The agricultural subsidy regime in the country needs reforms to address the distortions it causes. Comment.

The subsidy regime in India involves direct subsidy-transfers along with indirect through procurement, leading to high spending on food subsidies. Distortions due to agri subsidy regime: (1) Provide staples/cereal crops - result of monocropping and lack of diverse cropping patterns. (2) Degraded soil health due to irregular usage of pesticides and fertilizer. Example: Urea fertilizer subsidy away from nutrient-based subsidy regime. (3) Diversion of fertilizers due to medicines. Example: Urea cost 3000/bag, letting 3300 subsidy to 2700 per bag. (4) Groundwater extraction - electricity subsidy - free electricity leads to use of pumps to extract water. Example: 80% groundwater extraction in India for agriculture. (5) Lack of incentives for crop diversification due to MSP pricing. (6) Disbursement of subsidies - indirect subsidies are segregated in nature. (7) WTO compliance - issue - Agreement on Agriculture - de minimis levels - dumbox subsidies.