SUMMARY xxi


are subject to the same type of liberalization discourse. In neither case have coalitions of actors across different paradigms been formed. These similari- ties are closely linked to the origin of both policies in the Green Revolution period and to their relation to the question of food self-sufficiency, which remains a powerful goal across the spectrum of Indian politics. In spite of several political factors that are specific to India, the two cases also repre- sent the general problems that countries face in seeking to reform policies on agricultural subsidies.


The Political Feasibility of Reform Options


In view of the past problems in attempting to reform policy, this study goes beyond the reform options that would be classified as first-best from the perspective of neoclassical economics. It identifies three groups of reform options, with different degrees of political feasibility and budget implica- tions: (1) reform options that do not face either major political challenges or budget constraints; (2) reform options that do not face major political chal- lenges but do face budget constraints; and (3) policy options that face major political challenges while avoiding budget constraints.


Fertilizer


Reform options that do not face major political resistance or budget con- straints include increasing efficiency through better application of knowledge and technology. Another reform option that fits this category but faces interna- tional market constraints is to relocate Indian fertilizer manufacturing to areas outside India that are close to sources of natural gas. This option would allow the government to reduce its expenditure on subsidies and to maintain self- sufficiency in the production of urea. However, such efforts are likely to be less successful if the international market price of natural gas remains high. One reform option that does not face political resistance but does face budget constraints is the continuation of the groupwise concession scheme that exists today. Under this scheme, fertilizer firms are grouped according to the feedstock they use and the year they came into operation. The savings in subsidy using this option would be marginal. Moreover, this option would not correct the distribution and environmental problems. Reform options that face strong political resistance include complete or partial decontrol or deregulation of the fertilizer industry, import liberal- ization, increases in the farmgate price of urea, and even price increases targeted specifically at large farmers. Each of these options addresses fiscal, distribution, and environmental concerns, but each has faced strong resis- tance from several political actors when previously proposed.


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