Types of Subsidies

Food Subsidy

The food subsidy’s main objective is to provide essential eatables to a large section of the population living below the poverty line in India. The subsidized food products are distributed through the PDS system in our country. The major food items supplied to the BPL families varies as per the region, but the common foodstuff includes:

    • Wheat
    • Rice
    • Sugar
    • Milk
    • Cooking oil and more

Export Subsidy

  • To make exports attractive and lend support to the companies, the government offer export subsidies. The export subsidies help make our products competitive in the international market and open new markets for domestic products.

Fertilizer Subsidy

  • The government provides relief to farmers by providing the fertilizer at the discounted prices. The fertilizer is provided at a fixed MRP that is below the actual price; the government pays the difference between the actual coat and the MRP.

Irrigation Subsidy

  • Indian government provides irrigation facilities at the lower rates as compared to the market rates. It is the difference between maintenance and operating cost of irrigation infrastructure in the state and irrigation charges recovered from farmers. This may work through provisions of public goods such as canals, tube wells, dams, etc. which the government constructs and charges no prices or low prices at all for their use from the farmers. It may also be through low-priced private irrigation equipment suchas pumping sets

Power Subsidy

  • The electricity subsidies suggest that the government charges low rates for the electricity supplied to the farmers. Power is mainly used by the farmers for irrigation objectives. It is the difference between the cost of distributing and generating electricity to farmers and the price received from farmers. The State Electricity Boards (SEBs) either generate the power themselves or purchase it from other producers such as NHPC and NTPC. Power subsidy “acts as an incentive to farmers to invest in borewells, pumping sets, tube wells, etc.

Agriculture / Farm Infrastructure Subsidy

  • Private efforts in several areas do not prove to be sufficient to improve agricultural production. Good roads, power, storage facilities, information about the market, transportation to the ports, etc. are vital for production and sale operations. These facilities are in the domain of public goods, the costs of which are huge and whose benefits accrue to all the cultivators in an area. No individual farmer will come forward to provide these facilities because of their bulkiness and inherent problems related to revenue collections.