Agriculture Beyond Subsidies

The most durable argument for agricultural subsidies in India is also the most honest: farming is hard, farmers are poor, and without state support, many would be in a worse situation than they already are. That argument is not wrong.

What is wrong is the conclusion many policymakers draw from it: that the answer to agricultural distress is more subsidy, delivered faster.

Odisha has been running this experiment for three decades. The results do not support the conclusion.

The scale of support that hasn't been enough

The agricultural support infrastructure in India is extensive. Fertilizer subsidies reached over ₹1.75 lakh crore in FY2022-23, reducing the cost of inputs for farmers across the country. The Minimum Support Price regime provides a floor for major crops. PM-KISAN transfers ₹6,000 per year directly into farm household accounts — a modest sum but a guaranteed one. State governments layer on subsidies for power used in irrigation pumps, for seeds, for crop insurance premiums.

In Odisha, a paddy farmer receives support at almost every stage of the agricultural chain: subsidized seeds, subsidized fertilizer, subsidized electricity for irrigation, and an MSP guarantee for what she grows.

And yet: average farm household income in India was ₹10,218 per month in the NSSO's 2018-19 Situation Assessment Survey, with Odisha near the lower end of that distribution — significantly below income levels in non-farm households, and below what would be needed to sustain a family without supplementary income from labor migration or non-farm work.

A generation of subsidy spending has not closed this gap materially. The reason is structural, not moral. Subsidies solve the wrong problem.

Subsidies reduce the cost of being a farmer. They do not increase the value of what farmers produce. Those are different interventions with different outcomes.

What the problem actually is

Agricultural distress in Odisha is not primarily caused by high input costs. It is caused by the combination of single-crop dependence, post-harvest losses, thin market access, and price collapse at harvest time — none of which subsidies address.

A paddy farmer in Odisha grows one crop per year on rain-dependent land. When she harvests, she must sell quickly because she has no storage. When she must sell quickly, she sells at whatever price local traders will pay — typically below the MSP, because the MSP guarantee requires access to procurement centers that may be far away or functionally unavailable during the harvest rush. The paddy that leaves her farm at ₹1,400 per quintal reaches a rice mill, then a packager, then a retailer, and eventually reaches an urban consumer at a price implying a farm-gate value significantly higher. The difference in value accrues to every step of the chain except the farmer.

This pattern repeats across vegetables, where farmers distress-sell at harvest because cold storage doesn't exist, and the tomatoes that rotted in the field were worth more than the paddy that sold at floor price.

MSP support has had an unintended consequence that deserves acknowledgment: it has made paddy the default risk-managed crop in Odisha, while higher-value alternatives — vegetables, pulses, oilseeds — carry more market risk because no equivalent support structure exists for them. Farmers are rational. They grow what is guaranteed. The guarantee is for the lowest-value crop. The agricultural income picture follows accordingly.

The infrastructure gap subsidies don't fill

Three interventions would materially change Odisha's agricultural income picture. None of them is a subsidy.

The first is cold storage infrastructure at the block level — within economically viable transport distance of farm clusters. India loses an estimated 16% of its fruit and vegetable production to post-harvest spoilage due to inadequate cold chain. In Odisha, the ratio is worse. Block-level cold storage would allow farmers to hold produce until prices recover and to supply the premium urban markets that existing cold chain infrastructure serves — markets they are currently structurally excluded from. The capital cost is real. The return, measured in farm income improvement per rupee spent, is higher than almost any subsidy alternative.

The second is functional rural market infrastructure — regular haats with price information, weighing infrastructure, and basic logistics connectivity. The informal market that exists across most of rural Odisha works against the farmer: information asymmetry, no price discovery, trader dominance at the point of sale. e-NAM (the National Agricultural Market platform) is the right concept — electronic trading that connects farmers to a broader universe of buyers and provides real-time price benchmarks. Odisha's integration into e-NAM has been significantly slower than states like Andhra Pradesh and Rajasthan, where adoption is measurably higher. This is a policy and implementation gap, not a technology gap.

The third is crop diversification support — not subsidies for alternative crops, but extension services, market linkages, and risk coverage that make it economically rational for a farmer to shift some acreage from paddy to higher-value crops. This requires building the market infrastructure that reduces the risk of growing alternatives, not just protecting the familiar one.

The political economy of the wrong answer

Subsidies persist not because they work but because they generate visible beneficiaries and political credit on a timeline that matches the electoral cycle. The farmer who receives PM-KISAN money in her account knows she received it. The minister who announces a fertilizer subsidy expansion has an event. The cold storage facility built in 2021, filling two crop cycles per year by 2024, measurably improving local farm income by year five — that is hard to credit to any particular political actor, has no ribbon-cutting moment visible to the voter, and takes a decade to demonstrate its full effect.

Infrastructure investment in agriculture requires a political time horizon that the subsidy paradigm structurally discourages. That is exactly why it is underdone relative to what the economics justify.

I grew up in western Odisha. I know what it looks like when a farming family's annual income depends on whether the monsoon cooperates and whether a local trader decides to offer a fair price at harvest. Subsidies make that situation slightly less precarious. They do not change the situation.

Odisha's farmers do not need more support to remain in the current agricultural system. They need an agricultural system worth being in — with market access, cold chain, diversification pathways, and the infrastructure to capture more of the value they create.

Subsidies are not without value in protecting livelihoods during any transition. But they are not the destination. The destination is a farm economy where farmers capture a significantly higher share of the value of what they grow — not through state protection, but through market infrastructure that gives them options they currently don't have.

Manas Majhi grew up in Junagarh, Kalahandi. He writes about opportunity, development, and the systems that distribute both. He is the founder of Majhi Group and Majhi OS.

See also: The Water Paradox: Why Kalahandi's Farms Fail When the Rivers Are Full, Odisha's Resource Trap, The Future of Odisha

Sources

Union Budget 2022-23 — Department of Fertilizers, Subsidy Allocations

PIB — Farmers' Monthly Income Reaches ₹10,218 in 2018-19: NSO Survey (NSS Report No. 587)

FAO Platform on Food Loss and Waste — India

e-NAM — National Agriculture Market, Mandi Integration Status

NABARD State Focus Paper — Odisha Agriculture