Misdirected farm subsidies

Subsidies and other programmes of government intervention often run the risk of being misdirected, apart from aggravating existing market distortions. There can be no better examples here than decisions to hike the minimum support price (MSP) of paddy by 15-16 per cent and slash subsidies on all fertilisers, with the exception of urea. Take the MSP first. With rice stocks in public godowns currently more than 2.5 times the country's normative buffer and strategic reserve requirements, the right signal that ought to have been sent to farmers is to reduce paddy acreage.

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