Chapter VI. Impact of Agricultural Subsidies in Punjab

Transcription

1 Chapter VI Impact of Agricultural Subsidies in Punjab In India, as also elsewhere, subsidies now account for a significant part of government s expenditure although, like that of an iceberg, only their tip may be visible. In the context of their economic effects, subsidies have been subjected to an intense debate in India in recent years. Issue like the distortionary effects of agricultural subsidies on the cropping pattern, their impact on inter-regional disparities in development, the sub-optimal use of scarce inputs like water and power induced by subsidies and whether subsidies lead to systemic inefficiencies have been examined at length. Inadequate targeting of subsidies has especially been picked up for discussion. In this chapter, an attempt is made to know the impact of subsidies on farmers, financial position of centre as well as state governments and Punjab State Electricity Board (Now is unbundled into Punjab State Power Cooperation Limited and Punjab State Transmission Cooperation Limited) and on natural resources. This chapter consists of three sections. First section has analysed the impact of input subsidies on farmers, second section deals with impact of subsidies on financial position of centre as well as state governments and electricity department, whereas impact of subsidies on natural resources are examined in third section. Section - I Agriculture subsisted are given by centre as well as state governments to the farmers. The main purpose of these subsidies is to help the farmers, so that they can use the new technology and to reduce the cost of production. Distribution of farmers 212

2 in Punjab according to education level is shown in table 6.1. This table indicates that out of total 471 farmers, 159 farmers are illiterate, 63 farmers are educated below primary, 189 farmers are educated up to matric level, 27 are educated up to senior secondary, 27 are graduates and 3 are educated up to post graduate level. Out of 159 farmers who are illiterate, majority (48.57 per cent) are related to large size family, followed by small size family (30.36 per cent) and medium size family (28.79 per cent). Out of 189 farmers who are educated up to matric level, 84 are related to small size category followed by medium (81 farmers) and large (24 farmers). Out of 27 farmers who are educated up to senior secondary level, 15 farmers are from medium size category and 12 from small size category, whereas 3 farmers who has got education above post graduate level are related to large size category. Percentage-wise analysis reveals that out of total small size farmers, majority of the farmers i.e. 50 per cent are educated up to matriculation, followed by illiterate (30.36 per cent), below primary (8.93 per cent), senior secondary (7.14 per cent) and graduate (3.57 per cent). In case of medium size category, per cent are educated up to matric level, followed by illiterate, below primary, 7.58 senior secondary and 7.58 graduates. Whereas out of total large size category farmers, majority of farmers i.e per cent is illiterate, per cent are educated up to matriculation, per cent below primary, 5.71 per cent graduates, 2.86 per cent post graduates and 2.86 per cent above post graduates. 213

3 Table 6.1 Distribution of Farmers in Punjab According to Education Level Education Level Small Medium Large Total Illiterate Below Primary Up to Matric Senior Secondary Graduate Post Graduate Above Post Graduate Total Source: Field Survey Note: Percentages are shown in parentheses (30.36) (28.79) (48.57) (33.76) (8.93) (15.15) (17.14) (13.38) (50) (40.91) (22.86) (40.13) (7.14) (7.58) (0) (5.73) (3.57) (7.58) (5.71) (5.73) (0) (0) (2.86) (0.64) (0) (0) (2.86) (0.64) (100) (100) (1000 (100) Above table reveals that none of small as well as medium size farmers are educated up to graduate and post graduate level. Distribution of farmers according to condition of their houses is shown in table 6.2. Amongst all the sampled farmers, 255 farmers having Pucca house, 198 farmers semi-pucca and only 18 katcha. Out of 168 small size category, majority i.e. 117 farmers are having semi Pucca house followed by 33 Pucca and 18 Katcha houses, whereas out of 198 medium size category 120 farmers are having Pucca followed by 78 semi-pucca. In case of large size category, most (102 farmers) are having Pucca and only 3 farmers semi-pucca house. It is observed that none of farmer from medium as well as large size category having Katcha house, on the other hand per cent of small size category farmers having are katcha houses. 214

4 Table 6.2 Distribution of Farmers in Punjab according to the Condition of House Type of House Katcha Pucca Semi Pucca Total Source: Field Survey Note: Percentages are shown in parentheses Small Medium Large Total (10.71) (0) (0) (3.82) (19.64) (60.61) (97.14) (54.14) (69.64) (39.39) (2.86) (42.04) (100) (100) (100) (100) It is found from the above table that per cent of large size category having Pucca house followed by of medium size category and small size category, whereas per cent of small size category are having semi-pucca house followed by of medium size category and 2.86 large size category farmers. Distribution of farmers in Punjab according to their income level is shown in table 6.3. It is observed that majority (159 farmers) of total sampled farmers are earning more than four lakhs per year from agriculture, out of which 102 farmers are from large size category followed by 57 medium size farmer, whereas none of farmers is getting more than four lakhs from small size category. Out of 102 farmers, 96 of medium size category, 3 each of small as well as large size category are getting between three to four lakhs per annum. None of large size category is getting income less than three lakhs from agriculture, whereas 78 farmers of small size category are 45 farmers of medium size category farmers getting between two to three lakhs. Out of total 168 small size category farmers, majority i.e. 87 per cent are earning less than two lakhs per year followed by per cent who are earning between two to three lakhs and only 1.79 per cent are earning between three to four 215

5 lakhs. Out of 198 farmers of medium size category, per cent are getting between three to four lakhs followed by per cent getting above four lakhs and per cent between two to three lakhs. Majority i.e per cent of large size category are earning above four lakhs followed by 2.86 per cent, who are earning between three to four lakhs. Table 6.3 Distribution of Farmers in Punjab according to their Income Income Level Small Medium Large Total Less than 2 Lakhs 2-3 Lakhs 3-4 Lakhs Above 4 Lakhs Total Source: Field Survey Note: Percentages are shown in parentheses (51.79) (0) (0) (18.47) (46.43) (22.73) (0) (26.11) (1.79) (48.48) (2.86) (21.66) (0) (28.79) (97.14) (33.76) (100) (100) (100) (100) It is observed that the income level of farmers is dependent upon the land size. Fertilizers are important input for increasing the productivity of crops. For this purpose farmers are using different types of fertilizers on their crops. It is observed that all the sampled farmers (including small, medium and large size category) are using both urea as well as DAP fertilizers for growing the crops. Whereas all the farmers are using more quantity of urea as compared to DAP. Distribution of farmers according to use of source of water to crops is shown in table in 6.4. This table indicates that out of total 471 sampled farmers, 276 are using submersible pump sets as well as diesel pump sets followed by 132 using submersible pump sets, diesel pump sets and canal water, 36 submersible pump sets and canal water, 18 submersible pump sets and 9 mono block pump sets. It is 216

6 observed that only small size category farmers (5.36 per cent) are using mono block pump sets. This table revels that majority i.e per cent of total farmers are using submersible as well as diesel pump sets, per cent are using submersible, diesel pump sets and water canal, 7.64 per cent used submersible and canal water, 3.82 per cent has only submersible pump sets and only 1.91 per cent are using mono-block pump sets. This table reveals that maximum number (57.14 per cent) of small size category farmers, per cent of medium and per cent of large size category farmers are using submersible as well as diesel pump sets. Table 6.4: Distribution of Farmers according to Use of Source of Water to Crops Particulars Small Medium Large Total Mono Block Pump set Submersible Pump set Diesel Pump sets Water Canal Submersible Pump set and diesel Pump set Submersible Pump set and water canal Submersible Pump set, diesel Pump set and water canal Total Source: Field Survey Note: Percentages are shown in parentheses (5.36) (0) (0) (1.91) (10.71) (0) (0) (3.82) (0) (0) (0) (0) (0) (0) (0) (0) (57.14) (57.58) (62.86) (58.6) (12.5) (7.58) (0) (7.64) (14.29) (34.85) (37.14) (28.03) (100) (100) (100) (100) Submersible pump sets are very useful for irrigation purpose, the reason is that it produces more water than other pump set. It is observed that few farmers (5.36 per cent) having less than 2 acres of land are using mono-block pump sets as they are 217

7 unable to afford the expenditure of submersible as well as diesel pump sets due to the low income level. During field survey it is found that agriculture subsidies on various inputs have positive impact on the income of farmers as they their production cost is reduced. All 471 farmers have stated that impact of agriculture subsidies on their income is positive. As they have to pay less on the purchase of fertilizers and getting free electricity as well as canal water (irrigation) for agriculture purpose. During survey it is found that maximum number of farmers are using diesel pump sets for irrigating the crops. Large size category farmers are spending more on diesel pump sets as compared to small and medium size category farmers. The main reason behind it is poor supply of electricity. Comparing the diesel cost with the electricity charges even if the subsidy is withdrawn by Punjab Government, it is found that the diesel cost is higher than electricity charges (flat rate). The farmers are ready to pay the bills for electricity, at the condition that supply of electricity should be regular. The distribution of farmers according to their response about agriculture subsidies is shown in table 6.5. Out of total 471 farmers, 342 are in favour of fertilizers subsidy, electricity as well as irrigation subsidies, whereas 129 farmers are in favour of fertilizers and electricity. Out of 342 farmers who want fertilizers, electricity as well as irrigation subsidies, majority (138 farmers) are related to medium size farmers followed by 120 small size category and 84 large size category. Whereas out of 129 farmers who are in favour of fertilizers and electricity, 60 are from medium size category followed by 48 small size category and 21 large size category. 218

8 Out of total (168 farmers) small size category, majority (71.42 per cent) are in favour of fertilizers, electricity as well as irrigation subsidies and per cent are in favour of fertilizers and electricity. On the other hand 69.7 per cent of medium size category and 80 per cent of large size category are in favour of fertilizers, electricity as well as irrigation subsidies and per cent of medium and 20 per cent of large size category are in favour of fertilizers and electricity subsidies. Table 6.5 Distribution of Farmers according to Response (Favour) about Agriculture Subsidies Particulars Small Medium Large Total Fertilizer and Electricity Fertilizer, Electricity and Irrigation Total Source: Field Survey Note: Percentages are shown in parentheses (28.57 (30.3) (20) (27.39) (71.42 (69.7) (80) (72.61) (100) (100) (100) (100) Distribution of farmers according to loan taken is shown in table 6.6. Majority i.e., 339 farmers out of 471 total sampled farmers have taken loan, whereas 132 farmers had not taken loan. Out of 168 small size farmers, most of farmers (138) have taken loan, reaming had not take loan, whereas out of 198 medium size farmers 126 have taken loan and had not. On the other hand 75 out of total large size farmers have taken loan and 30 are those farmers who did not take loan. It is observed that per cent of total farmers are in debt and per cent of total farmers did not take any loan. Among all the categories of farmers, per cent of small size category farmers, per cent of large size category farmers and per cent of medium size category farmers have taken loan for meeting their requirements. 219

9 Table 6.6 Distribution of Farmers according to Loan Particulars Small Medium Large Total Yes No Total Source: Field Survey Note: Percentages are shown in parentheses (82.14) (63.64) (71.43) (71.97) (17.86) (36.36) (28.57) (28.03) (100) (100) (100) (100) During field work, it is observed that moneylenders/commission agents provide loans for productive as well as unproductive purposes. They are easily approachable at odd hours and have very simple way of lending. Even after independence and nationalisation of banks, the farmers are still in the clusters of professional moneylenders who charge exorbitant rates of interest. Money is required for the productive as well as unproductive purposes. Distribution of farmers according to purpose of loan is shown in table 6.7. This table reveals that most of farmers i.e. 237 out of 471 have taken loan for productive purpose followed by 63 who have taken loan for unproductive purposes and 39 took for both purposes. Out of small size category farmers majority (102 farmers) have taken loan for productive purposes followed by 30 who have taken loan for unproductive and 6 farmers took for productive as well as unproductive purposes. Same pattern is also seen in medium size category. Out of total farmers, it is observed that per cent of total farmers has got loan for productive purposes, per cent for unproductive purposes, whereas only 11.5 per cent have taken loan for both the purposes i.e. productive as well as unproductive purpose. Out of total small size category farmers, per cent have taken loan for productive purposes followed by per cent and only 4.35 per cent 220

10 for unproductive and both the purposes respectively. Majority (59.52 per cent) of medium size category farmers have taken loans for productive i.e per cent for unproductive and per cent for both the purposes. Most (80 per cent) of the large size category farmers have got credit for productive followed by 12 per cent and 8 per cent for unproductive and both the purposes. Table 6.7 Distribution of Farmers according to Purpose of Loan Particulars Small Medium Large Total Productive Unproductive Both Total Source: Field Survey Note: Percentages are shown in parentheses (73.91) (59.52) (80) (69.91) (21.74) (21.43) (8) (18.58) (4.35) (19.05) (12) (11.5) (100) (100) (100) (100) Distribution of farmers according to source of loan is shown in table 6.8. The farmers take loans from institutional and non-institutional sources. Institutional sources include commercial banks, cooperation banks, regional rural banks and land development banks whereas non-institutional sources include commission agents/money lenders, friends, land lords and traders. Out of 339 farmers (including small, medium as well as large size category), majority 202 farmers have taken loans from non-institutional sources and 137 farmers from institutional sources. Out of 137 farmers who have taken loan from institutional sources, majority (66 farmers) have taken loan from cooperatives banks followed by commercial banks (38 farmers), regional rural banks (27 farmers) and land development banks (6 farmers) respectively. Whereas out of 202 farmers who have taken loan from non-institutional 221

11 sources, 109 have taken from money lender, 28 from friends, 27 from land lords and 18 from traders. It is found that most (59.59 per cent) of total farmers take loan from noninstitutional sources (40.41 per cent) as compared to institutional sources. Data reveal that per cent of total farmers availed the credit from cooperation societies followed by per cent farmers who availed the credit from commercial bank, per cent and 4.38 per cent of farmers acquired credit from regional rural banks and land development banks respectively. In case of non-institutional sources, majority i.e per cent of total farmers has taken loan from commission agents/money lenders followed by per cent of the total farmers availed the credit from relatives and friends. Whereas per cent of total farmers borrowed from landlords and 8.91 per cent from cloth merchants/grocers etc. Table 6.8 Distribution of Farmers according to source of loan Particulars Small Medium Large Total Institutional Commercial Banks Cooperative Societies Regional Rural Banks Land Development Banks Sub-Total (A) Non-Institutional Sources Commission Agents/Money Lenders Friends/Relatives Land Lords (23.40) (29.51) (31.03) (27.74) (38.30) (59.02) (41.38) (48.18) (25.53) (11.48) (27.59) (19.71) (12.77) (0) (0) (4.38) (34.06) (48.41) (38.67) (40.41) (43.96) (80) (80.44) (63.86) (19.78) (6.15) (13.04) (13.86) (19.78) (13.85) (0.00) (13.37) 222

12 Traders Sub-total (B) Grand Total (A+B) Source: Field Survey Note: Percentages are shown in parentheses (16.48) (0.00) (6.52) (8.91) (65.94) (51.59) (61.33) (59.59) (100) (100) (100) (100) Although the rates of interest charged by institutional sources is very less yet the farmers prefer taking loans from non-institutional sources. Amongst the institutional sources the major source of loan is co-operative societies whereas in non-institutional sources major source is commission agents/money lenders. Punjab farmers are getting agriculture subsidies on various types of inputs like fertilizers, electricity, irrigation (canal water), seeds, gypsum, mechanization etc. Table 6.9 shows distribution of farmers according to comparison of various types of subsidies. At present, Punjab farmers are getting fertilizers subsidies by centre government, electricity and irrigation by state government. Table 6.9 Distribution of Farmers according to Comparison of Various Types of Subsidies Particulars Small Medium Large Total Fertilizers, electricity and irrigation Total Source: Field Survey Note: Percentages are shown in parentheses (100) (100) (100) (100) (100) (100) (100) (100) It is observed that all the sampled farmers are getting maximum subsidies on three inputs (major subsidies) i.e. fertilizers, electricity and irrigation (canal water) as compared to seeds, pesticides, machinery etc. (minor subsidies). 223

13 Section - II At present, Government of Punjab is giving various schemes to the people of the State. The main reason is to improve the living standard of the people, whereas the financial status of Government of Punjab, it is not up to mark. The financial position of Punjab state government during to is shown in table It is observed that the fiscal deficit of Punjab state government has increased during pre as well as post liberalisation periods except in and during to It has increased from Rs.1, crores in to Rs.1, crores in and declined to Rs.1, crores in and increased to Rs.4, crores in and declined to Rs.4, crores in and again declined to Rs.2, crores in and increased to Rs.4, crores in and again increased to Rs.6, crores in Total subsidies (including electricity and irrigation) have increased from Rs crores in to Rs.1, crores in and declined to 1, crores in and increased to Rs.1, crores in and again increased to Rs.2, crores in and further increased to Rs.3, crores in Subsidies of electricity have increased from Rs crores in to Rs crores in and again increased to Rs.1, crores in and declined to Rs.788 crores in and increased to Rs.1386 crores in and again increased to Rs.2, crores in and further increased to Rs.3, crores in , whereas subsidies of irrigation (canal water) have increased from Rs crores in to Rs crores in and declined to Rs.434 crores in and increased to Rs crores in and again increased to Rs crores in and further increased to Rs.1, crores in

14 It is observed that the percentage share of electricity subsidies in state s fiscal deficit is high as compared to canal subsidies during pre as well as post liberalisation periods. In , the percentage share of electricity subsidies in fiscal deficit is 54.88, whereas percentage share of canal subsidies is In , the percentage share of electricity subsidies is per cent in fiscal deficit on the other hand percentage share of canal water is 8.89, which is two times approximate. Whereas the percentage share of total subsidies (including electricity and irrigation) has increased during pre as well as post liberalisation periods except in , , , and

15 TABLE

16 It is observed that total subsidies have increased in all the study period except in , whereas variations are seen in percentage share of total subsidies in fiscal deficit of state governments pre as well as post liberalisation periods. The financial position of centre as well as state governments in India is shown in table This table reveals that centre as well as state governments fiscal deficit has increased during pre as well as post liberalisation periods. The combined deficit of all the governments of India has increased from Rs.12,012 crores in to Rs.1,03,294 crores in and again increased to Rs.4,83,341 crores in The fiscal deficit of centre government has increased from Rs.8,299 crores in to Rs.44,632 crores in , Rs.1,18,816 crores in and further increased to Rs.3,36,992 crores in , whereas the fiscal deficit of state governments has increased from Rs.3,713 crores in to Rs.18,787 crores in , Rs.87,922 crores in and further increased to Rs.1,46,349 crores in Subsidies given by centre government (fertilizers) have increased from Rs crores in to Rs.3, crores in , Rs.16, crores in and further increased to Rs.1,34, crores in On the other hand, the agriculture subsidies (electricity and irrigation) given by state governments have increased from Rs crores in to Rs.8, crores in to Rs.41, crores in and further increased to Rs.44, crores in It is found that the percentage share of electricity as well as irrigation subsidies in state government s fiscal deficit is high as compared to fertilizers subsidies in centre government s fiscal deficit during pre as well as post liberalisation periods except in The percentage share of fertilizers subsidies 227

17 in centre government has increased from 5.69 per cent in to 8.71 per cent in , to per cent in It is seen that the percentage share of subsidies provided by centre government is increasing in centre s fiscal deficit during to , whereas same trend of percentage share in state government s fiscal deficit is also found in case of subsidies provided by state governments except in

18 TABLE

19 Above table concludes that in the fiscal deficit of centre as well as states government has increased throughout the study period. Subsidies given by centre government have also increased in all this period, whereas subsidies provided by state governments declined in post liberalisation period ( ). The percentage share of total subsidies (including centre and state governments) in fiscal deficit has increased except in As post-liberalisation ( ) is compared to preliberalisation period ( ), the centre subsidies have increased by times, state subsidies 4.5 times and share of total subsidies in combined fiscal deficit is 1.8 times. The financial position of Punjab State Electricity Board is shown in table The balance sheet of the Punjab state Electricity Board (PSEB) for the years consistently shows a rising mismatch between the assets and liabilities, resulting from mounting accumulated losses. The main reason is due to free electricity to farmers, SC and BPL consumers. Data related to financial position of PSEB shows that its loss had increased from Rs crores in to Rs crores in , to Rs.1, crores in and further increased to Rs. 4,767.8 crores in Table 6.12 Financial Position of Punjab State Electricity Board during to Years 230 Loss (In Rs. crores)

20 Source: Government of Punjab, Technical and Financial Status Report of Punjab State Electricity Board. The Punjab State Electricity Board claims huge amount of unpaid subsidy from the Government and this device is sought to be used to meet the assets and liabilities gap in the balance Sheets. Section - III The policy of subsidy on fertilizers encourages the farmers for excessive use of nitrogen fertilizers with relative under-utilization of the other fertilizers and micronutrients. Unbalanced fertilizer use does not lead to immediately visible harmful effects whereas it adversely affects soil quality over time. Moreover, the injudicious use of fertilizers can practical cause all forms of pollution i.e. of soil, air and water. The soil pollution load further increases due to their reaction products and residues. Some of the reaction products such as nitrates and phosphates find their way to surface waters and aquifers. The enrichment of surface waters with these nutrients by runoff from agriculture fields and by leaching causes eutrophication. Air pollution is also caused by the gases arising from fertilizer use in soil. The gases like ammonia, nitrogen dioxide, nitrous oxide, sulphur dioxide, etc. may not only vitiate air and also lead to ozone layer depletion and global warming (State of Environment Punjab 2007). The consumption of fertilizers in Punjab state is shown in table This table reveals that the consumption of Nitrogenous (N) is maximum followed by 231

21 Phosphatic (P2O5) and Potassic (K 2 O) during to In the total consumption of NPK is nutrients tonnes, out of which per cent is of N followed by per cent of P 2 O 5 and 3.81 per cent of K 2 O. The percentage share of N is constant in and in , whereas the percentage share of P 2 O 5 declined from per cent in to per cent in Table 6.13 Consumption of Chemical Fertilizers in Punjab during to (In 000 Nutrients tonnes) Years Nitrogenous Phosphatic Potassic (K 2 O) Total (NPK) (N) (P 2 O 5 ) (69.03) 207 (27.17) 29 (3.80) 762 (100) (71.89) 328 (26.88) 15 (1.23) 1220 (100) (76.77) (76.77) (21.48) 354 (20.92) Source: Government of Punjab, Statistical Abstract, Various years Note: Percentages are shown in parentheses (1.75) 39 (2.31) (100) 1692 (100) Agriculture in Punjab has a heavy requirement of water for irrigation purposes. The dominance of rice and wheat monoculture cropping pattern over the years has led to overexploitation of ground water resulting in rapid decline of water table in the entire state (except south western part), as ground water is generally sweet and fit for irrigation. Out of 137 blocks of the state, 103 blocks are overexploited, 5 blocks are critical, 4 blocks are semi critical and only 25 blocks are in safe category (Sate of Environment Punjab 2007). The provision of subsidy on electricity has a negative impact on the sustainability of agriculture as it has implications for depletion of underground water. The cheap availability of electricity has increased steeply the use of tube wells for irrigation purpose in Punjab. Table 6.14 shows distribution of tube wells in Punjab state during to The total number of tube wells have increased from 232

22 6 lakhs in to lakhs in and again increased to lakhs in and further increased to lakhs in It is observed that number of diesel tube wells have declined during pre as well as post liberalisation periods except in and , whereas electric tube wells have increased during pre as well as post liberalisation periods. Table 6.14 Distribution of Tube wells in Punjab during to (In Lakhs) Years Diesel Electric Total Source: Government of Punjab, Statistical Abstract, Various years Note: Percentages are shown in parentheses The subsidized electricity sale has reduced the marginal cost of irrigation to almost zero. It persuaded farmers to over-irrigate their lands. This reveals the nonoptimal use of electricity and of the scarce underground water resources by the farmers. The reckless use of water through tube wells has caused the problems of underground water depletion in some areas. This rapid pace of underground water depletion may trouble sustainability of Punjab s agriculture. The canal system, which irrigates nearly one-third of the total area in Punjab, is highly skewed and 87 per cent of its catering is just in five districts of Amritsar, Ferozepur, Faridkot, Bathinda and Muktsar. Further, more the area under canal irrigation is also declining every year because of decreasing carrying capacity of canals and lesser water coming from the rivers of Sutlej, Beas and Ravi. In , the area under canal irrigation was 16.6 lakhs hectares, but fell to 9.62 lakhs hectares 233

23 in At present, lakhs hectares are under canal irrigation, which is around 36 per cent of the total irrigated area in the State. The water availability from the three rivers has fallen from million acre feet (MAF) two decades ago to around 14 million acre feet (Virk, 2008). The availability of this cheap mode of irrigation also persuaded farmers to shift to cultivation of water intensive crops like rice from their old practices of growing cotton. This crop diversification has been a major factor for the depletion of ground water at a fast pace in Punjab, more extraction of water takes plashes than the recharge through rain. It is observed that the present grim ground water scenario in different regions of the state is essentially the outcome of faulty production practices leading to excessive and irrational use of water. Other factors less than required availability of surface water, free power supply to the agriculture sector, disproportionate installation of tube wells by farmers. The foregoing discussions about the impact of agriculture subsidies on the different aspects of Punjab economy reveals agriculture subsidies have positive impact on the income of small, medium as well as large size category farmers, whereas subsidies are regressive, as large size category farmers have more land, pump sets, electricity load etc. and they use more quantity of fertilizers, electricity as well as canal water as compare to small and medium size farmers. Majority i.e per cent of farmers in Punjab are in debt. They incur deficits (consumption expenditure exceeds income) to meet their requirements they have to borrow. The major proportion of loans is taken for productive purposes. All the farmers are in favour of fertilizers subsidies, on the other hand majority of farmers are to pay flat charges on electricity and nominal charges on irrigation (canal water) as compared to diesel pump sets. It is observed that the policy of subsidy on 234

24 fertilizers encourages the farmers for excessive use of nitrogen fertilizers with relative under-utilization of the other fertilizers and micronutrients, whereas free electricity increased the demand for new connections for tube wells and water table has declined during pre as well as post liberalisation periods. This increase in number of tube wells along with deepening water level aggravated the power crisis as more power is needed to draw same amount of water from the peeper water level. Centre, state governments as well Punjab State Electricity Board are in fiscal deficit and a lot of variation is seen in percentage share of total subsidies in fiscal deficit of governments. 235