IDEAS: Subsidies for paddy farmers miss the mark

A paddy farmer sprays pesticide on his crop in Kampung Tali Air Sepuluh, Sekinchan. (Bernama pic)

KUALA LUMPUR: The government’s subsidy programme for paddy farmers is not producing the intended results, the Institute for Democracy and Economic Affairs (IDEAS) said today.

Agricultural subsidies were benefitting the big farm owners rather than smallholders, it said in a report titled “Evaluation of Agricultural Subsidies and the Welfare of Rice Farmers” at Universiti Malaya today.

IDEAS also spelt out some ways in which the system could be improved so that the target groups, especially smallholders, would benefit.

The study’s author Prof Fatimah Kari, who is also IDEAS Senior Fellow and professor in the Department of Economics, University of Malaya, said at a public lecture that agricultural input subsidies such as fertiliser and pesticides were allocated based on the land size owned by farmers.

As such, she said, it benefitted farmers with large farms more than the smallholders.

Fatimah said the rice sector had yet to achieve the optimal efficiency level despite substantial public investments having been made through all the subsidy programmes.

“The governance structure of the industry tends to over-invest in certain regions where productivity remains low and lagging. Whilst, the subsidy programme must remain inclusive to achieve social equity, there is a trade-off between efficiency and equality and such trade-off has resulted in escalating costs in the industry.”

On the reduced allocation for agriculture in Budget 2019, Fatimah said:

“There is an urgent need to rationalise agricultural subsidies to eliminate leakages and market distortion effects to ensure that the subsidy programme remains financially sustainable in the long term.

“The reduction in budget allocation must also include the need to come up with a better targeting and rationing mechanism which can be based on farms characteristics, location, efficiency, productivity as well as quality of rice produced.”

She suggested that the “Sekinchan model” be adopted by other paddy farming communities.

“Despite facing the same struggles such as increased input costs, climate change and diseases, the Sekinchan paddy farming community is still more productive than other communities. It shows that a bottom-up initiative is effective in developing agricultural clusters. One of the important characteristics of the Sekinchan community is their openness to experiment and try small-scale innovations.”

Among the recommendations in the report:

*Rationalise subsidies so that inefficiency and wastage is tackled and targeted aid is provided. Also, more investment in research and development is needed to enhance the technology and skills of farmers.

*Subsidies and policies to help farmers should have an exit strategy designed at the beginning of policy implementation. Under such an exit strategy, beneficiaries will “graduate” from the successful government support and not view it negatively as a withdrawal of help and support to the farmers.

*Implement measures to reduce cost and improve productivity.