WHETHER or not fertiliser ought to be subsidised and to what extent is a somewhat technical subject, and only industry insiders are interested in the details that feed into this question. What is not so technical, though, is the spectacle of watching a government announce the withdrawal of the subsidies one day, only to reverse its own decision the next as a result of the ensuing political uproar. In its last budget, the government had announced an amount of Rs27bn for subsidising fertiliser for the entire fiscal year, but the amount ran out in December. Instead of increasing the allocation, it decided to withdraw the fertiliser subsidy altogether. When a furore erupted, it quickly backtracked, and declared triumphantly that it was the Punjab chief minister whose insistence led to the restoration of the subsidy. Now, apparently, the only thing left to do is to locate the budgetary resources to fund the subsidy for the remainder of the fiscal year.

This is economic policy at its most absurd — part populist, part factional with a large dose of indecision. There is a good case to be made for why fertiliser should be subsidised, especially considering the condition of the farm sector and the increasingly dire circumstances of small farmers. But it is also a fact that a large share of this subsidy never reaches the small farmer. Manufacturers eat up a large chunk, calculated to be as high as 30pc in some cases. Then comes the middleman. And finally, and most significantly, there is the problem of distribution. Fertiliser distribution is famously weak, skewed heavily in favour of big landlords with political connections, and the prices written on the bags are difficult to enforce. Given the massive weaknesses that weigh on the agriculture sector, a far more serious policy approach is necessary to lift its sagging fortunes than simple crowing about a fertiliser subsidy. Sadly, during the tenure of this government, we have seen an ‘agriculture package’, and this debate around a subsidy, with no real attempt at reforming the underlying weaknesses that keep the sector hostage to middlemen, large landlords, substandard seeds and pesticides, and poor water utilisation practices. If the Punjab chief minister wants to have his regard for agriculture taken seriously, he should focus on fixing the procurement machinery and on ensuring that the benefits of the subsidy actually reach the intended recipients.

Published in Dawn, January 15th, 2017