Fertiliser subsidy anathema to WB

By Paneetha Ameresekere | Published: 2:00 AM Oct 22 2021
News Fertiliser subsidy anathema to WB

By Paneetha Ameresekere 

Fertiliser subsidies constitute a major expenditure in the Government of Sri Lanka’s agricultural budget and could result in a suboptimal composition of agricultural spending when interventions to incentivise farmers to adopt climate-smart technologies, help them access value chains or invest in better agro-logistics could have greater payoffs, the World Bank (WB) in a report dated 1 October 2021 but released on their website on Monday (18), warned.

 The publication titled ‘Agricultural Productivity, Diversification and Gender’ said most of the fertiliser subsidy (90 per cent) is accounted for by paddy, followed by tea (four per cent) and vegetables (two per cent). The WB further said more generally, there have been concerns that the fertiliser subsidy might take away resources from other spending such as on roads, health and education which could contribute to rural development more broadly. 

Fertiliser subsidies have been primarily used to meet production and therefore food security objectives, but were deemed less effective than direct income transfers from the perspective of providing support to low-income paddy farmers, the WB said. Furthermore, these subsidies appear to have impacted market decisions by encouraging the cultivation of paddy and disincentivising movements to other types of agriculture that have more potential for value addition, it said. Paddy productivity is particularly low, constraining productivity growth among farmers who devote a large share of their land to paddy, the WB said.

 Fertiliser subsidies come at a fiscal and opportunity cost and may need careful consideration in the broader context of spending to support the agriculture sector and rural development, the WB also said. Tea production is the leading agricultural wage sector in Sri Lanka, employing 41 per cent of wage workers, of whom 56 per cent are women, the WB said. Tea is the top agricultural export commodity in Sri Lanka. 

The paddy sector is the second largest employer of agricultural wage workers (87 per cent of whom are male) and most paddy output is sold domestically, it said. Policies to increase the crop mix toward higher-value, exportoriented crops and to equalise access to resources for both male and female farmers, including land and agricultural inputs, could help improve productivity and income, and reduce gender disparities, it said.

By Paneetha Ameresekere | Published: 2:00 AM Oct 22 2021

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