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Assessing Direct Benefit Transfer of Agricultural Subsidies in Bihar and Odisha
Subsidies have played a major role in expanding the ownership and use of machines in agriculture in India. Many states have shifted from price subsidy to the direct benefit transfer of machine subsidies. This study uses administrative data on the sale of 4.9 lakh subsidised agricultural implements in Bihar and Odisha to evaluate the effectiveness of the DBT of agricultural subsidies in the two states.
This paper was informed, in part, by interviews with farmers, farm implement dealers, and government officials in Bihar and Odisha, who generously shared their experience and insights. The research was supported by the Bill and Melinda Gates Foundation under the Cereal Systems Initiative for South Asia. The results of this research do not necessarily reflect the views of the BMGF.
The use of machines in agriculture helps increase land and labour productivity, cropping intensity, and farm incomes. Machines also reduce drudgery and are often essential to the adoption of conservation agriculture practices such as zero-tillage and in situ incorporation of crop residues (Biggs et al 2011; Biggs and Justice 2015). Machines, however, require large capital investments that most farmers in India cannot afford. The high cost of machines poses three interrelated challenges for Indian agriculture.
First, average farm power availability is relatively low in India. The Government of India has set a target of increasing the availability of farm power from 2.02 kW per hectare (ha) (2016–17) to 4.0 kW per ha by the end of 2030. In Bihar and Odisha, farm power availability was at 2.80 kW per ha and 1.65 kW per ha, respectively (WAPCOS 2018).
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