Roadmap for Answer Writing

1. Introduction

• Definition of Agricultural Subsidies: Briefly explain what agricultural subsidies are and their purpose.
• Importance in India: Highlight the significance of these subsidies in India’s economy, mentioning that they constitute about 2% of India’s GDP.

2. Types of Subsidies in the Farm Sector

A. Direct Subsidies

• Direct Benefit Transfers (DBT):
  • Example: PM-KISAN scheme providing ₹6,000 directly to farmers.
• Input Subsidies:
  • Example: Nutrient Based Subsidy (NBS) for fertilizers; Urea costs around ₹268 for a 50 kg bag.
• Credit Subsidies:
  • Example: Kisan Credit Card (KCC) offering loans at reduced rates.
• Insurance Schemes:
  • Example: Pradhan Mantri Fasal Bima Yojana (PMFBY) offering subsidized crop insurance.

B. Indirect Subsidies

• Irrigation Subsidies:
  • Example: Accelerated Irrigation Benefits Program (AIBP) covering up to 60% of costs.
• Power Subsidies:
  • Example: Free or subsidized electricity in states like Punjab and Haryana.
• Transport Subsidies:
  • Example: Subsidies for transporting agricultural produce.
• Seed Subsidy:
  • Example: Financial assistance under the Seed Village Programme for certified seeds.
• Warehousing Subsidies:
  • Example: Subsidies from the Warehousing Development and Regulatory Authority (WDRA).

3. Issues Raised by the World Trade Organization (WTO)

A. Amber Box Subsidies

• Concern: WTO norms require reductions; India argues these are essential for small farmers.

B. Export Subsidies

• Criticism: WTO members like Brazil and Australia argue that India’s subsidies for exports (e.g., sugar) distort global prices.

C. Domestic Support

• Minimum Support Price (MSP):
  • Concern that MSP inflates exports and distorts trade.

D. Public Stockholding

• Issue: India’s large food grain reserves policy raises concerns about market price distortion.

4. Conclusion

• Summary of Importance: Reiterate the significance of subsidies for farmers.
• WTO Compliance: Stress the need for India to navigate WTO regulations carefully to protect its agricultural interests.

Relevant Facts for the Answer

1. Economic Contribution: Farm subsidies constitute about 2% of India’s GDP.
2. PM-KISAN Scheme: Provides ₹6,000 annually to farmers directly.
3. Fertilizer Pricing: A 50 kg bag of Urea retails at around ₹268, due to subsidies.
4. Kisan Credit Card: Enables farmers to obtain loans at subsidized rates.
5. Insurance Coverage: The PMFBY scheme helps mitigate crop losses from unforeseen events.
6. Irrigation Projects: The AIBP can cover up to 60% of total irrigation project costs.
7. Electricity Subsidies: States like Punjab and Haryana offer free or subsidized electricity for agriculture.
8. WTO Criticism: WTO norms call for reductions in Amber Box subsidies, impacting small-scale farmers.
9. Export Subsidy Concerns: Criticism from countries like Brazil and Australia regarding sugar export subsidies.
10. MSP and Trade Distortion: The WTO cites MSP as distorting trade dynamics.

This roadmap and the relevant facts will help structure a comprehensive answer that covers both the types of subsidies and the challenges posed by international trade regulations.