8. Evaluating the Role of Subsidies in Sustainable Agriculture: A Case Study of India

The issue of agricultural subsidies is contentious due to the complexities that occur through changes in production, consumption and trade patterns. The changes are often criticised for their trade-distortion effects and implications for sustainability. Among other factors, the impact also depends on the type of support provided. Particularly, subsidy on inputs is often used to promote or alter production patterns. In the process, over-application of specific inputs tends to ignore the associated environmental externalities. Although the emission impact of input overuse in agriculture is well acknowledged and attributed to the subsidised nature of inputs, the relationship remains yet to be appraised in the existing literature. This contribution attempts to fill the void by analysing the impact of inputs—measured through their use and the associated subsidy—on net returns for the farmer and the emissions from the agricultural sector. The results are helpful not only to quantify the relationship between subsidised inputs and emissions from agriculture but also to assess the relative impact of inputs in causing emissions from the agricultural sector. A key finding is that the gains in net returns from the use of subsidised inputs are more than offset by the adverse effects of emissions. Furthermore, the use of fertilisers has a more substantial contribution to emissions, in comparison to the effect of electricity consumption on emissions. In view of the relatively significant impact of fertilisers, the use of inorganic inputs demands attention through policy re-orientation. The cash transfers, if linked to the use of organic fertilisers, will be more effective in incentivising the farmers to switch. Simultaneously, the business model for fertiliser manufactures should also be revisited early to transform into semi-organic production arrangements.