Day 24 – Q. 2. India’s agricultural subsidy system is often criticised for being inefficient, inequitable, and fiscally unsustainable. Examine how Direct Benefit Transfer (DBT) can address these concerns while highlighting the challenges it may face in effective implementation. (150 words, 10 marks)

Q. 2. India’s agricultural subsidy system is often criticised for being inefficient, inequitable, and fiscally unsustainable. Examine how Direct Benefit Transfer (DBT) can address these concerns while highlighting the challenges it may face in effective implementation. (150 words, 10 marks)

Introduction 

India’s agriculture subsidies, amounting to over ₹4 lakh crore annually (Budget 2024), are  riddled with leakages and misallocation. Therefore, Direct Benefit Transfer (DBT) is being  increasingly promoted to offer direct subsidy, reduce inefficiencies, and empower farmers.  

Body  

Present Issues with Subsidy System 

1. Leakages and ghost beneficiaries: CAG (2023) flagged fertiliser diversion to industries  and ghost beneficiaries in PDS due to poor targeting.  
2. Regional and crop bias: Subsidies are concentrated in crops like rice and wheat and  in states like Punjab, skewing resource distribution.  
3. Input-based distortion: Subsidies on fertiliser and electricity encourage overuse,  harming soil health and water tables (NITI Aayog, 2021).  
4. Fiscal burden and inefficiency: Economic Survey 2022 highlighted ballooning subsidy  bills crowding out investment in rural infrastructure and R&D.  

How DBT Can Address These Issues 

1. Targeted benefit delivery: DBT ensures subsidies reach genuine beneficiaries, cutting  down leakages and corruption in delivery.  
2. Farmer autonomy and efficiency: Direct cash transfers give farmers flexibility to buy  best-suited inputs based on local conditions.  
3. Neutral input usage: DBT discourages overuse of fertilisers and electricity by delinking  subsidy from physical input use.  
4. Administrative transparency: Digitised DBT platforms enhance accountability  through Aadhaar seeding, GPS tagging, and real-time tracking.  
5. WTO-compliant structure: Direct income transfers are permissible under WTO “green  box,” unlike price-distorting input subsidies.  

Challenges in Implementation of DBT 

1. Land ownership complexity: Majority of tenant and sharecroppers lack formal land  titles, excluding them from DBT eligibility.  
2. Digital and banking divide: In remote areas, lack of connectivity and banking access  hinders timely and inclusive transfer.  
3. Resistance from stakeholders: Fertiliser and power lobbies, along with state  governments, resist DBT due to loss of control and revenue.  
4. Risk of exclusion and errors: Issues in Aadhaar-linking or data mismatch can exclude  deserving farmers and delay benefits.  
5. Price volatility exposure: Without subsidised inputs, farmers face market fluctuations  unless DBT is accompanied by other support measures.  

Way Forward 

1. Update land records and include tenants: Adopt recommendations of the DILRMP and Bhoomi Project (Karnataka) to digitise land records and include actual cultivators.  2. Strengthen rural banking and digital access: Follow Jharkhand’s DBT-enabled  fertiliser pilot and expand banking correspondents in remote areas.  
2. Phase-wise implementation: NITI Aayog recommends a calibrated, region-wise DBT  rollout, starting with inputs like fertilisers.  
3. Combine with advisory services: Madhya Pradesh’s “Krishi Upaj Mandi” model shows how advisory + income support can guide optimal farm investments.  5. Centre–State coordination: As per the 15th Finance Commission, cooperative  federalism is vital for effective subsidy reforms like DBT. 
4. Use DBT-linked data analytics: NITI’s 2023 report suggests leveraging DBT data for  policy targeting, grievance redressal, and course correction.  

Conclusion 

A well-designed DBT model ensures subsidy efficiency, farmer empowerment, and fiscal  prudence while aligning with WTO rules. It is time India transitions to this sustainable and  inclusive alternative.