Fertilizer Subsidies: Which Way Forward

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The fertilizer subsidy programs reviewed exhibit, to one degree or another, various components of both fertilizer supply and demand creation subsidies. Common to all is the basic objective of increasing national staple food supply and pro-poor growth and also constantly changing implementation strategies in reaction to evolving market situations and market distortions, inefficiencies and excessive, unsustainable fiscal costs. In addition, the Chinese government has used various trade quota, tariff, and tax regulations to control supply to protect domestic production and insulate farmers from international price volatility. Regardless, not only are large subsidy budgets fiscally unsustainable, but they lead to crowding out of other often more effective support for agriculture. The fiscal burdens of subsidies in 2011 are summarized . It can be observed that fertilizer subsidies in Bangladesh and Malawi account for very large proportions of total government expenditure. In seven of the nine countries, total fertilizer subsidy expenditures accounted for between 24% and 73% of total government support for agriculture. The highest levels occur in countries with combined support for domestic fertilizer production and farm-level support, with the exception of Indonesia. The two countries with the lowest levels of fertilizer subsidy expenditure in total and as a proportion of the agriculture budget, Rwanda and Tanzania, have very focused support for fertilizer subsidies and no domestic production in Rwanda and no direct support for production in Tanzania. The small production of phosphate fertilizers in Tanzania is supported by access to the farm-level subsidized portion of the market.
NPK fertilizers, Nitrogen-use efficiency
Huang, J., A. Gulati, and I. Gregory (Eds.). 2017. Fertilizer Subsidies: Which Way Forward, FAI/IFDC Report, Muscle Shoals, AL, USA.