Friday, October 3, 2008
Rice subsidy economics
A few days ago TV news reported that the Minister of Agriculture Development said that the government rice subsidy, has resulted in a 15% increase in the amount of paddy produced. Please tell me that this report was not correct. If our annual production is 2million tons and it has increased by 300,000 tons at a market price of Rs9billion(Rs30kg of paddy) then the cost of a Rs50billion subsidy all of it from imported fertilizer, has been a colossal waste. It would have been cheaper for us to import the milled rice at a fraction of that cost, and used the money saved on more productive areas.
We have total imbeciles in power making incredulous statements and no one, especially the media is questioning the facts, and secondly, its deduction and pointing out the flaws and assumptions.
I have noted earlier, that I am also a recipient of this subsidy, and like 90% of the farmers who receive this subsidy are subsistence farmers, barely making a return, despite the subsidy and without it would probably make a loss, not even covering ones own manual input if current paddy prices persist. In my experience only rice farmers who own extents exceeding 10 acres seem to be prosperous taking account of the subsidy they also receive.
On a more serious note, the government is still only playing politics with this subsidy that vegetable farmers do not get, and are reluctant to reduce the subsidy, for fear of provoking the rural vote bank. No real steps have been taken to try and change the format of the subsidy from chemical to organic fertilizer, nor to advice, encourage and incentivize increases in productivity, by reducing both inputs and increasing outputs in a concerted manner.
They are instead involved in a multitude of programs run by different sections of the ministry, with no overall goal or aim in mind, and with numerous specialists in different fields going their separate ways. The farmer is also confused by this lack of assistance and is left to do it alone.
The government is smug that they have not needed to purchase any paddy due to the market prices being higher than their guaranteed minimum price. The big government millers control the paddy purchasing. The smaller miller is effectively shut out or his costs of purchase have increased due to inspection taxes per bag at police checkpoints when paddy is transported, that are not applicable to Nipuna and Dudley the govt. reps.