Trade-Related Subsidies – Bridging the North-South Divide

The report examines the proliferation of subsidies in India across agriculture, energy, and industrial sectors, highlighting a significant gap between official budgetary estimates and actual costs. It argues that while subsidies are intended for welfare and food security, they often result in regressive distribution, environmental degradation, and financial instability for state entities. The document specifically analyzes the impact of irrigation, power, and fertilizer subsidies on the environment and equity, and reviews India's export incentive schemes and their compatibility with WTO rules, including specific disputes in the iron and steel sector.

• There is a significant discrepancy between central and state subsidy levels; in 1994/95, state-level subsidies accounted for 69% of all-India subsidies, totaling Rs 937,544.4 million.
• Agricultural input subsidies have led to severe environmental degradation, including the depletion of underground aquifers in Gujarat, Punjab, Haryana, and Rajasthan due to subsidized power and low water charges.
• Power subsidies in India are highly regressive; in Karnataka, 80% of the benefits of subsidized electricity accrue to farmers owning more than 2 hectares, who represent only 11% of the rural population.
• Fertilizer subsidies have distorted the NPK (nitrogen, phosphorus, potassium) ratio from 6.02:2.43:1 in 1990/91 to 10:2.9:1, leading to excessive nitrogen application and groundwater pollution.
• Despite high input subsidies, Indian agriculture as a whole suffers from net taxation when measured by the WTO's Aggregate Measure of Support (AMS), which was negative 38.47% of the value of production for 19 products in 1995/96.
• The Public Distribution System (PDS) suffers from substantial leakages, with 31% of rice and 36% of wheat failing to reach intended beneficiaries.
• Energy subsidies for LPG and kerosene are often captured by wealthier populations; a survey in Hyderabad found 63% of the LPG subsidy went to the richest 40% of the population.
• India's iron and steel sector has faced multiple Countervailing Duties (CVDs) from the EC and USA, leading to a WTO dispute where the panel ruled in favor of India, stating the US acted inconsistently with WTO rules regarding SAIL's sales price information.
• The Textile Upgradation Fund Scheme (TUFS), launched in 1999 to modernize the industry, had disbursed Rs. 31,670 million by December 2001.

APA

Mehra, M. K., Sinha, M., & Sahu, S. (2004). Trade-Related Subsidies – Bridging the North-South Divide. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/trade_related_subsidies.pdf

Chicago

Mehra, Meeta K, Mayank Sinha, and Sohini Sahu. Trade-Related Subsidies – Bridging the North-South Divide. International Institute for Sustainable Development, 2004. https://www.iisd.org/system/files/publications/trade_related_subsidies.pdf.

Wikipedia

{{cite report |last1=Mehra |first1=Meeta K |last2=Sinha |first2=Mayank |last3=Sahu |first3=Sohini |title=Trade-Related Subsidies – Bridging the North-South Divide |publisher=International Institute for Sustainable Development |date=2004 |url=https://www.iisd.org/system/files/publications/trade_related_subsidies.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mehra2004traderelated, author = {Mehra, Meeta K and Sinha, Mayank and Sahu, Sohini}, title = {{Trade-Related Subsidies – Bridging the North-South Divide}}, institution = {International Institute for Sustainable Development}, year = {2004}, url = {https://www.iisd.org/system/files/publications/trade_related_subsidies.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }