ISLAMABSAD : June 5, 2024: The fertilizer manufacturers have termed the government’s proposed scheme to provide direct subsidy on fertilizers to the farmers as a non-starter being a bad idea. In its latest communication with Finance minister , Mohammad Aurangzeb, the industry said in the past Punjab made several such plans but they ended up without serving the purpose. The industry reminded the history of Punjab’s past schemes aimed to pass on direct subsidy to the farmers . It claimed that the similar scheme was introduced in the past by Punjab government and it finally ended up as a big failure.
To ensure that the desired benefit is passed on to small farmers, a direct targeted subsidy mechanism, has been under consideration for the last two years. To ensure that the desired benefit is passed on to small farmers, a voucher-based SMS enabled direct subsidy mechanism, was introduced by Government of the Punjab, considering high prices of phosphatic fertilizers. Despite best efforts, Govt has not yet succeeded in passing on this subsidy benefit on expensive phosphatic fertilizers to farmers across the country. In Sindh, KPK and Baluchistan this subsidy is altogether not being offered to farmers while Punjab has always faced shortage of funds due to which even issued coupons could not be encashed by the farmers. Resultantly, in last Rabi season failure of disbursement of subsidy on phosphatic fertilizers led to less consumption of DAP in Wheat that became one of the reasons ultimately impacting its yield and now Govt would be required to import over 3 Million MT Wheat to meet local requirements by sending precious FOREX.
With above referred failure of the government to provide subsidy to farmers in time, any proposal to provide direct targeted subsidy to farmers that too in the absence of availability of exact land records and accurate profiles of farmers cannot be implemented in its true spirit. Pertinent to mention here that consumption of Nitrogenous Fertilizers is ~3X higher compared to Phosphatic Fertilizers. The ask of Govt from farmers to purchase fertilizers at higher prices would first require availability of substantial amount of additional cash (significant portion of which is arranged by farmers from aarthies) and then wait for subsidy from Govt, if at all provided to them. This change would substantially increase cost of production for the farmers with disastrous impacts on crop yields; not to mention serious negative political impacts for any Govt.
It is also highlighted here that if the objective of direct targeted subsidy mechanism is to control smuggling, please note that overall volume of urea smuggled to neighboring countries is too small to make it a reason to have radical changes in whole ecosystem of local farmers.
By providing fertilizers to local farmers at affordable prices, fertilizer industry has always supported the government for economic growth of the country. Considering non-availability of land records, accurate profiles of actual farmers, complexity of small farmers using landholding of big landlords on lease basis etc., we understand attempt to implement direct targeted subsidy mechanism would face severe challenges in meeting its objective. Failure of a single crop my have higher negative impacts compared to gains being anticipated by the government through proposed radical change of whole system. While protecting food security of the country and avoiding any risks of fiscal and trade deficits, fertilizer industry would be happy to partner with government for its all achievable initiatives of well-being of farmers and economic growth