Attend Spring Meetings on development topics from Apr 18-23. Comment and engage with experts. Calendar of Events

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Submitted by Mahabaleshwar Hegde on
While the overall theme looks good. some of the ideas are half baked. One of particular interest is "Significantly reduce fertilizers subsidies and announce a moratorium on raising minimum support prices. The savings from the subsidy reduction can be set aside to further accelerate the roll out of the unique identification program (Aadhar) and link direct cash transfers to this program" While nobody would like to deny utility of an Aadhar, the projection that it is the answer to all the subsidy problem is highly over rated. The point of particular interest here is on Fertilizer subsidy and minimum support price. My detailed assessment of the issues relating to Fertilizer subsidy in its current form while indicating that it has increasingly become counter productive, shows that it requires urgently mechanisms to introduce competition driven productivity improvements and investments in both brownfield & greenfield capacities, by liberalizing the pricing of fertilizers. While that looks as an attractive proposition and the right direction to take, The need for protecting the interest of the farmers in the short term brings out the idea of direct transfer of cash. However the lack of digital infrastructure (land records, tittle of ownership, leasing information etc) to identify the beneficiaries and the infrastructure required to disburse cash only after buying the fertilizer, makes the proposition an unfeasible idea. Similarly, the history of fertilizer subsidy clearly shows how short term ideas become long term political tools and become socio political structures, impossible of dismantling. That lesson should be in the back of mind while embarking on a direct transfer regime - since it has all the potentials to become another monster of a socio political structure of benefits. If the real point is about policies which have long term impact and have the potential to break the monsters of subsidy based socio political structures, the thrust should be on liberalizing the farm sector - if farming is an enterprise it should be treated so. The first point of liberalizing for the farm sector is dismantling the mandis and the related structures which restrict the farmers. The second point will e liberalizing the farm input regime. My guess is that with such long term measures, the need for subsidy will disappear by itself.