For decades governments had been providing subsidies to supplement their income, manage the supply of agricultural commodities, and influence the cast and the supply of such commodities. which includes a blanket tax exemption; subsidies on fertiliser, seeds, energy and water for irrigation; low-interest loans; cheap crop insurance; high tariffs to block food imports; and price supports for more than 20 crops. Since 2014 no fewer than eight states have waived a total of well over $25bn in farmers’ debts.

There are two most common ways of subsidising agriculture are-
1. Firstly, governments may pay much higher prices for the agricultural products than what the farmers can obtain under free market environment, and
2. Secondly, by supplying the inputs at a price that is below the cost of supplying these inputs or below at the price that would prevail in an open free trade environment.

The advocacy to reform the agricultural subsidies are as follows:

The form and approach of agriculture subsidies are exemplified in “Strategy for New India @ 75” document by Niti Aayog-
1. Replacing the minimum support price (MSP) by a minimum reserve price (MRP), which could be the starting point for auctions at mandis.
2. It pitched for setting up an agricultural tribunal and auctioning of farm produce in mandis by fixing minimum reserve price.
3. Separating the criteria for MSPs for (i) surplus produce; (ii) for deficit but globally available products; and (iii) for products that are in deficit both domestically and globally.
4. Examine options for including private traders operating in markets to complement the minimum support price regime through a system of incentives and commission payments.
5. A long-term solution lies in the creation of a competitive, stable and unified national market to enable better price discovery, and a long-term trade regime favourable to exports.
6. Agriculture advisory service: An effective and technology driven Agriculture Advisory Service may be considered on the lines of those of the United States Department of Agriculture (USDA) and the European Union (EU). The mandate would be to ensure that farmers adopt an optimal cropping pattern that maximizes their income.
7. Futures trade: Futures trade should be encouraged. Removal of entry barriers to increase market depth should be considered.
8. Crop insurance: PMFBY needs to be modified to – o Promote weather-based insurance. o Increase non-loanee farmers’ insurance coverage. o Allow for mixed cropping and increase the number of crops notified.
9. On farm exports, the think tank suggested the government should come up with a coherent and stable agricultural export policy, ideally with a five to ten-year time horizon and a built-in provision for a mid-term review.
10. The Essential Commodities Act, which has proven a disincentive to large investment in agricultural technology and infrastructure, should be replaced with a modern statute that balances the interests of farmers and consumers.
11. Reorient fertilizer subsidy policy: The current lopsided fertilizer subsidy policy needs to bring secondary and micronutrients on the same nutrient based subsidy (NBS) platform as phosphorus (P) and potash (K).
12. Investment subsidies for micro-irrigation: Rather than power and water subsidies, investment subsidies for micro-irrigation can be provided through the DBT mode.

There is need of policy environment that should facilitate income security to farmers, while maintaining the country’s food security and address environmental concerns.