THE federal government’s decision to allow a subsidy of Rs5.4bn on diammonium phosphate, or DAP, fertiliser will help reduce the input costs of wheat farmers. According to the finance ministry, the government has approved a subsidy of Rs1,000 per 50kg bag of DAP, which will reduce its price by 25pc. The DAP subsidy is part of the prime minister’s special package for the growers to be approved by the federal cabinet next Tuesday. The subsidy was announced two days after some ministers raised concerns over the rising prices of food, especially of wheat flour, at a recent cabinet meeting and the absence of an administrative response. The total value of the package is estimated to be Rs24bn and it includes an increase in the wheat support price from Rs1,400 per 40kg to Rs1,600 per 40kg and subsidy on fungicides and weedicides in addition to DAP. The fertiliser subsidy will be paid from the Rs50bn earmarked for the agriculture sector in the Rs1.2tr fiscal stimulus package given to fight the economic impact of the Covid-19 pandemic. Only a fifth of the money allocated for agriculture could be spent until now.

It is encouraging to see the government realising the impact of consistently rising input costs on farmers’ meagre incomes and spiralling food inflation on consumers. The actions being taken will help the growers cut the overall cost of their inputs and boost their incomes. But it will not help control food prices surging since August last year. The solution to the higher food prices demands an overhaul of existing agriculture policies and investment in new high-yield technology. If the wheat growers, for example, are able to double their output per acre, it will not only halve their costs and substantially increase their incomes but also bring down wheat prices in the market. Also, the increased yields will spare a part of cultivable land under wheat for growing other value-added crops and vegetables. Thus the government should focus more on revamping policies than fiscally unsustainable subsidies.

Published in Dawn, November 2nd, 2020