What is input subsidy in agriculture

Agricultural input subsidies were a major feature of agricultural development policies in rural economies from the 1960s to 1980s. The theoretical case for agricultural subsidies is based on their promotion of agricultural productivity by making investment in new technologies more attractive to smallholder farmers. If market failures mean that farmers’ private input costs are higher than …

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What is the rationale of subsidising agricultural inputs?

The rationale of subsidising agricultural inputs is to be traced to the role that these subsidies play in stimulating development of any country through increased agricultural production, employment and investment. However, there are arguments advanced on both sides. i. Products of subsidised inputs sell at lower prices.

What is an agricultural subsidy program?

An agricultural subsidy (also called an agricultural incentive), is a governmental subsidy paid to agribusinesses, agricultural organizations and farms to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities.

How do input subsidies affect input supply?

Input subsidies can impact beneficially on input supply systems by reducing supplier margins through economies of scale across the industry and within particular suppliers (as a result of increased volumes) and/or through increased competition if increased volumes attract new entrants into input supply.

What are the various agricultural subsidies in India?

Agricultural subsidy in India primarily consists of subsidies like, fertilizer, irrigation, equipment, credit subsidy, seed subsidy, export subsidy etc. Subsidy on fertilizers is provided by the Central government whereas subsidy on water and irrigation is provided by the local State governments.

What is the meaning of input subsidy?

‘Agricultural input subsidies’ were defined as grants (or loans, if repaid at below the market price) given to a farmer as a means of reducing the market price of a specific input used in agricultural production or providing it free of charge.

What is input in agriculture?

Agricultural inputs are defined as products permitted for use in organic farming. These include feedstuffs, fertilizers and permitted plant protection products as well as cleaning agents and additives used in food production.

What is an output subsidy?

This type of subsidy is provided in order to encourage the production of a product. In order for manufacturers to increase their production output, the government compensates for some of its parts in order to lessen their expenses while increasing their output.

What is input and output in agriculture?

The inputs in agriculture are seeds, fertilisers, machinery, labour, etc. The operations involved in agriculture are ploughing, sowing, irrigation, weeding, and harvesting. As outputs of the farming activity, a farmer gets crops, wool, dairy products, and poultry products.

What are some examples of inputs in agriculture?

The most commonly used consumable inputs are:High-quality seeds.Soil.Fertilizers.Insecticides.Pesticides.Insect Traps.Straw.Hay.More items…•

What are agricultural inputs examples?

Agricultural inputs means resources that are used in farm production, such as seeds, fertilizers, pesticides, veterinary drugs, equipment, animal feed, energy and processing plants or machineries; Sample 1.

What are the types of subsidies?

5 Common Types of Government SubsidiesExport subsidies. An export subsidy is when the government provides financial support to companies for the purpose of exporting goods to sell internationally. … Agriculture subsidies. … Oil subsidies. … Housing subsidies. … Healthcare subsidies.

What are supply side subsidies?

Supply-side subsidies When a supply-side subsidy acts to reduce the price at which subsidised suppliers are willing to provide a certain quantity of housing, this shifts the supply curve downwards from S1 to S2.

What is a subsidy example?

Examples of Subsidies. Subsidies are a payment from government to private entities, usually to ensure firms stay in business and protect jobs. Examples include agriculture, electric cars, green energy, oil and gas, green energy, transport, and welfare payments.

What is crop inputs?

Crop input means any substance applied to or used in the cultivation and growth of a cannabis plant. “Crop input” includes, but is not limited to, pesticides, fungicides, fertilizers, and other soil or medium amendments.

What is a input process and output?

A computer receives an input, processes the information, then performs an output. For example, sending a text message from a mobile phone: input – type in the message and press send. process – the phone’s hardware and network process the message. output – the message goes to the receiver.

What are outputs of agriculture?

Answer: The important inputs are seeds, fertilisers, machinery and labour. The outputs from the system include crops, wool, dairy and poultry products. Some of the operations involved are ploughing, sowing, irrigation, weeding and harvesting.

What is agricultural input subsidy?

Agricultural input subsidy interventions aim to make particular inputs, most commonly fertilisers and seeds, available to potential users at below market costs as a way of incentivising adoption, increasing agricultural productivity and profitability and ultimately reducing poverty and stimulating economic growth among farm households.

What are the inclusion criteria for agricultural input subsidies?

The inclusion criteria follow the conventional population, intervention, comparator, outcome, and study design (PICOS) structure, with two research questions drawing on different bodies of research. Research question 1 (RQ1) relates to beneficiary outcomes, while research question 2 (RQ2) relates to consumer welfare and wider economic growth. RQ1 can be addressed through experimental and quasi-experimental studies, but RQ2 is far less amenable to such designs. We therefore included simulation modelling studies to address that question.

How do fertilizer subsidies affect the economy?

Fertiliser and seed subsidies are associated with increased use of these inputs, higher agricultural yields and increased income among farm households, but evidence of their effects on poverty is limited. There is much evidence that subsidy schemes are prone to inefficiency, bias and corruption. Models show that introducing or increasing subsidies generally results in positive effects for consumers and wider economic growth. However, the models indicate that the way subsidies are funded, world input prices and beneficiary targeting all have important influences on predicted outcomes. The authors were not able to find any studies examining subsidies for machinery.

How do subsidies affect agriculture?

Input subsidies can increase input use, and raise agricultural productivity with wider benefits. However, the design of subsidy schemes is crucial to their effectiveness, if they are to reach the desired farmers and stimulate input use. The effectiveness of subsidies in comparison to other interventions requires further study.

How many studies are there on agricultural subsidies?

It includes 15 experimental and quasi-experimental studies and 16 simulation modelling studies. The majority relate to sub-Saharan Africa (15 to Malawi) and to subsidised fertilizers and seeds.

What data is extracted from a primary research question?

We extracted a range of data including bibliographic details, outcomes, time period covered, study design and outcomes data . For our primary research questions we synthesised evidence from experimental and quasi-experimental studies using meta-analysis, meta-regression analysis and a qualitative synthesis of relevant implementation and contextual factors. For our secondary research questions we synthesised evidence from modelling studies narratively and displayed effects in scatter plots where possible.

Is seed subsidy positive?

Overall, this review finds generally positive results for both primary and secondary outcomes across our theory of change. Included studies provide evidence linking fertiliser and seed subsidies to increased use of the subsidised inputs, higher agricultural yields and increased income among farm households, while the limited evidence relating to effects on poverty make it difficult to draw any clear conclusion. Models simulating subsidy effects show the introduction or increase in subsidies generally results in positive effects for consumers and wider economic growth.

Why should we continue to give subsidies to farmers?

The government should continue to make such subsidies to motivate and uplift our nation’s farmers .

How are subsidies granted?

Subsidies are granted by distributing various inputs at lower prices than the prices given in the marketplace. The extent of these subsidies will be equal to the discrepancy between the two prices per unit of distributed input. Following are the myriad of subsidies that are classified under this category:

Why are farmers not able to get loans?

They have limited cash, which is not enough to nearly enough to approach the credit market. Thus, it is because of the lack of collateral required for loans. Even if the farmers have the required collateral, the farmer is not able to avail of loans. The urban banking institutions usually don’t indulge in agricultural credit undertakings as it is considered a risky business. Below are some steps the government can take to tackle this hardship:

What is the government’s collective duty to uplift farmers?

Farmers are the backbone of our nation , and it is the government’s collective duty to uplift them. The objectives of imposing agricultural subsidies are divided into economic and social objectives.

What is the purpose of the subsidy for fertilizer?

The central or the union government bears it. The necessity for this subsidy originates from the nature of the pricing policy of the fertilisers by the government.

What is electricity subsidy?

This is also known as electricity subsidy, and it implies that the government should charge low prices for the electricity provided to the farmers. Power is mainly used for irrigation purposes. It is a discrepancy between the cost of distributing to and generating electricity for the farmers and the amount received from the farmers.

Why are agricultural exports encouraged?

This way, his harvest is recognised internationally, and he also contributes to the country’s foreign exchange rates. Therefore, agricultural exports are widely encouraged as long as it causes no harm to the domestic economy.

What is agricultural subsidy?

An agricultural subsidy (also called an agricultural incentive) is a government incentive paid to agribusinesses, agricultural organizations and farms to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities.

Who controls Canadian agriculture subsidies?

Canadian agricultural subsidies are currently controlled by Agriculture and Agri-Food Canada. Financial subsidies are offered through the Canadian Agricultural Partnership Programs. The Canadian Agricultural Partnership began in April 2018 and is planned to take place over five years with a combined federal, provincial and territorial investment of three billion dollars. Some programs offered surround issues including AgriAssurance, agricultural leveraging programs, promoting diversity in agriculture, crop and livestock insurance, marketing activities, risk mitigation, and more. Before the Canadian Agricultural Partnership, agricultural subsidies were organized under the Growing Forward 2 partnership from 2013 to 2018.

Why did the US government give subsidies to farmers?

Roosevelt signed the Agricultural Adjustment Act, which created the Agricultural Adjustment Administration (AAA). This came as a result of the series of programs, public work projects, financial reforms and regulations enacted by the president known as the New Deal. The AAA helped to regulate agricultural production by reducing surplus and controlling the supply of agricultural products in society. Through the control of seven crops ( corn, wheat, cotton, rice, peanuts, tobacco and milk ), Congress was able to balance the supply and demand for farm commodities by offering payment to farmers in return for taking some of their land out of the farming process. Unlike traditional subsidies that promote the growth of products, Congress recognized that agricultural prices needed to be boosted and did so by limiting the growth of these crops.

Why do developing countries have a comparative advantage in producing agricultural goods?

Generally, developing countries have a comparative advantage in producing agricultural goods, but low crop prices encourage developing countries to be dependent buyers of food from wealthy countries. So local farmers, instead of improving the agricultural and economic self-sufficiency of their home country, are forced out of the market and perhaps even off their land. This occurs as a result of a process known as ” international dumping ” in which subsidized farmers are able to “dump” low-cost agricultural goods on foreign markets at costs that un-subsidized farmers cannot compete with. Agricultural subsidies often are a common stumbling block in trade negotiations. In 2006, talks at the Doha round of WTO trade negotiations stalled because the US refused to cut subsidies to a level where other countries’ non-subsidized exports would have been competitive.

How much did the EU spend on agriculture in 2010?

In 2010, the EU spent €57 billion on agricultural development, of which €39 billion was spent on direct subsidies. Agricultural and fisheries subsidies form over 40% of the EU budget.

Why are export subsidies bad?

Although some critics and proponents of the World Trade Organization have noted that export subsidies, by driving down the price of commodities, can provide cheap food for consumers in developing countries, low prices are harmful to farmers not receiving the subsidy.

When did the ethanol subsidy expire?

However, the federal ethanol subsidy expired 31 December 2011.

Why is subsidizing agricultural inputs important?

The rationale of subsidising agricultural inputs is to be traced to the role that these subsidies play in stimulating development of any country through increased agricultural production, employment and investment. However, there are arguments advanced on both sides.

What is input subsidy?

Input subsidies tax the budgetary capacity of the government. Fiscal imbalance paves the way for macro-economic imbalances creating inflation, lowering growth and creates inability to finance imports. Growth, in order to be sustainable, has to be efficient and subsidies of the kind the India agriculture is used to, …

What would happen if the subsidies were withdrawn?

i. Products of subsidised inputs sell at lower prices. If the subsidies were to be withdrawn, the prices of products would rise as their production cost would go up. But their higher prices would affect their sale. Reduced application of inputs in cultivation would lower agricultural production, particularly food production, and compels the country to import food products.

What is an agricultural subsidy?

An agricultural subsidy is a governmental subsidy paid to farmers and agribusinesses to supplement their income, manage the supply of agricultural commodities, and influence the cast and the supply of such commodities. Subsidies in India have a long history.

When did India start subsidizing land?

In free India, subsidies were introduced in 1947 when the relief and rehabilitation finance for refugee settlement was heavily subsidised. Since then, subsidies have covered a wide spectrum of Indian economy.

Abstract

Agricultural input subsidies, a form of social protection, are often considered an important means of improving agricultural productivity in low- and middle-income countries. However, their effectiveness and efficiency remains contentious with respect to productivity, economic and consumer welfare measures, as well as food and nutrition security.

Background

Agricultural input subsidies (AISs), a form of social protection, are often considered an important means of improving agricultural productivity in low- and middle-income countries (LMICs) (Gordon 2000 ). In recent years, there has been a resurgence of interest and investment in AISs, mainly in Africa (Morris et al.

Results

Figure 1 presents the conceptual framework we developed for assessing the relationships between AISs and nutrition and related health. Its development was based on a synthesis of key pathways from the Hemming et al.

Discussion

Our review identified only four papers addressing the impact of AISs on nutrition and related health. Three of these were of Malawi’s FISP from post-2010, and one was of a rice technology study from The Gambia from the mid-1980s.

Conclusion and recommendations

Both impact and its context are poorly understood but crucial for nutrition-sensitive policy-making. Given the financial resources devoted to AIS in some countries (and resurgence of interest in AIS programmes), this is an important area to be addressed.

Acknowledgements

We would like to thank the London International Development Centre (LIDC) Interdisciplinary Seed Fund (awarded to HLW and DJ) for supporting this work, and advice received from Drs Karen Lock, Carlos Oya and Sara Stevano. HLW was part-funded by the Leverhulme Centre for Integrative Research on Agriculture and Health.

What are agricultural inputs?

We use agricultural inputs as a common term for a range of materials, which may be used to enhance agricultural productivity. Most important among these are fertilizers and improved seeds. All the programmes reviewed subsidise fertilizers, and most of them combine fertilizers with improved seeds in small packages.

What are smart subsidies based on?

The characterisation of smart subsidies given above suggests that the concept is based on the economic principles of efficiency, equity and sustainability. We will therefore apply these principles as our assessment criteria. In the following, we briefly discuss each principle in relation to smart input subsidies.

How does agricultural input subsidy affect food security?

Agricultural input subsidies, a form of social protection, are often considered an important means of improving agricultural productivity in low- and middle-income countries. However, their effectiveness and efficiency remains contentious with respect to productivity, economic and consumer welfare measures, as well as food and nutrition security. This is exacerbated by a weak evidence base, including no review focused on the impact of agricultural input subsidies on food security and nutrition. Further, where studies have considered nutritional outcomes of agricultural input subsidy interventions, this has often been in regard to changes in consumption of the targeted staple food, measured in terms of calorie consumption or a similar measure of changes in energy availability, ignoring other aspects of malnutrition, including impacts from dietary diversity. This wider consideration of impacts from dietary diversity is important, given the increasing recognition in nutrition policy of its importance. We address this gap in the literature with a review of the evidence on the impact of agricultural input subsidy programmes on nutrition and nutrition-related health in low- and middle-income countries, mapping this evidence against a conceptual framework of the mediating pathways.

What is AIS in agriculture?

… AIS is a method for boosting farmers’ financial ability to buy inputs they cannot or are reluctant to get at showcase rates. Thus, AIS is considered as a way of attaining higher agricultural productivity, improved food security through lesser food prices and nutrition security (Walls et al., 2018). Vosters (2018) described subsidies as any disbursement that provides a farmer with an incentive to cultivate a particular crop or follow a precise “best management practice” or retain prices low for customers. …

How are farm subsidies funded?

A farm input subsidy programme (FISP), which is funded by a payment made from public resources , is intended to reduce the production costs of small-scale farmers (FAO 2014). The objectives of FISPs include: to drive pro-poor economic growth; decrease food prices, enhance food security and input adoption, increase the efficiency of input use, develop the input supply system, boost producer welfare, improve soil fertility and provide political benefits (Dorward 2009). These objectives can be categorised as economic and non-economic rationales for the implementation of subsidy programmes. Ten of the fifteen subsidy programmes implemented in Africa since 2000 are large- scale programmes. Some are universal subsidies that target specific crops (Lesotho, Nigeria, Swaziland) and some are targeted at beneficiary groups and crops (Botswana, Malawi, Mozambique, Tanzania, Zambia and Zimbabwe). All the programmes are implemented over three- to ten-year periods, cost between US$ 100–160 million per year and are funded largely by national governments (Druilhe & Barreiro-Hurlé 2012). By 2011 ten African countries had spent about US$ 1 billion on these programmes, close on 30% of their agricultural budgets (Chinsinga & Poulton 2014). Table 1 illustrates the differences between universal, voucher and smart subsidies. Very few African programmes qualify as pure ‘smart’ subsidy programmes (Lunduka

Which countries do not have large scale subsidy programs?

Key Findings. • Of the 15 countries that make up the Southern African Development Community (SADC), Angola , the Democratic Republic of Congo (DRC), Madagascar, South Africa and the Seychelles do not have large-scale subsidy programmes, but may practice ad hoc subsidisation.

Why do farmers lose income in the SADC region?

For most small-scale farmers in the SADC region, reliance on the subsidy has contributed to a loss of income because farmers tend to produce the same crop in the same area at the same time, which leads to a glut on the market and reduced prices.

When did Madagascar sign the CAADP Compact?

Madagascar signed the CAADP Compact in 2013. Agricultural spending in the country increased significantly from 4% in the mid- 2000s to about 25% in 2009; on average it has exceeded the 10% commitment to date and has grown its agricultural sector at an average rate of 3.2% a year (Resakss. org 2016). In 2009, the country decided to double production and announced a 50% subsidy on fertilisers (SADC 2011). There is no information available on this and it is possible that the scheme was shelved following the 2009 political crisis and resultant economic collapse.

What is input voucher?

Input vouchers are certificates that farmers use to buy inputs at the subsidised price; the input supplier redeems the certificates for cash from the government. Inputs can also be distributed through private distribution networks, as opposed to state distribution systems. It also facilitates beneficiary targeting and can reduce administrative costs.

What is regional indicator development plan?

The Regional Indicative Strategic Development Plan aims to encourage and support a structural transformation of the region’s agriculture-dependent economies (Oxfam 2015). It intends achieving this by prioritising access to, and utilising improved inputs, including seed and synthetic fertilisers. It also focuses on public-private partnerships and harmonisation of seed, fertiliser and agrochemical regulatory and policy frameworks (FANR 2013). Despite the good intentions, only 2 of 15 countries, Malawi and Madagascar, spend more than 10% of their national budgets on agriculture; only 5 of 15 countries, Angola, Madagascar, Mozambique, Namibia and Zambia, have consistently exceeded the 6% annual growth rate; and only South African and Zambian farmers use more than 50 kilograms per hectare (50 kg/ha) on average of fertilsers (Regional Strategic Analysis and Knowledge Support System (ReSAKSS) (ReSAKSS.org 2016). Practices that emanate from the Plan and which have been implemented by African governments, such as input subsidies, have not always had the desired effect—they have not proved economically or ecologically sustainable, nor socially just and equitable.

Does the DRC provide subsidies to small scale farmers?

The National Agricultural Investment Plan makes provision for a Small Scale Farmers Initiative that provides farmers with direct input support (UNDP 2013c) but it is not clear how this works. There is no evidence that the DRC provides input subsidies to small-scale farmers; if it does, this may be on an ad hoc basis, such as when it waived fertiliser import tariffs for a project run by the International Fertilizer Development Corporation (IFDC) (Aluma 2016).

Overview

History

By region

Impact of subsidies

Alternatives

See also

Further reading

External links