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Smart subsidy by Punjab Govt: a step in right direction

In Pakistan more than 50% of the farm land is owned by less than 10% of farmers i.e. land holding is concentrated in hands of rich zameendars/agriculturalists. However, the remainder 90% of farmers have very small land holdings, which highlights the significance of small and subsistence farmers in Pakistan’s agri-sector employment. In this scenario, the subsidy given by government on urea produced on imported LNG is directly and disproportionately benefitting the large farm owners and zameendars whose agricultural income remains untaxed.

Punjab Agriculture Minister, Malik Nauman Langrial while talking to a select group of journalists disclosed that government plans to unleash revolution in agriculture through launching of Kissan Card. This is a great step in the right direction as this move is aimed at disbursing “targeted subsidy to small farmers”. Farmers having up to five acres would get direct subsidy through NRSP on fertilizers. As many as five million farmers will benefit in next two years.

Scope to Kissan Card will be extended to farmers upto 12.5 acres of landholding. Government will ensure provision of timely payments to farmers for buying various agriculture inputs. Similar scheme was introduced by Government of Punjab in February 2017 on phosphorus and potassic fertilizers in order to promote the balanced use of fertilizers and ensure that the subsidy trickles down to small and subsistence farmers. That scheme was very successful and resulted in improved usage of balanced fertilizers in Pakistan.

Currently the government is bearing Rs38 billion per annum on account of subsidized RLNG to fertilizer plants. Additionally, the government also decided to import 100,000 of urea for an approximate amount of Rs6 billion, raising the total cost of these adverse decisions on the national exchequer to Rs44 billion (US$275 million). Along with the above, the subsidy to sell imported LNG at cheaper rate annually amounts to Rs21 billion.

Had the efforts been deployed to provide much bigger ‘smart’ subsidies earlier, the subsistence farmers would have benefited significantly at much reduced cost to the country. Small scale farmers, with less than 5 acres of land can potentially get urea free of cost if this entire amount is targeted to them as subsidy.

 

A reduction of even Rs500 per bag in urea price for the small farmers could have been achieved by just spending less than 25% of the total annual cost of Rs44 billion to run LNG based plants and import urea. A similar objective could have been achieved on DAP by just spending 6% of total cost. Such a scheme would have benefitted the small farms who need the support in these times of runaway inflation.

Such targeted subsidy would also enable the usage of balanced nutrients in the country. Yields of major crops in Pakistan have remained below peer averages and one of the reasons is the lack of application of balanced nutrients as required by crops for optimum growth. Experts suggest that farmers can earn billions of rupees through enhanced agri-productivity resulting from the application of balanced nutrition. The targeted subsidy program introduced by the Punjab government that awarded direct payment to small-scale farmers for P&K fertilizers has led to increase in the use of these critical soil nutrients by 56% in the last couple of years.

The subsidy disbursement mechanism should be the same as was introduced in 2017. The mechanism should essentially be sticker-based so that it can be executed through a web portal. The portal would enable fertilizer marketing companies to generate unique codes for their products and enable the farmers to redeem a certain number of bags per CNIC. The subsidy proceeds would then be transferred into the farmers easy paisa account.

It is imperative that Punjab Government should speed up the implementation of this much awaited relief to the small and subsistence farmers, while other provinces should also join hands in this endeavor. This would enable the farmers to unlock the potential of growth in yields thereby improving agricultural production at a national level.

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