The Political Economy of Agricultural Policy Reform in India

76 CHAPTER 6

nalization of the fertilizer subsidy have different and sometimes conflicting interests. In 2003, the decision to adopt the NPS was successful because the immediate changes proposed were fairly limited: fertilizer units were encouraged to improve efficiency without substantially changing the policy framework. As noted earlier, the group of ministers who negotiated the NPS were able to safeguard the individual interests of the group members. Pub- licly, the ministers of finance, agriculture, and petroleum and natural gas had little reason to obstruct the NPS. Having safeguarded the interests of its constituents by breaking the reform process into three stages and leaving the most important, third stage undetermined, the MoCF also had no strong reason to object to the new policy. However, when the time came to adopt the Alagh Committee’s recommendations for the third stage of the NPS, the MoCF persistently opposed the first-best and second-best strategies discussed earlier.13 The government finally decided to continue with the groupwise concession scheme adopted in 2003. The MoF announced its intention to test direct delivery of subsidy to the farmer, but ultimately that initiative too was abandoned because the DoF, which was entrusted with it, decided against implementing it.

Past efforts at fertilizer policy reform have been hindered not only because the fertilizer producers’ lobby has been well organized and active but also because the existence of the MoCF and DoF offers the fertilizer industry an exclusive channel through which it can articulate its interests at the ministe- rial as well as the cabinet level. However, the support for the status quo in policy has come not only from the DoF but also from the DoAC in the MoA. Support for change in policy has come only from the MoF and from the Plan- ning Commission. Given this balance of power, it would be tempting to con- clude that bureaucratic politics alone has derailed fertilizer policy reform. However, it is also necessary to ask why the Ministry of Finance has not been able to garner more support for its liberal position. Discussing interbureau- cratic politics in farm-sector policymaking, Varshney (1998, 181) observes that “the Finance Ministry in particular stands out in its influence over the conduct of economic policy.” Its power arises from its control over the government’s purse strings. Why, then, has the MoF not been able to successfully push fer- tilizer subsidy reform? Why, when reforms have taken place successfully in other sectors, have reforms in fertilizer stalled repeatedly? To answer these questions, we must look at the ideas and discourses that dominate the debate on fertilizer policy reform as well as the relative sizes, arguments, and posi- tions of the coalitions on both sides.

13 Interviews with MoF officials, New Delhi, July–August 2006 and July 2007.

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