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Subsidised tractor scheme and farm mechanisation

March 29, 2010

THE federal and the Punjab governments are continuing their “subsidised tractors' schemes” for the second year, and would provide 10,000 tractors each under their respective plans.

Not to be left behind, the Sindh government has also chimed in with 5,000 tractors, taking the tally to 25,000 machines this fiscal. Since every tractor carries a price cut of Rs200,000, the total subsidy comes to a substantial amount of Rs5 billion - Rs2 billion each for Punjab and the federation and Rs1 billion for Sindh.

One can hardly deny the contribution these tractors had made to agriculture sector last year and would make this year as well. But, with the benefit of hind sight, one can also argue that the scheme, both at federal and provincial levels, need some readjustment in its focus, if not an entire paradigm shift.

At the procedural level, the scheme has also developed some grey areas, which should be addressed to realise full potential of the money being spent on it. In only its second year, the scheme has started drawing allegations, which are not entirely false.

The target of the scheme, if authors are to be believed, was an addition to “farm tillage and poverty alleviation in rural areas.” On both accounts, the scheme needs realignment of focus.

The scheme, in its current framework, is not designed for the rural poor. It is rather aimed at the middle-class or upper middle-class farmers. Only those farmers, who own 25-50 acres, are entitled to apply for a tractor under this scheme. The winner of the balloting has to pay around Rs400,000 before availing a price cut of Rs200,000 per tractor. Anyone, who owns between 25 to 50 acres, can hardly be called poor. It is thus benefiting those who survive, rather thrive, well above the poverty line.

One can hardly deny the potential of a tractor, being a complete employment unit, to alleviate poverty the owner can generate employment by providing multiple services to local farmers and spring above the poverty line. But, the scheme excludes the rural poor. The balloting mechanism should include rural poor.

The scheme is tractor-specific, which also needs to be looked into afresh because it might not be efficiently adding to farm tillage, as intended. The soil needs three kinds of implements, which can be categorised as primary (for soil preparation), secondary (agronomic practices) and tertiary (harvesting). Though tractor has a role to play in all the three categories, its utility, however, is compromised in the absence of other implements.

Its exclusive focus on tractor also raises a question how could the federal or a provincial government assess the need of local farming? Of course not! Farming is a local business and almost every district has its own soil requirements, ecology and cropping pattern, and needs corresponding implements. How can governments, federal and provincial, assess the need themselves and then execute the implements' subsidy plan. Instead of launching high-profile subsidy schemes, the government should form committees at the district level to ascertain these needs and tailor the subsidy plan accordingly.

It also underscores the need for other implements and required official focus on them. Here, the governments, especially of Punjab, are falling far behind. It is, in fact, withdrawing money from schemes - the Productivity Enhancement and the Farm Mechanisation Scheme - that are marginally subsidising other implements.

By reducing money and calling back even allocated funds for subsidising other than tractor implements, the government, especially in Punjab, is only exposing itself to the allegation of pandering to its rural rich - feudal or semi-feudal - voters and doing so at the cost of the poor.

Both, the federal and provincial governments also need to guard against the creeping political influence in the balloting process, quality issues of tractors and farmers' corruption charges. Though the last year's balloting by the Punjab government largely escaped allegation of any political favour, it was not entirely free from farmers' corruption charges. The winning farmers, who actually do not need tractors but apply to take chance, are now found selling the ballot paper in the open market. Since it carries a benefit of Rs200,000 per ballot, some farmers are selling the entitlement at a price of around Rs150,000. If unchecked, things can quickly spin out of hand and kill the purpose of the scheme. The federal scheme, on its part, carries additional allegations of benefiting local party leaders.

The governments thus need to make the process more stringent so that only deserving growers are included in the balloting.

The governments should realise that subsidy is need-based process and must be directed to the areas, which are neglected but vital for national scheme of things. Tractor exclusively does not fit in that context. It is already a hot commodity, being sold in the market on a substantial premium. It is other implements, like grader, crop-specific harvesters and high precision gadgets, which are being ignored, but necessary to produce quality products.

At a certain level, the scheme might be even turning out to be counter-productive. This year, some 290,000 farmers applied under the scheme in Punjab alone. It also means that 290,000 potential buyers would now wait for six months for the machine, and delay their routine purchase. Meanwhile, there is no guarantee that tractors manufacturers would not increase the price.

In view of these factors, the federal and provincial governments need to rehash their subsidy plans. It is not to argue that they should stop subsidising tractors but only to plead that they must take “entire agriculture spectrum in view, corresponding need for implements and make it more responsive to needs of the sector.”