Tractors Subsidy in India

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About Tractor's Subsidy in India

India is an agricultural-based country. A major portion of our population is engaged in agriculture and therefore, it becomes the area of prime importance to give financial assistance through various mediums.

The central government, as well as the state governments of different states, have launched numerous Schemes for the welfare of farmers.

Now due to growing technology, advancement in the field of agriculture is also necessary to have good yield in less input. To achieve the same, machinery plays a vital role and here we will discuss the subsidies for this helpful machinery. As the machinery are costly and an average farmer can't afford such machinery and therefore the government has launched the following subsidies for the same.

A tractor subsidy is a direct or indirect payment to individuals or firms, usually in the form of a cash payment from the government or a targeted tax cut. In economic theory, subsidies can be used to offset market failures and externalities in order to achieve greater economic efficiency.Subsidy is a transfer of money from the government to an entity. It leads to a fall in the price of the subsidised product.The objective of subsidy is to bolster the welfare of the society. It is a part of non-plan expenditure of the government. Major subsidies in India are petroleum subsidy, fertiliser subsidy, food subsidy, interest subsidy, etc.

Subsidies are an initiative of the government to provide all the farmers with the best perks and advantages on having monetary support. On 1 January 2013, the Indian government founded and formulated the DBT agriculture scheme, under which transfering the subsidy to the farmers beneficiary becomes easy and smooth in flow. The subsidy categories under this plan involve LPG subsidy, MNREGA payment, old age pension and other scholarships and many more such schemes around. DBT agriculture scheme has all the required information and knowledge stored under the portal such that the farmers can get the direct and accurate benefit of the government schemes and policies. The structure of DBT agriculture plan is simple and clear, it transfers the money directly into the account of the farmers below poverty line. This transfer of payment will happen through NPCI’s aadhar payment bridge. CPSMS website is the portal to get all the information realted to the DBT agriculture scheme and plan.

Subsidies involve the government paying part of the cost to the firm; this reduces the price of the good and should encourage more consumption. A tractor subsidy shifts the supply curve to the right and can be justified for goods which offer benefits to the rest of society.

Advantages of subsidies

  • Enables greater social efficiency. Consumers end up paying the socially efficient price which includes the external benefit.
  • If you subsidise public transport, it will encourage people to drive less, and reduce their negative externalities. In the long term, subsidies for a good will help change preferences. It will encourage firms to develop more products with positive externalities.


1. Rashtriya Krishi Vikas Yojana (RKVY)

The scheme is a state plan scheme and it is a part of the National Agriculture Development Programme. The farmers are given a 100% subsidy under this scheme. The subsidy is provided for all agriculture mechanisation. The scheme has different norms as per the government of the state government.

2.Sub-Mission on Agricultural Mechanization (SMAM)

The scheme was launched to aid small and marginal farmers of the country. Special centres are there which further give guidance on various agricultural activities to the farmers across the nation.

3.National Food Security Mission (NFSM)

The main motive of this scheme is to improve productivity. It mainly focuses on improving the machinery rather than purchasing the new ones. Because with continuous use it is obvious to have some flaws in machinery and in that case this scheme proves very beneficial.

4.NABARD loans in India

NABARD scheme gives 30% subsidy for the purchase of tractors and 100% subsidy for other transport machinery. This gives opportunities for farmers to purchase machinery to advance his farming.

Like these, there are several schemes that the government at different levels has launched as per the requirement and arising situations. The farmers are the backbone of our nation and their condition reveals the condition of the nation. The subsidies are disposed of in two forms Direct cash subsidies and indirect subsidies. The direct one is in the form of cash and is more helpful for farmers whereas the indirect tractor subsidy is by making agricultural income as a tax-free income.

There is also a requirement of certain documents to go into the process of subsidy. The important documents include adhar card, voter id, Voter card, copy from the bank (statement), account details, PAN card, contact information, name and date of birth, application letter, and payment receipt.


First Individual Approach Scheme 1972-1978

 Different forms of experiments on agricultural insurance on a limited, ad-hoc and scattered scale started from 1972-73 when the General Insurance Corporation (GIC) of India introduced a Crop Insurance Scheme on H-4 cotton. The new corporation took over the experimental scheme in respect of H-4 cotton. This scheme was based on “Individual Approach” and later included groundnut, wheat and potato. The scheme was implemented in the states of Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu and West Bengal. It continued up to 1978-79 and covered only 3110 farmers for a premium of Rs.4.54 lakhs against claims of Rs.37.88 lakhs

Comprehensive Crop Insurance Scheme (CCIS) 1985-99

This scheme was linked to short term credit and implemented based on the „homogenous area approach‟. Till Kharif 1999, the scheme was adopted in 15 states and 2 UT‟s. Both PCIS and CCIS were confined only to farmers who borrowed seasonal agricultural loan from financial institutions. The main distinguishing feature of the two schemes was that PCIS was on voluntary basis whereas CCIS was compulsory for loanee farmers in the participating states/UTs. Main

Features of the Scheme were:

1. It covered farmers availing crop loans from Financial Institutions, for growing food crops and oilseeds, on compulsory basis. The coverage was restricted to 100 per cent of the crop loan subject to a maximum of Rs.10,000/- per farmer.

2. The premium rates were 2 per cent for cereals and millets and 1 per cent for pulses and oilseeds. Farmers‟ share of premium was collected at the time of disbursement of loan. Half of the premium payable by small and marginal farmers was subsidized equally by the Central and State Governments.( Tripathi, 1987).

3. Burden of Premium and Claims was shared by Central and State Governments in a 2:1 ratio.

4. The scheme was a multi agency effort, involving GOI, State Governments, Banking Institutions and GIC. CCIS was implemented till kharif 1999 and it covered 763 lakh farmers for a premium of Rs. 404 crores against claims of 2303 crores.

Experimental Crop Insurance Scheme (ECIS) 1997-98

As demanded by various states from time to time attempts were made to modify the existing CCIS. During 1997, a new scheme, namely Experimental Crop Insurance Scheme was introduced during Rabi 1997-98 season with the intention to cover even those small and marginal farmers who do not borrow from institutional sources. This scheme was implemented in 14 districts of five states. The Scheme provided 100 per cent subsidy on premium. The premium and claims were shared by Central and State Governments in 4:1 ratio. The scheme covered 4.78 lakh farmers for a sum insured of Rs.172 crores and the claims paid were Rs.39.78 crores against a premium of Rs.2.86 28 crores. The scheme was discontinued after one season and based on its experience National Agricultural Insurance Scheme was started.

The National Agricultural Insurance Scheme (NAIS)

It was introduced in the country from the rabi season of 1999-2000. Agricultural Insurance Company of India Ltd (AIC) which was incorporated in December, 2002, and started operating from April, 2003, took over the implementation of NAIS. This scheme is available to both loanees and non-loanees. It covers all food grains, oilseeds and annual horticultural / commercial crops for which past yield data are available for an adequate number of years. Among the annual commercial and horticultural crops, sugarcane, potato, cotton, ginger, onion, turmeric, chillies, coriander, cumin, jute, tapioca, banana and pineapple, are covered under the scheme. The scheme is operating on the basis of both „area approach‟, for widespread calamities, and „individual approach‟, for localized calamities such as hailstorm, landslide, cyclone and floods.

 Farm Income Insurance

The Farm Income Insurance Scheme was started on a pilot basis during 2003-04 to provide income protection to the farmers by integrating the mechanism of insuring yield as well as market risks. In this scheme the farmer‟s income is ensured by providing minimum guaranteed income.

Livestock Insurance

 Livestock insurance is provided by public sector insurance companies and the insurance cover is available for almost all livestock species. Normally, an animal is insured up to 100 per cent of the market value. The premium is 4 per cent of the sum insured for general public and 2.25 per cent for Integrated Rural Development Programme (IRDP) beneficiaries. The government subsidizes premium for IRDP beneficiaries. Progress in livestock insurance, however, has been slow and poor (Table 5.9). In 2004-05 about 32.18 million heads were insured which comprised 6.58 percent of livestock population. The implementation of the livestock insurance as it obtains now, does not satisfy the farmers much. The procedure for verification of claims and their settlement is a source of constant irritation and subject of many jokes. This calls for a relook.

Weather Based Crop Insurance / Rainfall Insurance

During the year 2003-04 the private sector came out with some insurance products in agriculture based on weather parameters. The insurance losses due to vagaries of weather, i.e. excess or deficit rainfall, aberrations in sunshine, temperature and humidity, etc. could be covered on the basis of weather index. If the actual index of a specific weather event is less than the threshold, the claim becomes payable as a percentage of deviation of actual index. One such product, namely Rainfall Insurance was developed by ICICI-Lombard General Insurance Company. This move was followed by IFFCO-Tokio General Insurance Company and by public sector Agricultural Insurance Company of India (AIC). Under the scheme, coverage for deviation in the rainfall index is extended and compensations for economic losses due to less or more than normal rainfall are paid.

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