Better utilization of fertilizer and food subsidies: Basic subsidies can be climate focused and aimed better

Source: The post better utilization of fertilizer and food subsidies has been created, based on the article “Basic subsidies can be climate focused and aimed better” published in “Live mint” on 27th March 2024.

UPSC Syllabus Topic: GS Paper 3-economy- Issues related to direct and indirect farm subsidies and minimum support prices.

News: The article suggests India should change how it spends its agriculture and food subsidies. It recommends promoting organic fertilizers and millets over chemical fertilizers and rice or wheat, for better environmental and economic benefits. Basic subsidies can be climate focused and aimed better

For details information on fertilizer subsidy read here

For details information on food subsidy read here

What is the current situation with India’s fertilizer and food subsidies?

a) India’s Fertilizer Subsidies

1. India’s budget shows a consistent increase in fertilizer subsidies since 2017. Despite higher subsidies, crop yields are declining.
2. Farmers are overusing nitrogen fertilizers, leading to nutrient imbalances. The NPK ratio is now 11.8:4.6:1, far from the ideal 4:2:1.

b) India’s Food Subsidies

1. India’s food subsidy bill accounts for about 1% of its GDP.
2. The bill has been around ₹2 trillion since 2020, largely due to the difference between MSPs (Minimum Support Prices) and CIPs (Central Issue Prices) of grains.
3. The emphasis on wheat and rice, supported by high MSPs, has led to environmentally unsustainable farming practices.

What are the government initiatives for better utilization of fertilizer and food subsidies?

The Indian government’s key initiatives for better fertilizer and food subsidy utilization include the National Plan for Organic Productions to shift towards organic farming, the classification of nano urea as a ‘nano fertilizer’ by the Ministry of Agriculture for sustainable fertilizer use, and promoting millets in 2023, the International Year of Millets, highlighting their nutritional and environmental advantages to redirect food subsidies effectively.
For information on Government Flagship Schemes in Agriculture read here

For information on nano fertilizer read here

For information on International Year of Millets read here

What are the concerns related to better utilization of fertilizer and food subsidies?

Overuse of Chemical Fertilizers: India’s heavy fertilizer subsidies have resulted in an excessive use of nitrogen fertilizers, disturbing soil health and causing an imbalance in nutrient use, as shown by the NPK ratio of 11.8:4.6:1 in 2022-23.

Declining Crop Yields: Increased fertilizer use has not translated into higher yields, suggesting inefficiency and potential environmental harm.

Policy and Oversight Conflicts: The divided management of fertilizer policy between separate ministries creates conflicting objectives and hinders coherent policy implementation.

What should be done?

1. Redirect fertilizer subsidies towards nano and organic fertilizers, aligning with net-zero emission goals.
2. Consolidate fertilizer oversight under the agriculture ministry to unify policy-making and execution, addressing policy gridlocks.
3. Encourage organic farming and crop diversification, as practiced in Odisha, with financial support and initiatives like rice-fallow management.
4. Channel food subsidies towards millets, particularly given 2023 being the International Year of Millets, to promote nutritious and less carbon-intensive crops. This would support Tribal communities and women farmers, moving towards a circular economy.
5. Maintain subsidy outlay levels while focusing on low-carbon alternatives for balanced welfare, fiscal responsibility, and climate change mitigation.

Conclusion

The strategy involves redirecting subsidies towards low-carbon alternatives like organic fertilizers and millets without reducing the subsidy amount. This approach aims for a balance between welfare, fiscal responsibility, and environmental sustainability.

Question for practice:

Discuss India’s current agricultural subsidy policies and proposed initiatives for improving environmental and economic outcomes.