68 CHAPTER 6


ERC recommendation of building in a 7 percent price increase every year. Analysis shows that the politics of farmgate pricing has been shaped by coali- tion politics and by strong farm interests represented at the cabinet level.


Farmers’ Interests in Fertilizer Policy


The protectionist bias in agricultural policy in India is justified in the name of small and marginal farmers and poor consumers. Policymakers argue that the farmgate price of fertilizer needs to be kept low so that small and marginal farmers can purchase and use these inputs.6 They further argue that low input prices keep food prices low, thus protecting poor consumers. Although pro- tecting the interests of small and marginal farmers is indeed important in a poor country, it is not entirely clear that keeping the farmgate price of fertil- izers unchanged is necessary to ensure that end result. It has been suggested that the farmgate price of fertilizer be increased and that small and marginal farmers receive a direct subsidy to protect their interests. Although the veto on increasing the farmgate price comes from farmers regardless of farm size, the resistance to targeting the subsidy at small and marginal farmers comes, pre- dictably, from owners of medium-sized and large farms (see “Automatic Annual Increases in Farmgate Prices”). Here we focus on the use of fertilizers by differ- ent groups of farmers and the structures of farm-sector interest articulation.


Use of Fertilizers and Farmers’ Interests


It is logical to expect that farmers, who are the biggest beneficiaries of the fertilizer subsidy, would be the most vocal opponents of price increases. How- ever, because use of the fertilizer subsidy is not uniform across regions or across crops, we can expect to see some variation in interest articulation by farmers. For example, farmers in northern states and those farmers in irrigated areas take more advantage of subsidies than those elsewhere (Singh 2004). Wheat, paddy, and sugarcane growers receive more than half of the subsidy on fertilizers (Singh 2004). However, the intensity of fertilizer use on small farms matches or exceeds that on large farms, suggesting that small farmers indeed benefit from this subsidy. This finding would lead us to expect a higher degree of interest articulation by farmers from regions that receive larger subsidies and by growers of wheat and paddy. Although it is true that farm leaders from Punjab and Uttar Pradesh, among the largest users of the subsidy, are the most vocal opponents of price increases, this phenomenon has more to do with the fact that national agricultural ministers have historically


6 Interviews with officials in several ministries in New Delhi, June–July 2005 and August 2006.


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