How to make the AIP more cost-effective

I wrote this op-ed with Jack Thunde, my colleague at IFPRI-Malawi. This op-ed was originally published on IFPRI Malawi website on September 14, 2020.

The Tonse Alliance Government has committed to implementing an ambitious but controversial reform of agricultural subsidies in Malawi. The reform, the Affordable Inputs Programme (AIP), which will cost MWK 160.2 billion (about USD 214 million), aims to: (1) reduce poverty and (2) ensure food security at household and national levels. These goals are similar to those of the now defunct Farm Input Subsidy Program (FISP). While FISP was initially successful in achieving national food self-sufficiency, its contribution to poverty reduction is less clear as the current incidence of poverty in the country is similar to 2005, when the program was launched.[1] Therefore, many observers are keen to learn how the new AIP will achieve its goals. With many uncertainties about the design, financing, and implementation of the AIP, we discuss some factors that could help the program accomplish its goals.

In order to achieve its twin goals in an affordable manner, the AIP must reach farmers who could not afford unsubsidized fertilizer and seed and ensure that they use the inputs efficiently. By targeting all farming households, the program should reach all households who need subsidized inputs but will also benefit those who do not. This makes it very costly. Since a reversal of the universality of the program is unlikely, the government should ensure that farmers get as much return on the subsidized inputs as possible.

One way to maximize efficiency of input use is to ensure that farmers use fertilizer that has the required nutrients in the right proportions and that they plant quality seeds. While there is little reliable information about input quality in Malawi, a study in Uganda found 30% of nutrients missing in urea and more than 50% of hybrid seeds being fake. A Malawi study highlighted the inability of most farmers and agro-dealers to identify fake seed, only noticing it upon realizing low germination rates. It is therefore important to ensure supply of quality inputs to help the AIP sustainably achieve its goals. Some countries use E-verification (scratch-off labels with telephone authentication codes) to allow farmers to check if they are buying genuine inputs. Such schemes could help ensure farmers buy high quality inputs that help improve yields.

Additionally, returns to fertilizer use are sensitive to soil quality. The same blend of fertilizer produces different returns depending on the quality of the soil. Therefore, a countrywide recommendation of one blend of fertilizer, as is the case in Malawi, compromises fertilizer use efficiency. Ideally, fertilizers should be blended according to the quality of soil in the target area. Farmers should be encouraged to use liming as a complementary technology and, where feasible, the government should carry out soil tests to tailor fertilizer blends to the quality of the soils.

Furthermore, the Department of Agricultural Research Services and other stakeholders could intensify promotion of fertilizer multiplication and micro-dosing. Fertilizer multiplication involves mixing inorganic fertilizer with manure and other organic matter to make it go further. With micro-dosing, farmers apply small doses of fertilizer in each hole when planting. This reduces the amount of basal fertilizer needed for dressing maize by about eight times compared to traditional application. Both fertilizer multiplication and micro-dosing have increased yields in areas where they have been tried, although farmers do find them laborious and time-consuming. Finding solutions to these challenges could help improve fertilizer use efficiency and significantly cut AIP costs.

The drive towards achieving food security and reducing poverty through AIP will also require minimizing leakages of inputs. These leakages are threefold: (1) development of secondary input markets where poorer farmers re-sell subsidized inputs to wealthier farmers and traders; (2) inability of the national identity card system to distinguish between farmers and non-farmers; and (3) distributors paying farmers for swiping national ID cards without delivering the inputs. Within limits, the former leakage can best be addressed through provision of cash/food transfers for poorest households since the incomes they get from selling the subsidized inputs already constitute a government transfer. For the second case, it is important for the government to have measures in place that will exclude ineligible households from getting the inputs. In the short term, cross-checking national ID cards against the FISP register of farm household will be needed. In the medium term, implementation of the Unified Beneficiary Registry should address this leakage. Lastly, for the third case, placing unique barcodes on each bag of fertilizer or seed which would be scanned together with the farmers’ national ID would ensure that the fertilizer is physically present and cannot be resold to another AIP farmer.

While a huge and costly undertaking, the AIP could improve the country’s food self-sufficiency if properly implemented and assuming the country experiences normal rainfall. Key measures that could help increase returns from the program include maximizing efficiency of input use and minimizing input leakages. Taking these factors into account in implementing the program would help reduce both program costs and increase crop production.

[1] The proportion of poor people in Malawi declined from 52.4% to 51.5% between 2004/5 and 2016/17.

Author: Edwin kenamu

I am an agricultural economist. I have a strong passion in understanding agricultural policy frameworks and how they can be improved so as to enhance livelihoods in agricultural households.

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