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Fertilizer Subsidy in India
30 Nov 2012

The Indian Institute of Management (IIM), Ahmadabad in its internal working paper titled “Fertilizer subsidy in India: who are the beneficiaries?” published in July 2009 which can be downloaded from the website, made following observations:

i. Fertilizer subsidy is concentrated in few states, namely, Uttar Pradesh, Andhra Pradesh, Maharashtra, Madhya Pradesh and Punjab;

ii. Rice, wheat sugarcane, and cotton account for about two-third of total fertilizer subsidy;

iii. The fertilizer subsidy is more equitably distributed in farm sizes;

iv. A reduction in fertilizer subsidy is likely to have adverse impact on farm production and income of small and marginal farmers;

v. The paper justifies the fertilizer subsidies and questions the rationale for direct transfer of subsidy to farmers.

Department of Fertilizers, Govt of India has already decided to implement direct cash transfer to the farmers in a phased manner. The direct cash transfer to the farmers has following advantages:

a) Direct transfer of subsidy to farmers would help the Government to target small, marginal and other farmers and would bring more transparency in subsidy disbursement;

b) It shall also help in avoidance of diversions of fertilizer for non-agricultural usage and thus better availability of fertilizer to farmers.