Model Answer
0 min readIntroduction
Post-1991 economic reforms ushered in a period of liberalization in India, impacting various sectors including agriculture. Fertilizer subsidies, a long-standing intervention aimed at boosting agricultural productivity, underwent significant changes during this period. Initially introduced to address nutrient deficiencies and promote the Green Revolution, these subsidies have evolved into a complex policy instrument with far-reaching consequences. While intended to enhance food security and farmer welfare, the impact of fertilizer subsidies on agricultural productivity growth during the post-reform period has been a subject of debate, marked by both positive contributions and unintended negative externalities. This answer will analyze this impact, considering both the economic and environmental dimensions.
Historical Context of Fertilizer Subsidies in India
Prior to the 1990s, fertilizer subsidies were largely administered through the Fertilizer (Control) Order, 1958. The post-reform period saw a shift towards a more market-oriented approach, though subsidies remained a significant component of agricultural policy. The Nutrient Based Subsidy (NBS) scheme, introduced in 2010, replaced earlier schemes and aimed to provide subsidies based on the nutrient content of fertilizers (Nitrogen, Phosphorus, Potassium, and Sulphur - NPKS). However, the implementation and effectiveness of NBS have been debated.
Impact on Agricultural Productivity Growth: Positive Aspects
- Increased Nutrient Availability: Subsidies made fertilizers more affordable, leading to increased nutrient application and, consequently, higher yields for many crops, particularly cereals like wheat and rice.
- Green Revolution Sustainability: Subsidies helped sustain the gains of the Green Revolution by ensuring continued access to essential inputs.
- Food Security: Increased productivity contributed to enhanced food grain production, bolstering India’s food security. According to data from the Department of Agriculture & Farmers Welfare, food grain production increased from 176.37 million tonnes in 1991-92 to 314.51 million tonnes in 2022-23. (Data as of knowledge cutoff - November 2023)
Impact on Agricultural Productivity Growth: Negative Aspects
- Imbalanced Nutrient Use: Subsidies often favored urea (Nitrogen) over other essential nutrients like Phosphorus and Potassium, leading to imbalanced fertilization and soil degradation.
- Declining Fertilizer Use Efficiency: Overuse of fertilizers, driven by subsidized prices, resulted in diminishing returns and reduced fertilizer use efficiency.
- Environmental Concerns: Excessive fertilizer application contributed to water pollution (eutrophication), soil acidification, and greenhouse gas emissions (Nitrous Oxide).
- Distortion of Market Signals: Subsidies distorted market signals, hindering the development of a competitive fertilizer industry and discouraging innovation.
- Regional Disparities: The benefits of fertilizer subsidies were not evenly distributed, with larger farmers often benefiting more than small and marginal farmers.
Economic Costs of Fertilizer Subsidies
Fertilizer subsidies impose a significant fiscal burden on the government. In FY23, the fertilizer subsidy bill was estimated to be over ₹1.75 lakh crore. This expenditure crowds out other potentially productive investments in agriculture, such as irrigation, research and development, and rural infrastructure. Furthermore, the subsidy regime creates opportunities for rent-seeking and corruption.
Recent Policy Changes and Their Implications
The government has been attempting to rationalize the fertilizer subsidy regime through measures like Direct Benefit Transfer (DBT) and promoting the use of bio-fertilizers and organic farming. The introduction of the Pradhan Mantri Krishi Samridhi Yojana (PMKSY) aims to improve fertilizer use efficiency and promote balanced fertilization. However, the implementation of these reforms faces challenges, including logistical hurdles and resistance from vested interests.
Comparative Analysis: India vs. Other Countries
| Country | Fertilizer Subsidy Approach | Impact on Productivity |
|---|---|---|
| China | Significant subsidies, but increasingly focused on efficiency and environmental sustainability. | High agricultural productivity, but facing environmental challenges. |
| Brazil | Reduced subsidies, emphasis on soil testing and precision farming. | Improved fertilizer use efficiency and reduced environmental impact. |
| USA | Minimal direct subsidies, reliance on market-based mechanisms. | High productivity, but concerns about environmental sustainability. |
Conclusion
The impact of fertilizer subsidies on agricultural productivity growth in the post-reform period has been complex and multifaceted. While subsidies initially contributed to increased yields and food security, their long-term effects have been marred by imbalanced nutrient use, environmental degradation, and economic distortions. A shift towards a more sustainable and efficient fertilizer policy is crucial, focusing on promoting balanced fertilization, investing in soil health, and encouraging the adoption of alternative nutrient management practices. Rationalizing the subsidy regime and linking it to soil health cards and DBT can help ensure that benefits reach the intended beneficiaries while minimizing negative externalities.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.