A.5. Direct Subsidies
Direct farm subsidies are those that are paid in the form of a direct cash subsidy and are given to farmers directly. In direct subsidies, the beneficiary pays the same price for the product but receives a separate payment for the purchase.
The PM Kisan Scheme, PAHAL in LPG, and agricultural loan waivers are a few examples of direct farm subsidies.
Direct farm subsidies have following benefits and issues –
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Benefits of Direct farm subsidies
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- Direct subsidies aid in boosting farmers’ purchasing power and enhancing the general level of living.
- Government empowerment through direct cash transfers allows recipients to choose their purchases based on their requirements.
- Since money is given to beneficiaries directly, it also aids in preventing the misuse of public funds.
- Direct payments also reduce wasteful resource use. Ex: Farmers will buy fertiliser at full price and only what is required.
- Farmers can invest the money they get in their businesses as capital.
- Reduces the expense of the government, releasing funds for storage and transportation.
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Issues of Direct farm subsidies
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- Rural communities have inadequate ATM and banking service accessibility and a lack of financial inclusion.
- The potential for farmers to use the funds for non-farm, wasteful uses.
- Inflation may result from increased public access to money.
- May affect the nation’s food security.
- Important problems like agricultural innovation and market reform went neglected.
- Problems with beneficiary identification.
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