Economic analysis of input subsidies availed by farmers in Punjab

Input subsidies are given in the farming sector to encourage the farmers to use the resources judiciously for getting higher yield level of crops. The direct subsidy benefit is realized by the farmers in monetary terms by reduction in price of farm inputs, farm machinery etc. while indirect subsidies are mostly given especially for chemical fertilizers, electric power supply for running tube wells to irrigate crops. Keeping in view the importance of subsidies in agricultural sector, the present study was undertaken to work-out the quantum of input subsidies availed by Punjab farmers with major emphasis on paddy and wheat crops. The data were collected from a representative sample of 180 farmers from all farm categories encompassing one district each selected randomly from three agro-climatic regions of Punjab. The results revealed that the quantum of direct subsidy facility provided by the government departments was mainly availed by medium, large farm category farmers showing disparity in their distribution. Crop-wise subsidy pattern showed that paddy cultivation availed Rs. 8486/-ha subsidy while it was Rs. 5763/-ha in case of wheat crop. The analysis revealed decline in net returns from paddy and wheat crops by about 13 and 11 per cent, respectively due to withdrawal of input subsidies. Fertilizer, power and diesel subsidies availed by large and medium farm category farmers were comparatively higher than being used by their counterparts. The crop-wise analysis revealed major subsidy chunk being used for raising paddy and wheat crops due to higher area under these crops. Major policy option brought out was to lay emphasis on rationalization of subsidies largely in favour of marginal and small farmers while giving with a rider to medium and large category farmers in order to decrease economic disparity in the agricultural sector.