What are the different types of agriculture subsidies given to farmers at the national and at state levels? Critically analyse the agricultural subsidy regime with reference to the distortions created by it.

Agricultural subsidies are fiscal transfers that lower the cost of inputs or assure remunerative prices to farmers, cushioning them against risk and food-insecurity.

Types of subsidies

• By level: Central subsidies on fertiliser (nutrient-based/urea), MSP-linked procurement, credit interest subvention and crop insurance (PMFBY); State subsidies on free/subsidised power, canal irrigation water, seeds and farm loan waivers.
• By nature: input subsidies (fertiliser, power, irrigation), output/price subsidies (MSP, procurement), credit subsidies (interest subvention) and investment/insurance support.

Distortions created

• Fiscal: the fertiliser and food subsidy bill strains both Union and State budgets, crowding out capital investment in irrigation and research.
• Ecological: cheap urea and free power skew the NPK ratio, deplete groundwater (Punjab, Haryana) and degrade soil.
• Cropping bias: assured MSP for wheat and rice discourages diversification to pulses, oilseeds and millets.
• Equity: input subsidies are captured disproportionately by large farmers; tenants and the landless gain little.
• Trade: such support is contested at the WTO as trade-distorting under the Agreement on Agriculture.

Way forward

The answer is rationalisation, not abolition. Direct Benefit Transfer of fertiliser subsidy, income support like PM-KISAN, nutrient-based pricing extended to urea, and a shift from price to investment support (as the M.S. Swaminathan and Shanta Kumar committees urged) can retain the welfare intent while curbing the distortions.