Impact of Government Subsidy on Agriculture Sector injalgaon District

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1 Impact of Government Subsidy on Agriculture Sector injalgaon District, Dept. of Business Administration SSBT s COET, Bambhhori, Jalgaon (MH), India Abstract The subsidy means, a benefit is given by the government to groups or individuals usually in the form of cash payment or tax reduction or in kind. The basic objectives of subsidy are to improve standard of living of poor, development of respective sector to improve share of respective sector in GDP and achievement of social policy objectives including redistribution of income, population control, etc. The major alternative modes of administering a subsidy are subsidy to producers. The 68% population of Jalgaon District is living in a rural area in which 60% of people depending on agriculture sector. But the growth of agriculture sector in Jalgaon District is slow after getting a subsidy. In this paper researcherstudy the impact of subsidy on agriculture sector of Jalgaon District with the help of survey methods. For this study researcher design two hypothesis & this hypothesis tested with help of statistical software. The subsidy makes a positive impact on the agriculture sector of Jalgaon District but problem in the distribution system of subsidy. Due to ineffective distribution system, subsidy is not reached to farmers on time. For this reason farmers cannot take advantage of subsidy in farming. Key words- Agriculture Sector, Impact, Subsidy, Subsidy Distribution 1. Introduction The subsidy is one of the important parts of agriculture sector in India. Government paid lot of amount subsidies to agriculture sector every year. An (Harshal Salunkhe, Nov-Dec 2012) agricultural subsidy is a governmental financial support paid to farmers and agribusinesses to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities. A subsidy, often viewed as the converse of a tax, is an instrument of fiscal policy. Derived from the Latin word subsidium, a subsidy literally implies coming to assistance from behind. The objective of subsidies, by means of creating a wedge between consumer prices and producer costs, lead to changes in demand/ supply decisions. The forms of subsidies are a cash payment to producers/consumers is an easily recognizable form of a subsidy. However, it also has many invisible forms. Thus, it may be hidden in reduced tax-liability, low interest government loans or government equity participation. If the government procures goods, such as food grains, at higher than market prices or if it sells as lower than market prices, subsidies are implied. The Government provides a lot of financial support to farmers in monetary and non monetary terms every year s. The government made several provisions in the five year plan and annual budget given importance and priority to development of agricultural sector. The rural areas are still home to some 60 percent of India s 1.1 billion people, a large number of whom are poor. Most of the farmers in Jalgaon District depend on rain-fed agriculture. However, bold action from policymakers will be required to shift away from the existing subsidy-based regime that is no longer sustainable, to build a solid foundation for a highly productive, internationally competitive, and diversified agricultural sector Farmers Situation in India (CSDS)[26] The conditions of farmers in India seem to be very unpleasant and therefore farmers do not want their children to continue farming. Low income and productivity, irregular weather cycles, and low levels of support from the government seem to be the most important reasons among farmers for such dissatisfaction. Around 50 per cent of the farmers are satisfied and 40 per cent were dissatisfied with their present economic 262

2 condition. The regional pattern suggests that farmers from Central India are more satisfied while their counterparts in Eastern India seem to be most dissatisfied with their present economic condition. Not surprisingly, landless farmers are least satisfied with their present economic condition and the large farmers are comparatively more satisfied with their present economic condition. Now days, in Maharashtra every day one farmer did suicide due financial cries. As per the comprehensive and widespread survey conducted by CSDS on the state of Indian farmers offers some interesting insights with respect to their socio-economic background, we see one by one. The farmers are living in India. In which 36 per cent farmers live either in a hut or a kuchha house. 44 per cent live in a kutchapucca or mixed house. Only 18 per cent of them have a pucca independent house.overall 83 per cent of the farmers consider agricultural to be their main occupation. 32 per cent of the farmers do work other than farming for additional household income. In past one year approximately one in every ten farmers said that their family had to remain without food on few occasions. 67 per cent women say that the income from agricultural is not sufficient to fulfill the livelihood needs of their family. The farmers (46 per cent) grow up to two crops in a year while 28 per cent said they produce more than two crops annually. 26 per cent of the farmers who were interviewed said they are able to produce only one crop in a year. These figures however differ from region to region due to quality of soil, irrigation facilities, climatic conditions and the fact that some regions are more prone to floods and droughts than others. In a survey, it was found that a large proportion of farmers (70 per cent) use local or traditional seeds. On being asked further if they used Hybrid seeds, 63 per cent of the farmers answered in the affirmative. Very few (4 per cent) said that they use Genetically Modified seeds. Most farmers use both organic and chemical fertilizers for their farming. 40 per cent of the respondents said that they use both chemical and organic fertilizers. 35 per cent said they use only chemical fertilizers and 16 per cent said that they use only organic fertilizers. The use of pesticides seems to be occasional. When asked how often they used pesticides, only18 per cent farmers said they use it regularly. 28 per cent said they use it occasionally, while 30per cent use pesticides only when the need arises. 13 per cent farmers never use pesticides in their farming. Only 40 per cent of the farmers said that irrigation facilities were available for their entire farming land. The most common sources for irrigation are private pumps, bore wells/boring and tube wells. 45 per cent of the farmers cited these as their main source of irrigation. 38 per cent of the farmers have access to canals in their villages for irrigation. Traditional sources of irrigation like pond and wells continue to be important. 34 per cent of the farmers depend on wells while 30per cent of the farmers said they depend on the pond to irrigate their land. Only 18 per cent of farmers said that they have the facility of Govt. tube wells for irrigation. Irrigation facilities are largely dependent on the availability of electricity. However, more than half the farmers said that there had been no electricity for farming (51 per cent) in their area in the week prior to the survey. If we see the region wise distribution, 87 per cent of the farmers in East India complained about not getting electricity for farming. North India comes next with 46per cent followed by Central India with 42 percent. Farmers are not happy with the overall condition of farmers in India. This is despite the fact that the government of India claims to have introduced many schemes and policies to improve their condition. Most respondents (50 per cent) feel that only rich farmers got the benefits of government schemes and policies related to farming. Only 10 per cent believe that poor and small farmers have got the benefit from farming related schemes and another 8 per cent saw no benefit whatsoever either to large farmers or marginal farmers. Distribution of subsidies in India The percentage of agriculture finance in India is continuously increased& it positively affects on production of agriculture goods in India. The Govt. of India may be divided into Indigenous (Urea) Fertilizer, Imported (Urea) Fertilizer, Sale of decontrolled fertilizer with concession to Farmers, Petroleum Subsidy, Grants to NAFED for MIS/PPS, Other Subsidy (Import/Export of Sugar, Interest Subsidies, Other Subsidies, Subsidy on Import of Pulses/edible oils). India subsidizes (Nick Grossman, 2011) agricultural inputs in an attempt to keep farm s cost low and production high. GOI s intended results are for farmers to benefit from lower costs, 263

3 but also for them to pass some of the saving to consumers in form of lower food prices. GOI pays directly to fertilizer companies in exchange for selling fertilizer at lower price to the farmers. Irrigation and electricity subsidies are provided directly to the farmers by supplying the electricity at the price lower than the cost of production. The effective price to the farmers for fertilizer is around 25 to 60 % and for electricity it is around 10 to 30 percent. Details of subsidies of GOI are given below from to Table No.1- Distribution of subsidies in India from to (Rs in Crores INR) Details of Subsidies Fertilizer Subsidy Petroleu m Subsidy Grants to NAFED Other Subsidies Total Subsidy Source- Report of the Committee on Statistics of Agriculture and Allied Sectors 2013 Total Subsidy data should be collected on a periodical basis. A committee on aligning Agricultural Pricing to a WTO trade dominated regime has made detailed recommendations on measuring Aggregate Subsidies to the Agricultural Sector as also the Aggregate Measure of Support. These techniques have been discussed earlier in this report. Such estimates need to be made on an annual basis. In this study researcher has tries to find out impact of subsidies on agriculture sector. The researcher has selected Jalgaon District for study.the data is collected through survey method. In this study researcher used questionnaire method. The questionnaire is filled up by the farmers because farmers are end user of subsidies. The researcher has used random sampling method because of total population is near about For testing the hypothesis Statistical measures like Mean, Mode, Median, Correlation, regression, standard deviation, variance, ratio and Minitab software are used. Impact of subsidy on agriculture sector in India Agricultural credit has played a very important role in sustaining farm production in India. Though the outreach and amount of agricultural credit have increased over the years, several weaknesses have crept in which have affected the viability and sustainability of these institutions. The government of India provides the finance to agriculture on subsidized rate for farming. It is helpful to farmers in India because in India near about 11% of people are farmers & in which 11% most of farmers have land but does not have sufficient finance for farming. Through subsidized finance farmers are doing farming. Mainly three types of finance are requiring for agriculture sector. i.e. Short term, Medium term & Long term finance. The period of long-term credit is generally 5 to 20 years or even more in some special cases.. In Agriculture, long-term investment comprises of sinking well, land leveling, fencing and permanent improvements on land purchase of big machinery like tractor with its attachments including trolleys, establishment of fruit orchard of mango, cashew, coconut, sapota (chiku), orange, pomegranate, fig, guava, etc. It is available through the nationalized bank. In medium term finance mostly include finance for farm equipment & small machinery e.g. tractor, thrasher & other equipments. In short term finance include crop finance duration of this finance is one year to two years & percent of interest is very low i.e. 2% to 4%. The agencies provide finance to the cultivators is Private agencies: (a) money lenders and landlords; (b) commercial banks. & public or semipublic agencies: (a) the State; (b) co-operative societies. 264

4 The India is one of the major producers of agriculture goods in world. As per of different geographical area various crops yield in India. India holds the second position in production of wheat, rice, cotton, sugarcane, and groundnuts. It is also the second biggest harvester of vegetables and fruit, representing 8.6% and 10.9% of the overall vegetable and fruit production in the world correspondingly. The agriculture production in India is continuously increases in last year s. In year the gross annual production of all crops is million tones & in year is million tones. As we compare the table no.1 & 2 we easy found that amount of subsidies is increase at same time production level of agriculture goods also increases. It shows that subsidies help to increase agriculture productivity. India between and increased irrigated area to million hectares, produced million tons of fertilizers, established 6836 regulated wholesale markets, generated 380 billion kwh power, constructed 28,84,000 km of roads and added million commercial vehicles, which modestly improved farm productivity and output and the process continues. The major things behind this development of agriculture infrastructure possible with help of government role & subsidy to agriculture sector. The fertility of land is one of important factor of good agriculture production. But now day excessive use of chemical fertilizer decreases the fertility of agriculture land. For more production farmers used more amounts of fertilizers in farm it result good production but at same time fertility of land is low. The government provides the subsidies on fertilizer this thing increase the farmer to buy fertilizer & much more use on farm. According to Prof Surendra Singh such imbalanced fertilization practice has aggravated the problem of deficiencies in available nutrients and is the root cause of deteriorating soil fertility and productivity of vegetables. Results further revealed that the intensively cultivated soils of the area showed deficiency of phosphorus, potassium, sulfur and zinc to extent of 54, 22, 46 and 33 per cent respectively. This suggests that excessive use of nitrogen over phosphorus and potash fertilizers and little use of organic source of nutrients have resulted in depletion of other soil available nutrients in the vegetable growing area. According to him, the decline in productivity in these soils over the years is a matter of great concern. Balanced fertilization of nitrogen, phosphorus, potassium, sulfur and zinc along with application of farmyard manure, compost, green manure and biofertilizers should be practiced for sustained soil health and enhanced productivity of vegetables in the years to come. Domestic fertilizer production increased from 4.09 million metric tons in 1981/82 to million metric tons in 2002/03. Corresponding figures for fertilizer consumption were 6.06 million tons and million tons respectively. 2. Review of Literature Authors (Deshmush B.B., 2014)conclude that subsidies make some positive & negative impact on agriculture sector of India. In last few year percentage of agriculture sector in GDP is decrease but at same time production of agriculture sector is also increases with investment. The increase in population & inflation is measure factor for low contribution of agriculture sector in India GDP. But agriculture subsidies play vital role in growth of agriculture sector in India. Without help of subsidies development of agriculture sector is very difficult. Due to corruption & ineffective management of subsidies in India, it has not reached to end users i.e. farmers & another side due to illiteracy of farmer regarding agriculture subsidies, he can t take benefit in farming & faced financial crisis. The U.S. government s (Enforcement, Feb, 2013) subsidies enforcement program is contributing to the NEI s goal of expanding U.S. exports, advancing economic growth and encouraging job creation. In this report he mentions detail about Subsidies Enforcement programmer for It is cleared that developed countries gives subsidies to agriculture sector &it s positive impact on agriculture sector. The input(maliro, 2011) subsidy program has both positive and negative features. There is evidence that coupons have reached the intended target of 60 per cent of small farmers, and the fertilizer purchased has almost certainly gone beyond this coverage due to secondary redistribution that occur subsequent to primary allocations. And other hand some of the misallocation that occurs with regard to coupon distribution. 265

5 3. Methodology For this study researcher used primary & secondary data. The primary data collected from farmers in Jalgaon District with help of sample survey method. Secondary data collected from published papers, government reports, and news paper. Sample Plan The area of research is Jalgaon District & the total sample size is 500. The researcher has used convenient sampling method because of the total population of farmers is The researcher made clusters in the form of 15 tahsil. In which researcher collected 33 samples per tahsil through quota sampling. The farmers are classified as per total land holed by him. Questionnaire Design There are 41 questions are included in the questionnaire. The questionnaire is multiple choices. The first part contains personal information of farmer, second part related to land related information, third part contains subsidies & subsidies distribution related information & last part contain subsidy impact related questions. The questionnaire contains most of closed ended questions & few open ended questions. The questionnaire is divided into four parts. Statistics Analysis For this study researcher design onehypothesis.for testing the hypothesis statistical measures like Mean, Mode, median, correlation, regression, standard deviation, variance, ratio and Minitab software are used. The researcher conducts two samplest-test with help of Minitab software for testing of hypothesis. 4. Result & Discussion The most of farmers in Jalgaon District are financially weaker due to the small size of farm. The major crop of Jalgaon District is banana and then secondly cotton is yield by famers, due few sugar factories less percent of farmers yield sugarcane.ownership of mechanized implement was lower because maintenance cost of tractor & others equipment is higher. The farmers hire all mechanized equipment as per need in the farm. The farmers are getting subsidy less than 15% as compared to annual expenses on production. The farmers are receiving subsidy from Bank, Fertilizer Company & the Electricity Board. The farmers are not satisfied with bureaucratic distribution process of Government for agricultural subsidies. The farmers are facing hurdles for getting agricultural subsidies. The major hurdle in getting subsidy is lack of awareness. Another one is corruption & rules & regulation. The less percent of farmers said documentation is a major hurdle for getting a subsidy. Large numbers of farmer s expect a direct subsidy for farming as compared to indirect subsidy. The less percentage of farmers gets subsidies for agricultural allied business. The agriculture subsidies are help full to reduced farmers suicides. The government policy is not fair regarding the credit distribution. Due to lack of training of advance technology farmers cannot benefit of advance technology in farming. The Government cannot provide subsidies benefits on time to farmers. The non eligible farmers get benefits of government subsidy. The government fails to maintain proper accounting & audit distribution of subsidies to farmers. The numbers of cultivators in India have decreased from 2001 to Suggestions The Government directly transfers the amount of subsidy to farmers account.the government should make the simple documentation process to take benefits of the subsidy. Also, make single window for farmers regarding documents that are required to take the subsidy.moral of marginal & small farmers are very low due to financial crises. It s the responsibility of government to boost the confidence in marginal & small farmers for motivating to farming by giving financial & moral support.government should provide subsidy on time to farmers. Most of the time subsidy is not given on time to farmers. If subsidy gets after stipulated time to farmers, they are not benefited to farming. E.g. the farmer needs credit in the month of May to August this 266

6 peak period of farming. If the Government provides credit for farming in the month of October, this credit does not benefit to farmers because the peak period of farming is left. The government should make one common agency for distribution of subsidy. Due to common agencies for distribution it is easy for the government to account & audit of subsidy.the government should change their existing policy and give maximum amount of subsidy to marginal & small farmers and increase their production capacity.government use E-Governance practices for distribution subsidy to farmers. This thing reduces the role of mediator. E-Governance practices increase the transparency in the distribution system of subsidy. At the same decrease the corruption in subsidy distribution.the government should identify real beneficiary subsidy. Many people working in government or private sector and they have agricultural land. They are also enjoying the status of farmer. They are getting all benefits of agricultural subsidy. For this thing real beneficiary is not getting his rights. The government should make a strict rule for people who avail subsidy. 6. Conclusion The subsidies make a positive impact on the agriculture sector of Jalgaon District. The subsidy helps to farmers for reducing his cost production. But due to the problem of bureaucratic process subsidy is not reaching to farmers within times. The government should improve the distribution process and reduce the leakage in the distribution system. The most of the farmers in Jalgaon District are marginal & small. They are getting less amount subsidy for farming. Due to less amount subsidy they are not reducing their cost of production. And after yielding good crops they are gaining good profit. If the Government should provide sufficient amount subsidy on time to farmers, it really benefited reduce their cost of production and gain good amount profit. If farmers gain good amount profit, they are improving their standard of living and not doing suicide. 7. References 1. Culture of Maharashtra. (n.d.). Retrieved 12 26, 2016, from cultural.maharashtra.gov.in: Deshmush B.B., H. A. (2014). Impact Of Subsidy On Agriculture Sector In India- An Analytical. International Journal of Agricultural Science & Research. International Journal of Agricultural Science and Research (IJASR), Enforcement, R. t. ( Feb, 2013). Subsidies Enforcement Annual Report to The Congress. The Office of the United States Trade Representative and The United States Department of Commerce. 4. Harshal Salunkhe, D. B. (Nov-Dec 2012). The overview of Government subsidies to agriculture sector in India. IOSR Journal of Agriculture and Veterinary Science (IOSR-JAVS), Jalgaon district. (n.d.). Retrieved 12 26, 2016, from wikipedia.org: 6. Maliro, D. D. (2011, May 16). Ph.D Thesis. Comparison of Agricultural Input Subsidies and Social Cash Transfers. Norwich,, England. 7. Nick Grossman, D. C. (2011, March). AGRICULTURE POLICY IN INDIA: THE ROLE OF INPUT SUBSIDIES. Retrieved 12 26, 2016, from Pawar. (2011). District Statistical Abtract(Social& Economical Abtarct of Jalgaon). Jalgaon. Jalgaon: Finance & Statistical Department, Maharashtra Govt. 9. (2013). Pocket book on Agricultural Statistics New Delhi: Government of India, Ministry of Agriculture, Department of Agriculture and Cooperation & Directorate of Economics and Statistics. 10. Salunkhe, D. H. (2016). A Study of Agriculture Subsidy and its Impact on Agriculture Sector with Referance to Jalgaon District. Pratibha: International Journal of Science, Spirituality, Business & Technology,

7 11. Salunkhe, D. H. (2015). Bureaucracy: A Study of Distribution Process of Agriculture Subsidy in India. International Conference on Global Trends in Engineering, Technology and Management (ICGTETM-2016) (pp. 5-8). Jalgaon: International journal of Engg. Trend & Technology. 12. Salunkhe, D. H. (2016, Sep 16). Ph.D Thesis. A Study of Impact of Goverment Subsidy to Agriculture Sector in Jalgaon District. Jalgaon, Maharashtra, India. 268