Agricultural Subsidy Programs Research Articles

Do climate adaptation programmes potentially exacerbate rural inequality? Identifying beneficiaries of a drought mitigation scheme in Maharashtra, India

ABSTRACT The adverse implications of climate change can exacerbate socially uneven distributions of vulnerability. Therefore, climate adaptation programs are maladaptive if benefits are captured by privileged social groups, contributing to heightened socio-economic inequality and leaving the plight of highly vulnerable population segments unaddressed. This paper examines this potential using the case of Birsa Munda Krishi Kranti Yojana, an irrigation subsidy program for Scheduled Tribe farmers administered by the Government of Maharashtra, India. We investigated this scheme in Talasari block, an impoverished rural sub-administrative area 135 km north of Mumbai. The research shows that benefits from the scheme tended to flow towards more well-off agricultural households, notwithstanding checks-and-balances within the program that sought to prioritise the needs of poorer farmers. In turn, these distributional effects contributed to intensified agrarian class stratification by providing more well-off farmers with enhanced capabilities to respond to climate stresses, shedding important conceptual insights into the interplay of climate change and government policy for class mobility within smallholder and tribal populations. The evidence from this paper highlights the imperative for inclusive agricultural development and raises questions about agricultural subsidy programs as policy levers to address climate adaptation.

Factors Affecting Farmers’ Access to Agricultural Subsidy in Makwanpur and Dhading Districts of Nepal

The government of Nepal has been providing high priority to subsidy programs to support farmers and boost the national economy. Increasing access to and effectiveness of the subsidy program is important to enhance growth of agricultural sector. However, there has always been a concern about access to and effectiveness of the subsidy programs to address the problem of farmers in Nepal. This study was carried out to determine the factors affecting farmers' access to the agricultural subsidy. For this, a multi-stage sampling method was employed, and altogether 120 commercial vegetable growers from Dhading and Makwanpur districts of Nepal were selected using simple random technique. Descriptive statistical tools and binary logistic regression were used to analyze the data. Out of the total sampled households, 55.83% had accessed at least one agricultural subsidy program, and the highest number of sampled households (39.17%) received the subsidy for agricultural tools. The result of binary logistic regression revealed that factors like ethnicity, membership in agricultural groups or co-operatives, farm visit by extension agents, and participation in agricultural training were significantly (p<0.01) influencing farmers' access to agricultural subsidy. Hence, the farmers are suggested to operate through agricultural groups or co-operatives, and the concerned authorities and policymakers should emphasize agricultural extension services and agricultural subsidy simultaneously for synergistic effects. SAARC J. Agric., 21(2): 263-276 (2023)

Impact of agricultural input subsidy policy on market participation and income distribution in Africa: A bottom-up/top-down approach

Previous literature on the effects of agricultural input subsidy programs on smallholder market participation has only focused on partial equilibrium analysis, while ignoring important general equilibrium effects. Therefore, this study fills this gap by highlighting the critical role of targeting in the implementation of the agricultural input policy in the Malawian context. Specifically, we establish a bi-directional link between a farm household model and a general equilibrium model in order to explore the spillover effects of the input policy on market orientation and income distribution. Based on the findings, the partial equilibrium analysis underestimates the effect of the input policy and neglects important heterogeneities between farmers. More importantly, we find that extending the program to farmers who are excluded from the cereal and/or labor markets can lead to higher market participation, economic growth, and a reduction in poverty. Our findings suggest better targeting to increase the impact of agricultural input policy on market participation.

DUKUNGAN PEMERINTAH DALAM PENUMBUHAN SIKAP PETANI TERHADAP IMPLEMENTASI SUBSIDI BUNGA PERTANIAN DI JAWA TENGAH

In order to support the National Economic Recovery (PEN) program in dealing with the impact of the COVID-19 pandemic, the Provincial Government of Central Java provides financial assistance to farmers to increase productivity and welfare of farmers, especially small farmers who have limited land with maximum land area of 1 (one) hectare and provides credit facilitation for commodity cultivation farming (on a farm). This government support is realized in the form of an interest subsidy program for agricultural sector loans to be implemented in 2022.
 This paper aims to 1) describe the implementation of the loan interest subsidy program in the agricultural sector between targets, achievements, program technical guidelines, and obstacles in program implementation; 2) analyze the factors of government support in influencing farmers' attitudes towards the loan interest subsidy program and its effect on the empowerment of farmers in Central Java Province. The research method used was a census using a questionnaire as a data collection instrument. The research locations were carried out in three districts as pilot project locations for the agricultural sector loan interest subsidy program in Central Java. Respondents are farmers who have received information about the interest subsidy program. The study results show that the support factor of the government has a significant influence on farmers' attitudes toward implementing the interest subsidy program. The author recommends that the government continue to provide adequate support for the interest subsidy program for agricultural sector loans in Central Java. This support can be in the form of providing clear and easy-to-understand information about the program, providing an adequate budget, good cooperation with financial institutions, providing guidance and assistance in program implementation. In addition, the government also needs to improve inter-agency coordination and encourage collaboration between stakeholders to strengthen the interest subsidy program. 
 Keywords: farmer attitude. interest subsidy

Effect of Agricultural Subsidy on Farm Income of Commercial Vegetable Farmers of Makwanpur and Dhading Districts, Nepal

Recent agricultural policies of Nepal prioritize subsidy programs. However, there has always been concern about the realistic assessment of the economic implications of subsidy programs. This study was carried out to assess the effect of agricultural subsidy on farm income in the Makwanpur and Dhading districts of Nepal. Altogether 120 households from Thaha-2 of Makwanpur and Benighat Rorang-7 of Dhading were selected using a multi-stage sampling technique. Descriptive statistical tools, correlation analysis, independent sample t-test, and multiple linear regression were used to analyse the data. Among the total sampled households, 54.17% had access to at least one agricultural subsidy program. The result revealed that farm income was the primary source of household income, contributing 64.17% to total household income. Pearson product correlation shows positive and statistically significant relation between subsidy and technology adoption, technology adoption and annual farm income, subsidy and annual farm income. The estimates of multiple regression coefficients show that subsidy had a significant (p< 0.01) and positive effect on the annual farm income of commercial vegetable farmers. Also, the area under cultivation was a highly significant (p<0.01) factor influencing the farm income. From the independent t-test, the annual farm income of subsidy recipients and non-recipients was found significantly different (p<0.01). So, this study suggests the concerned stakeholders to identify the most needed and best-suited technologies and implement the subsidy program accordingly to boost the annual farm income of commercial vegetable farmers. Keywords: Effect, Farm income, Regression, Subsidy

Determinants of mechanized technology adoption in smallholder agriculture: Implications for agricultural policy

Agricultural mechanization is viewed as a tool for transforming agriculture in the Global South. Despite gaining traction among governments across sub-Saharan Africa (SSA), with many countries now having dedicated agricultural mechanization subsidy programs, recent evidence shows that adoption is not universal among farmers. While adoption of mechanized agriculture is generally theorized as an outcome of the interaction of cultural, political, ecological, and socioeconomic factors, little is known about the specific factors that may be driving ongoing differences in the adoption of mechanized agricultural technologies by smallholder farmers in semi-arid Ghana. Using a cross-sectional survey (n = 1100) with smallholder farmers, we explored the determinants of the adoption of mechanized technologies. Results from the logistic regression analysis indicate that remittances (OR=12.27; P < 0.001), access to formal (OR=4.27; P < 0.001) and informal (OR=9.65; P < 0.001) credit, farm labor (OR=0.88; P < 0.01), farm size (OR=1.83; P < 0.001) and local agricultural information sources (OR=0.50; P < 0.01), emerged as significant correlates of mechanized technology adoption among smallholder farmers. The standardized beta coefficients further revealed that access to credit and remittances were the strongest predictors of mechanized technology adoption. These findings highlight the potentially strong role of economic factors in shaping mechanized technology adoption in smallholder farming contexts. Coupled with the fact that a significant proportion of farmers are yet to adopt these technologies, there is a need to rethink the agricultural transformation agenda of governments. There are two potential ways to address the needs of poorer farming households who are unable to afford mechanized technologies: the introduction of more subsidies and the promotion of alternative low-cost techniques of food production. However, given the failure of existing mechanization packages to benefit many farmers, governments need to simultaneously promote alternative production methods like agroecology which do not rely on mechanized technologies.

Can Agricultural Extension and Input Support Be Discontinued? Evidence from a Randomized Phaseout in Uganda

AbstractMany development programs that attempt to disseminate improved technologies are limited in duration because of external funding constraints or an assumption of impact sustainability, but there is limited evidence on whether and when terminating such programs is efficient. We provide novel experimental evidence on the impacts of a randomized phaseout of an agricultural extension and subsidy program that promotes improved inputs and cultivation practices among smallholder women farmers in Uganda. We find that phaseout does not diminish the use of either practices or inputs as farmers shift purchases from NGO-sponsored village-based supply networks to market sources. These results indicate that short-term interventions can suffice to trigger persistent effects, consistent with models of technology adoption that emphasize learning from experience.

Does subsidizing legume seeds improve farm productivity and nutrition in Malawi?

Over the last two decades, most African governments have been implementing agricultural input subsidy programs (ISPs) aimed at increasing crop yields, and incomes, and reducing hunger, nutritional insecurity, and poverty. Although ISPs are popular policy interventions, it remains unknown whether they improve the productivity of nutrient-dense crops such as legumes, dietary quality, and child or adolescent nutrition. We address this gap by testing the hypothesis that subsidizing legume seeds (SLS) improves farm productivity, dietary quality, and child or adolescent nutrition. To do this, we use decade-long nationally representative panel data from Malawi and panel regression models with an instrumental variable approach to address endogeneity. We found that SLS increases area planted with legume crops, groundnut yield, gross value of crop production, along with production and consumption (dietary) diversity, calories, and micronutrient—vitamin A and zinc—consumption. We further found that SLS is positively correlated with child or adolescent weight-for-age Z-score but not height-for-age Z-score. These novel findings emphasize that SLS could be among the key policy interventions to address malnutrition in the Malawian small farm sector.

Government Support in Mexican Agriculture: The Program of Agri-Food Productivity and Competitiveness

The Mexican government has various subsidy programs under its National Development Plan. This publication focuses on The Program of Agri-Food Productivity and Competitiveness, one of the major agricultural subsidy programs administered by the Ministry of Agriculture that subsidize economic activities in the agri-food supply chain. The publication describes the structure of the program, the subsidy rules and amounts.

Effect of fertilizer subsidy on household level cereal production in Ghana

Agricultural input subsidy programs have once again become a major plank of policies in Africa, aimed at productivity improvements and poverty reduction among farmers. In Ghana, a nationwide Fertilizer Subsidy Program (GFSP) was commenced in 2008. However, there has been limited rigorous evaluation of its impact on crop yields to date. Using matching methods, this study estimated the treatment effect of GFSP on a cross-sectional sample of 5,923 cereal households drawn from a population-based survey dataset for 2012/13 and 2016/17. Results showed that cereal yield enhancement attributable to GFSP was 24.5%. Additionally, the effect disaggregated by type of cereal showed that farmers cultivating maize benefited the most. These findings support the ability of GFSP ability to improve productivity.

Understanding the Effects of China's Agro-Environmental Policies on Rural Households' Labor and Land Allocation with a Spatially Explicit Agent-Based Model.

Understanding household labor and land allocation decisions under agro-environmental policies is challenging due to complex human-environment interactions. Here, we develop a spatially explicit agent-based model based on spatial and socioeconomic data to simulate households' land and labor allocation decisions and investigate the impacts of two forest restoration and conservation programs and one agricultural subsidy program in rural China. Simulation outputs reveal that the forest restoration program accelerates labor out-migration and cropland shrink, while the forest conservation program promotes livelihood diversification via increasing non-farm employment. Meanwhile, the agricultural subsidy program keeps labor for cultivation on land parcels with good quality, but appears less effective for preventing marginal croplands from being abandoned. The policy effects on labor allocation substantially differ between rules based on bounded rational and empirical knowledge of defining household decisions, particularly on sending labor out-migrants and engaging in local off-farm jobs. Land use patterns show that the extent to which households pursue economic benefits through shrinking cultivated land is generally greater under bounded rationality than empirical knowledge. Findings demonstrate nonlinear social-ecological impacts of the agro-environmental policies through time, which can deviate from expectations due to complex interplays between households and land. This study also suggests that the spatial agent-based model can represent adaptive decision-making and interactions of human agents and their interactions in dynamic social and physical environments.

Reducing poverty by ‘ignoring the experts’? Evidence on input subsidies in Zambia

Since the early 2000s, agricultural input subsidy programs (ISPs) have again become a popular agricultural development policy tool in sub-Saharan Africa. Although many of the programs include as objectives raising incomes and reducing poverty among smallholder farmers, there is limited empirical evidence on whether ISPs are achieving these goals. Focusing on the case of Zambia, we use nationally-representative household panel survey data to estimate the effects of ISP fertilizer and hybrid maize seed on smallholder farm household welfare. Results suggest that during the years of analysis, Zambia’s ISP reduced the poverty headcount ratio and poverty severity among these farm households by 1.5 and 9.0 percentage points, respectively. We found little evidence of spillover effects on households not directly participating in the program. However, we found some evidence of heterogeneous direct program effects: welfare improvements resulting from the ISP are greatest for households with farm sizes of 1–5 ha, female-headed households, and households with relatively older heads.

Assessing Socio-Economic Impacts of Agricultural Subsidies: A Case Study from Bhutan

As an agrarian nation, Bhutan’s agricultural policies prioritize agricultural subsidies to boost agricultural production, rural incomes, improve food security, and reduce income poverty, especially among the rural poor. However, the effectiveness and efficiency of such policy interventions remains unknown. Based on semi-structured interviews with heads of households from six blocks representing two districts, expert consultation with agricultural policymakers and extension agents, we attempted to evaluate the socio-economic impacts of agricultural subsidy programs including co-payments. The study found that while over 90% of the households received at least one form of subsidy, except for agricultural machineries and piglets, the non-poor population has greater access to the subsidies compared to the poor. For instance, only 35% of the poor received seed and sapling subsidies compared to 52% seeds and 39% sapling subsidies received by the non-poor population. Furthermore, none of the poor received Jersey cow or biogas subsidies due to their inability to co-pay. Additionally, the agriculture machinery subsidy was found to be counterproductive to the lower income groups (&lt;US$153.85) and beneficial to the higher income groups. However, 14.5% of the households who received a poultry subsidy experienced 3 times more income (at a mean income change of 634.31 US$) compared to those who did not, indicating that this subsidy has larger potential to improve income for the poor. To efficiently achieve the objectives of increasing rural income and reducing poverty, we recommend agricultural subsidy programs and projects be provided as a package to poor small holders, where inputs are given based on existing capacity, availability of technical support, and market accessibility.

The Influence of an Agricultural Subsidy Extension Program on Smallholder Maize Farmers in Tanzania

Smallholder farming in Tanzania is a household activity implemented at the subsistence level. The government of Tanzania launched the subsidy program to promote food secure households and shift subsistence farming to business farming. Food insecurity was associated by low rates of fertilizer application and poor seed quality among smallholder farmers due to fertilizer and seed costs which led to an increase in food prices. This study aimed at assessing the impact of the agricultural subsidy program for smallholder maize farmers. Four research objectives focused on agricultural productivity, food security, usage of improved inputs, and farmers’ perceptions of how the program functioned. An ex post facto research design was used with a sample of 120 smallholder farmers. The investigation involved 60 farmers who received subsidies and 60 who did not. The study used an interviewer administered questionnaire. Farmers who received subsidies significantly increased maize production. Comparison of average output before and after subsides shows an increase in number of bags (100 kg) per acre from an average of 5.35 bags to 10.10 bags. Farmers who did not receive subsides produced about the same amount of maize at time one and time two. There was general satisfaction with the functioning of the program, however certain areas need to be improved including that program objectives are followed, ensuring farmers can manage market price of inputs, and enhancing extension services for farmers to produce more surplus

The Influence of an Agricultural Subsidy Extension Program on Smallholder Maize Farmers in Tanzania

Smallholder farming in Tanzania is a household activity implemented at the subsistence level. The government of Tanzania launched the subsidy program to promote food secure households and shift subsistence farming to business farming. Food insecurity was associated by low rates of fertilizer application and poor seed quality among smallholder farmers due to fertilizer and seed costs which led to an increase in food prices. This study aimed at assessing the impact of the agricultural subsidy program for smallholder maize farmers. Four research objectives focused on agricultural productivity, food security, usage of improved inputs, and farmers’ perceptions of how the program functioned. An ex post facto research design was used with a sample of 120 smallholder farmers. The investigation involved 60 farmers who received subsidies and 60 who did not. The study used an interviewer administered questionnaire. Farmers who received subsidies significantly increased maize production. Comparison of average output before and after subsides shows an increase in number of bags (100 kg) per acre from an average of 5.35 bags to 10.10 bags. Farmers who did not receive subsides produced about the same amount of maize at time one and time two. There was general satisfaction with the functioning of the program, however certain areas need to be improved including that program objectives are followed, ensuring farmers can manage market price of inputs, and enhancing extension services for farmers to produce more surplus

Empirical examination of the constraints and causes of crop seed losses in Ghana

ABSTRACTDevelopment interventions have endeavored to improve the availability of improved seeds to enhance agricultural productivity in West African sub-region. The objective of this study, therefore, was to examine the constraints of seed production and the causes of seed losses in Northern Ghana. We used primary data on farm information collected from 62 seed producers in northern Ghana. The data were analyzed descriptively and supported by the Chi-square test. The results indicated that high input costs, undeveloped marketing system and seed distribution channels, erratic rainfall pattern, and inadequate machinery constituted the main challenges for seed producers. Field pests, poor storage structures, poor farm hygiene, and poor bagging process significantly influenced seed losses. We recommend, among other interventions, that agricultural policies of Ghana, such as “the planting for food and jobs” and the agricultural input subsidy program, provide seed producers with technical and financial support to reduce cost of production and seed losses. There is also the need to strengthen seed trade associations to provide technical backstopping and the needed services to actors in the seed value chain of Ghana.

Effects of payment for ecosystem services and agricultural subsidy programs on rural household land use decisions in China: Synergy or trade-off?

While agri-environmental policies that target different problems are often simultaneously implemented at the same place, little attention has been paid to the interactions of the policies, either in policy design or evaluation. The goal of this study is to understand the potential interactions (synergies or trade-offs) between an agricultural subsidy program and two payments for ecosystem services (PES) programs, namely the Conversion of Cropland to Forest Program (CCFP) and the Ecological Welfare Forest Program (EWFP), and their effects on household land use decisions. Data collected from 481 rural households in Anhui, China are used for the exploration. The Sustainable Livelihoods Framework is used to identify factors that may affect household land use decisions, i.e., whether to expand, stabilize, or shrink the cropland area, and further to identify whether to abandon or rent out land if the shrinkage decision is made. The results show that: (1) most rural households (58%) in the study area reduce cultivated land, and mostly via cropland abandonment, while only 16% of the interviewed households expand land area; (2) the most important factors determining cropland expansion include farm tools and transportation equipment, while the number of parcels and financial support are the dominant factors that stimulate households to adopt abandoning over renting-out decisions when deciding to shrink cropland; (3) EWFP payment has a significant direct impact on cropland management, while no significant influences are observed from the other two programs; (4) there exist complex trade-offs among the three government programs with similar or conflicting aims, which highlights the need to take policy interactions into account when designing new agri-environmental policies.

The evolution of agricultural input subsidy programs: contextualizing policy debates in Malawi’s FISP

Malawi has been associated with the re-emergence of agricultural input subsidy programs in sub-Saharan Africa (SSA) since its launching of the Farm Inputs Subsidy Program (FISP) in 2005. It has also been at the center of policy debates regarding its capacity to launch a uniquely African Green Revolution within a marketized and capitalist configuration, and in a context of constrained public resources. Such debates have been informed by the evidentiary literature, which has been mixed and sharply divided. This paper, using qualitative methods, explores how such debates have shaped Malawi’s food security policies and brought about recent alignment in government and donor policy positions. The results indicate that the recent change in FISP policy is intimately linked to wider concerns to commercialize agriculture and the general reconfiguration of food security policy to more accurately reflect presumed ‘possibilities’ and what is fiscally pragmatic. The paper highlights some of the complexities that have been faced by policy makers in the process of devising appropriate pro-poor agricultural and food security policies within the broader enterprise of economic growth in a rather challenging context. It contributes to scholarly efforts to untangle Malawi’s food security-development policy paradox™ which might be relevant to other countries in SSA.

What Drives China’s New Agricultural Subsidies?

China’s agricultural policy has undergone a fundamental transformation in the four decades since the introduction of market reforms in 1978 and now involves a wide array of policy instruments that range from output and input subsidies to public infrastructure expenditures. This article analyzes the political-economic determinants of China’s agricultural subsidy changes using producer subsidy equivalents (PSEs) drawn from annual data from 1984 to 2015 on 16 agricultural commodity sectors that include multiple policy instruments. Empirical results indicate that national factors, such as high rates of economic growth and a lower share of agriculture in the economy, have been the primary drivers of increases in PSEs, and that larger, more geographically concentrated agricultural sectors are more likely to be subsidized at a higher PSE rate. Finally, China’s joining the World Trade Organization in December 2001 led to significant increases in PSEs that were not already explained by internal national or commodity-specific factors. In essence, China’s agricultural subsidy programs and levels increasingly resemble those of developed countries, primarily as a result of economic transformation and the ability to structure agricultural policies within the WTO rules. Moreover, this article predicts that agricultural subsidies will trend slightly upward in the next decade and that the strongest opportunities to export to China will be in animal products or grains that are utilized for feed or processed foods, where the levels of subsidies are predicted to increase but remain lower than for traditional food crops.

How Sustainable are Benefits from Extension for Smallholder Farmers? Evidence from a Randomized Phase-Out of the BRAC Program in Uganda

Many development programs are based on short-term interventions, either because of external funding constraints or because it is assumed that impacts persist post program termination (sustainability). Using a novel randomized phase-out research method, we provide experimental tests of the effects of program phase-out in the context of a large-scale agricultural input subsidy and extension program operated by the NGO BRAC to increase the use of improved seed varieties and basic farming practices among women smallholders in Uganda. We find that while supply of improved seeds through local, BRAC trained women declined, demand does not diminish, and farmers shift purchases from BRAC to market sources, indicating a persistent learning effect. We also find no evidence of declines in the practice of improved and less costly cultivation techniques taught by the program. These results have implications for both efficient program design and for models of technology adoption.