Farm Subsidies, Minimum Support Prices, PDS and Food Security

What the official syllabus says

UPPCS Main Examination, General Studies III:

• Issues related to direct and indirect farm subsidies and minimum support prices, Public Distribution System: objectives, functioning, Limitations, revamping, issues of buffer stocks and food security, Technology missions in agriculture.

This is a dense line: it joins the support given to farmers (subsidies and prices) with the support given to consumers (the Public Distribution System), and both with the stocks the government keeps and the missions that raise output.

Topics in detail

Farm subsidies

• Direct support: income transfers such as PM-KISAN (2019; Rs 6,000 a year in three instalments)
• Indirect subsidies: fertiliser (urea under price control; Nutrient Based Subsidy for phosphatic and potassic fertilisers since 2010), power, irrigation water, seeds, credit (interest subvention) and crop insurance (Pradhan Mantri Fasal Bima Yojana, 2016)
• Effects: fiscal cost, overuse of urea and imbalance of nitrogen, phosphorus and potassium, groundwater depletion from cheap power, benefit to larger farmers
• Reform options: direct benefit transfer of subsidies, neem-coated urea, targeting, investment in place of subsidy
• WTO Agreement on Agriculture: amber, blue and green box support; the de minimis limit (10% of the value of production for developing countries); the peace clause for public stockholding (Bali, 2013)

Minimum support prices

• Commission for Agricultural Costs and Prices (set up in 1965 as the Agricultural Prices Commission); MSP for kharif and rabi crops; Fair and Remunerative Price for sugarcane
• Cost concepts A2, A2+FL and C2; MSP at least one and a half times the cost of production (from 2018-19)
• Procurement: concentration in a few crops and States; decentralised procurement by States
• Price support for pulses and oilseeds (PM-AASHA); price deficiency payments
• Debates: legal guarantee for MSP, market distortion, crop diversification

Public Distribution System

• Evolution: wartime rationing, the PDS, the Revamped PDS (1992), the Targeted PDS (1997), Antyodaya Anna Yojana (2000)
• Objectives: food security of the poor, price stabilisation, support to farmers through procurement
• Functioning: procurement by the Food Corporation of India and State agencies, central issue prices, allocation to States, fair price shops
• National Food Security Act, 2013: coverage of up to 75% of the rural and 50% of the urban population; 5 kg of grain a person a month; 35 kg a household a month under Antyodaya; maternity benefit; meals for children
• Free foodgrains under the Pradhan Mantri Garib Kalyan Anna Yojana
• Limitations: exclusion and inclusion errors, leakages and diversion, poor quality, storage losses
• Revamping: end-to-end computerisation, Aadhaar seeding, ePoS devices at fair price shops, One Nation One Ration Card, cash transfers in pilot areas, fortified rice
• High Level Committee on restructuring the FCI (Shanta Kumar, 2015)

Buffer stocks and food security

• Buffer stock norms and strategic reserves; open market sales to cool prices
• Costs of holding excess stocks; storage and transit losses
• Dimensions of food security: availability, access, utilisation and stability
• Nutrition security: hidden hunger, malnutrition, Poshan Abhiyaan (2018), PM POSHAN (school meals), millets in the diet
• Climate change and food security

Technology missions in agriculture

• Technology Mission on Oilseeds (1986), later widened to pulses, oil palm and maize
• National Food Security Mission (2007) for rice, wheat, pulses and coarse cereals
• Mission for Integrated Development of Horticulture
• National Mission for Sustainable Agriculture and the National Mission on Agricultural Extension and Technology
• National Mission on Edible Oils
• What a mission approach means: targets, clusters, seeds, extension, credit and marketing in one package

Overlaps

• General Studies VI: agricultural crops, problems of agriculture and their solutions in Uttar Pradesh.
• General Studies II: welfare schemes and the role of the State in delivering them.