Sunday, July 20, 2008

How best to conduct fertilizer intervention/ subsidy?

Here is paper where the authors look at how best to intervene with fertilizer subsidy in developing countries:

It is argued that there are compelling rationales for “smart” fertiliser subsidy programmes in Africa. However, achieving these benefits depends greatly on how the programmes are implemented. The authors assert that the contribution of fertiliser subsidy programmes to reducing poverty and hunger would be higher if they could be designed and implemented so as to:

  • target households with little ability to afford fertiliser
  • target areas where applying fertiliser can actually contribute to yields
  • promote the development of a commercial fertiliser distribution system rather than undercutting it

The paper argues that several points should be considered before implementing fertiliser subsidies. These include:

  • they may not be the best option; for example, subsidies targeted to particular crops such as maize may reduce output of other food crops such as cassava, therefore reducing the net food supply response
  • fertiliser subsidies have a questionable recordas a tool for increasing overall agricultural productivity, especially for small, poor farmers
  • low or no fertiliser use by many smallholders is explained not just by credit constraints that limit acquisition, but also by the risk of crop failure, with resulting financial losses and consumption shortfalls. The lack of insurance causes inefficiency in production choices, therefore, recent trials of weather-indexed insurance are a promising potential solution for the risk problem

Drawing on experiences of Zambia and Malawi, the authors suggest several practical guidelines for how to maximize the effectiveness of fertiliser subsidies in meeting important national objectives such as improved national food security, alleviation of hunger, and equity. These include:

  • implement a targeted input voucher system
  • if budget resources are highly constrained, then target fertiliser vouchers to farm households with low purchasing power
  • seek to involve a wide range of fertiliser importers, wholesalers, and retailers in the input voucher scheme
  • focus on alleviating infrastructure and input supply constraints as well as improving procurement efficiency

(Via Eldis)

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