy that accrued to agriculture due to the concessional rate

of interest charged to this sector when compared to other sources and

94

b) Default subsidy which accrues to agriculture in the form of bad-debts.

Accordingly, interest and default subsidy can be calculated

separately and then added to get the subsidy on credit to Indian agriculture.

The second one perceives credit subsidy as the difference between the cost

of supplying credit to the agriculture sector and rate of interest received

from the agricultural sector.

For the study, agricultural credit subsidy means only the 2

per cent interest subsidy received by the farmers for their prompt payment

and that too, the Co-operative Banks are being taken into account and not

the nationalized banks. The actual amount entered in the accounts of the

respective department is taken into account. The rate of interest prevalent

in Tamilnadu was 12 per cent up to 2003-04 and 9 per cent in the following

two years.

With a view to rejuvenating the agriculture sector, the

government has reduced the interest on crop loans from 9 per cent to 7 per

cent in the year 2006-07 and 2 per cent interest subsidy comes into effect

from April 2006. The interest rate was further reduced to 5 per cent in the

year 2007-08. It was further reduced to 4 per cent in the year 2008-09. That

is the farmers can avail a 3 per cent interest subsidy for the prompt

payment. From the year 2009-10, the government declared not to charge

interest on co-operative crop loans who repay their crop loans in time.

Only in Tamilnadu interest free crop loans are extended through

95

Co-operative Bank for the farmers who repay the loan promptly.

Table 2.15 shows the details of agriculture credit subsidy given to the

farmers in the state Tamilnadu.

TABLE 2.15

AGRICULTURAL CREDIT SUBSIDY IN TAMILNADU

Year Amount (in crores)

2000-01 71.0900

2001-02 310.5100

2002-03 121.0000

2003-04 124.8500

2004-05 17.1250

2005-06 38.5610

2006-07 18.2800

2007-08 15.0400

2008-09 26.6857

2009-10 38.2235

Source: Tamilnadu Co-operative Bank, Chennai.

It is clear from Table 2.15 that the highest amount of credit

subsidy is provided for the farmers during the year 2001-02. In the year

2003-04 an amount of Rs.124.85 crores was given. In the subsequent years

smaller amount is recorded.

2.3.10 Credit Subsidy in Kanyakumari District

Credit is an important source of finance for a large section of

the population in the district. Especially the marginal and small farmers

who are unable to mobilize the finance depends mostly on the Co-operative

96

Banks for their credit needs. After the introduction of the interest free loan

many of the marginal and small farmers approach the Co-operative Banks

and make the payment promptly to avail the benefit. Table 2.16 shows the

position of credit subsidy in the district.

TABLE 2.16

CREDIT SUBSIDY IN KANYAKUMARI DISTRICT

Year Amount

(in Rs.)

No. of

Beneficiaries

2005-06 3,86,98,465 7,939

2006-07 1,61,751 8,428

2007-08 28,98,532 10,845

2008-09 93,97,318 19,046

2009-10 4,35,47,795 35,960

Source: Kanyakumari District Central Co-operative Bank, Nagercoil.

From the Table 2.16 it is noted that the amount of credit

subsidy availed by the farmers in the district is showing an increasing

trend. The number of farmers benefitted by the interest free loan is five-

fold more than that of the year 2005-06.

2.4 DEBT WAIVER AND DEBT RELIEF

Most of the small and marginal farmers rely upon the non-

institutional credit to meet their growing needs as the banks are reluctant to

advance loans to this farmers. Moreover, the continuing default of the

farmers makes them unable to avail of fresh loans in the bank and forced

them to approach money lenders to get credit for exorbitant high interest

97

rates. According to a recent study, the dependence on non-institutional

agencies is high amongst low land holding classes: it is as high as 47 to 77

percent amongst owning below one hectare of land and 42 per cent for the

1 to 2 hectare category.11

Due to successive droughts, the co-operative credit institution

is in a position of financial crisis. The farmers are also not able to obtain

fresh loans. At this juncture, the Honorable Chief Minister J. Jayalalitha

enable them to obtain fresh crop loan by rescheduling their outstanding

loan together with interest due to co-operative credit institution as on

31.3.2004 amounting to Rs.2,598 crores into a term loan repayable in a

period of 5 years with a moratorium of 2 years. Very few states have

undertaken this major restructuring of repayments of loans due from

farmers. Further to support the marginal and small farmers from their debt

crisis the government of Tamilnadu during the year 2006-07 have waived

agricultural loan obtained from Co-operative Bank to the tune of Rs. 6,866

crores. Of which, the share of Kanyakumari district was Rs.125.68 crores

and benefitted 80,378 beneficiaries.

A debt waiver and debt relief scheme was then announced by

the Finance Minister in the union budget 2008-09. The total value of

overdue loan to be waived was estimated at Rs.50,000 crores and One

��11

EPW Research Foundation, (2008), “Loan Waiver Scheme”, Economic and Political Weekly,

March 15, p.28.

98

Time Settlement (OTS) relief on the overdue loan was estimated at

Rs.10,000 crores. Thus a total sum of Rs.60,000 crores was announced, out

of which Rs.2843.90 crores waived for the agricultural loan obtained by

the Tamilnadu farmers from Commercial Banks. Later the amount was

enhanced to Rs.71,680. The government estimates that, as a result of this,

the number of beneficiaries will raise from 40 million to 43 million. While

presenting the Interim Budget for the Year 2009-10 on February 16, 2009,

the Finance Minister stated that the total debt waiver and debt relief till that

date had amounted to Rs.65,300 crores covering 36 million farmers

throughout the country.12

Table 2.17 shows the details regarding the debt waiver and

debt relief scheme implemented by the state government as well as the

central government in various time periods.

TABLE 2.17

AMOUNT OF DEBT WAIVER IN TAMILNADU

Year

1

Nature

2

Applicable To

3

TN

(in crores)

4

K.K.DIST

(in crores)

5

2005-06 Rescheduled Co-operative Banks 2,598 3.87

2006-07 Waiver Co-operative Banks 6,866 125.68

2008-09 Waiver Nationalised and

Co-operative Banks

2,843.90 1.24

Source: 4. various budgets, 5. KDCC Bank, Nagercoil.

��12 Misora Puri, (2002), Indian Economy, Himalaya Publishing House, New Delhi, p.313.

99

2.5 SHARE OF AGRICULTURAL INPUT SUBSIDIES IN

TAMILNADU

Agricultural input subsidies stimulate additional production

of scarce commodities. By providing incentives to the farming community

they may use the scarce land more efficiently. Table 2.18 shows the

quantum of direct and indirect subsidies utilized by farmers during the year

2009-10.

TABLE 2.18

SHARE OF IMPORTANT AGRICULTURAL SUBSIDIES IN

TAMILNADU (2009-2010)

Subsidy Value

(in crores) % share

Per Hectare

(in Rs.)

Direct Subsidy 55.04 1.41 94.20

Indirect Subsidy

Fertilizer

Power

Credit

3434.37

263.00

140.00

88.23

6.76

3.60

5877.96

450.13

239.61

Total 3892.41 100.00 6661.90

Source: Computed Data.

Considering all the three inputs together with direct

subsidies, the total subsidies in agriculture amounted to Rs.3892.41 crores

during 2009-10. Of the total subsidy, direct subsidy accounted for 1.41 per

cent, fertilizer subsidy 88.23 per cent, power subsidy 6.76 per cent and

credit accounted for 3.6 per cent. The per hectare subsidy of GCA

amounted Rs.6661.90 in Tamilnadu for the year 2009-10. As per Acharya

100

and Jogi the per hectare input subsidy for Tamilnadu during the year

2000-01 was Rs.5683. While considering the total agricultural subsidies in

India, in the year 2000-01 it was Rs.50440 crores and Rs.108,982 crores in

the year 2009-10. There was a double fold increase in the total subsidy and

it is not reflected in the per hectare subsidy amount of the state.

2.6 SHARE OF AGRICULTURAL INPUT SUBSIDIES IN

KANYAKUMARI DISTRICT

There is considerable variation in per hectare input subsidy of

Tamilnadu state and the District. The per hectare subsidy found more than

that of the state. Table 2.19 indicates the share of agricultural input

subsidies in Kanyakumari District for the year 2009-10.

TABLE 2.19

SHARE OF AGRICULTURAL INPUT SUBSIDIES IN

KANYAKUMARI DISTRICT (2009-2010)

Subsidy Value

(in crores) % share

Per Hectare

(in Rs.)

Direct Subsidy 5.34 7.22 516.97

Indirect Subsidy

Fertilizer

Power

Credit

36.68

27.60

4.35

49.59

37.31

5.88

3963.18

2938.89

421.13

Total 73.79 100.00 7840.17

Source: Computed data.

The results pertaining to the share of different subsidies in

total showed that the fertilizer subsidy amounted to more than half of the

101

percent. Out of the total subsidy, 49.59 per cent relates to fertilizer subsidy

and the rest goes to other categories. The power subsidy accounted for

37.31 percent. The direct subsidy provided through the department

accounted to 7.22 percent of the total subsidy. This shows the fact that

more emphasis is given to direct subsidy which reach the intended

beneficiaries without much reduction.

As regards credit subsidies, only Rs.421.13 was subsidized

per hectare. In Kanyakumari district the major subsidized input was

fertilizer followed by power. Among the three indirect subsidies referred,

credit formed the lowest proportion, i.e., 5.88 per cent of the total input

subsidies in the district. The value of input subsidy accruing to the farmers

was estimated as Rs. 7840.17 per hectare of gross cropped area in

Kanyakumari District for the year 2009-10.

2.7 UTILISATION OF SUBSIDIES BY SAMPLE FARMERS

The information pertaining to the amount of subsidies

utilized by different farm size groups are estimated and presented in this

section. As the input subsidy amount is not directly available, certain

approaches are adopted to generate the amount for the year 2010-11.

Direct subsidies are implemented through various schemes of

government by the concerned department officials. The direct subsidies

available to the farmers in the district are seed subsidy, implements

required for day to day agricultural operations, demonstration, subsidy on

102

green manure seeds, micronutrients and bio-fertilizers. Direct subsidies are

specifically earmarked for the small and marginal farmers,

women farmers (30 per cent) and scheduled caste and scheduled tribes (20

per cent). The amount meant for the different farm size groups are

calculated on the basis of the information provided by the sample farmers.

Depending on the usage of inputs the indirect subsidies

referred such as power, fertilizer and credit benefit the farmers. In the case

of fertilizer subsidy, the amount of fertilizer used by the sample farmers

during the reference period was multiplied by the rate of subsidy to arrive

at the fertilizer subsidy availed by the different farm size.

As regards the amount utilized by different size groups of

farmers in electricity subsidy, the units of power consumed by the farmers

for agricultural purposes have been computed and multiplied with the per

unit rate of power subsidy.

Based on the requirements and financial strength, the farmers

may avail loans from the Co-operative Banks. The interest subsidy may be

availed if the loan amount is repaid on or before the due date. The amount

reported by the sample farmers was taken as the amount of credit subsidy

utilized. Table 2.20 shows the detail of the amount utilized by different

size groups of farms in each subsidy in the study unit.

103

TABLE 2.20

UTILISATION OF INPUT SUBSIDIES IN KANYAKUMARI

DISTRICT (2010-2011)

(in Rs.)

Source: Computed data.

The utilization of direct subsidy by marginal farmers was

found to be very high when compared to other category. Lesser amount

was availed by the large farmers and it was valued at Rs.112.42. The

medium and small farmers utilized direct subsidy worth of Rs.120.85 and

Rs.121.81 respectively.

Regarding the utilization of fertilizer subsidy, the small

farmers reaped higher benefits than other categories (Rs.1569.67). Second

the marginal farmers received more benefits which amounted to

Rs.1419.72. The fertilizer subsidy utilized by the large farmers was

surprisingly very low. The medium farmers also reaped only a smaller

amount. Majority of the fertilizer subsidy were availed by the marginal and

small farmers.

Farm Size Direct

subsidy Fertilizer Power Credit Total

Marginal 233.59 1419.72 1326.13 120.00 3267.43

Small 121.81 1569.67 1310.62 140.00 3148.10

Medium 120.85 1175.18 1806.18 80.00 3182.30

Large 112.42 1200.53 2087.03 0 3399.58

Overall 115.34 1336.68 1727.20 84.00 3263.22

104

The use of power subsidy by the large farmers was found

very high and they utilized power subsidy worth Rs.2087.03 against

Rs.1310.62 and Rs.1326.13 by small and marginal farmers. The medium

farmers also utilized an amount of Rs.1806.16. This could be due to the

capacity and capability of the medium and large farmers.

The share of credit subsidy in the total subsidy by the sample

farmers is nil in the case of large farmers. Credit subsidies were utilized

mainly by the marginal and small farmers and not by large farmers. It may

be noted that the medium farmers utilized only a lesser amount than the

other two categories namely marginal and small farmers.

The farm level data of input subsidies utilized by the farmers

showed that the subsidies were not mainly confined to a particular category

of farmers. Though the total subsidy availed by the large farmers is higher

in comparison to other categories, the larger proportion in the power

subsidy is availed by them. The power subsidy benefits the large and

medium farmers while fertilizer subsidies benefit the marginal and small

farmers.

2.8 CONCLUSION

The input subsidies played an important role in the ushering

of green revolution in India from the year 1960. Still now it plays a

dominant role in sustainability of agriculture sector in the country. In the

present situation the fertilizer subsidy is concerned more beneficial to the

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farmers to compete against the uncertainty rise in prices. The study shows

that there is remarkable improvement in the payment of different type of

subsidies including fertilizer subsidy for the development of agriculture

sector in India.

chapter ii agricultural subsidies in india – an...

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