The Political Economy of Agricultural Policy Reform in India

POLITICS OF FERTILIZER SUPPLY TO AGRICULTURE 75

asking the industry to secure sources of natural gas from abroad instead of depending on the domestic suppliers only. The ERC noted that the industry has not made vigorous efforts to secure sources of supply of natural gas, but has argued instead that the government should do so (ERC 2000, 45).

Interbureaucratic Politics

Although the fertilizer industry’s lobbying power is not in doubt, it is neces- sary to investigate the institutional features of the Indian political system that enable it to further its goals. The existence of a separate DoF within the MoCF allows the fertilizer industry’s concerns to be heard both at the level of bureaucratic interactions and within the cabinet.

Fertilizer policy reform is enacted by executive decision and does not require legislative approval. The reform process can best be understood by focusing on the various government stakeholders, identifying their positions, and reviewing the process for resolving conflict among these stakeholders. The efforts of the MoF to decontrol the urea sector have been thwarted in the past in part because of the sector-specific interests of the MoCF and the MoA. Several efforts to reform fertilizer subsidies have originated in the MoF. The call for a consensus on subsidy issues originated in this ministry. The MoF, for example, ordered the ERC report, and the call to adopt it in full came from the finance minister in 2001. In 2005, the MoF engaged in widespread consultation with stakeholders to find ways of cutting subsidies on food, fertilizer, and petroleum.11

Besides containing the deficit, the finance ministry allocates money to different sectors through the annual budget. Over the past decade and a half, agriculture has suffered from a lack of public investment. The MoF has argued that if new investments are to be made, resources must be freed from other parts of the budget, for example by reducing all subsidies, but particularly those for urea, which is where the most restructuring can take place.12 How- ever, the MoF does not have the authority to unilaterally enact cuts to the subsidies or to propose a policy structure in the fertilizer sector. For that it has to negotiate with the DoF on the one hand and the DoAC on the other. The MoF also plays a role in setting feedstock prices that affect the price of fertilizer and therefore the subsidy associated with it. In recent years, only the views of the Planning Commission on government spending have accorded with those of the MoF. All other ministries involved in the ratio-

11 Interviews with officials in the Department of Economic Affairs, MoF, New Delhi, July 2005 and August 2006. Minutes of some of these consultations are available at http://finmin.nic.in/

the_ministry/dept_eco_affairs/economic_div/foodsubs.htm. 12 Interviews with MoF officials, New Delhi, July–August 2006.

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