DS 3.1: Subsidies and smallholder access to P fertilizer

Summary report of DS 3.1 Smallholder Access to P Fertilizer of the 1st Global TraPs World Conference, Beijing 2013 (written 8/2013; released 3/2014)

Preliminary note: No abstract is available for this Dialog Session. The following text comprises the orientations discussed and identified in the joint Dialogue Session 3.3 & Mutual Learning 2.5. Sebastian Wunderlich (MSc. student University of Oldenburg), facilitated this Dialogue Session of the 1st Global TraPs World Conference, July 18-20, 2013 and is responsible author of this summary. Nineteen scienctists (N = 11) and practitioners (N = 8) collaborated in this joint session . For further questions, please contact Prof. Ulli Vilsmaier, Leuphana University, Lüneburg (vilsmaier@leuphana.de) or Prof. Roland W. Scholz, Fraunhofer  IGB (roland.scholz@emeritus.ethz.ch) and Gerald Steiner Gerald (gsteiner@wcfia.harvard.edu)

Agricultural input subsidies and particularly fertilizer subsidies have been a popular option for stimulating fertilizer use and increased agricultural productivity in developing countries where there is an emphasis on food security and/or self sufficiency. Fertilizer subsidies were a major component of the green revolution in Asia and Latin America during the 1960-70s and continue to be practices to this day in many Asian economies. In sub-Saharan Africa, large scale universal subsidy programs characterized by government controlled input marketing systems were the norm from the 1960s through the 1980s. In this system farmers received fertilizers at controlled and subsidized prices often in combination with heavily subsidized credit. The results of these programs were mixed. In most cases, the programs succeeded in raising fertilizer use and increasing productivity, but they were very expensive, did not always reach the targeted clients and were dependent on government support. Furthermore these programs were susceptible to significant inefficiencies resulting from high administrative costs, government monopolies and political influence. In the 1980s and 1990s these subsidy programs were eliminated as part of the structural adjustment process that promoted market liberalization. At the end of the 20th century and after a period of market liberalization, new subsidy programs began to emerge in sub-Saharan Africa. These new smart subsidy programs were meant to address the shortcoming of universal subsidies by: targeting specific farmers; utilizing and supporting private input supply chains, and having a robust exit strategy. To summarize fertilizer subsidies are controversial. Benefits of the subsidy programs include promoting adoption of fertilizer use by farmer and increasing agricultural productivity and food security. However, subsidies are expensive and can stress national budgets, often benefit the wrong people, can contribute to overfertilization and distort agricultural markets. While use of smart fertilizer subsidies offers the possibilities of improving efficiencies, accessibility and sustainability of fertilizer input programs, it remains to be seen if such programs can be strictly implemented and enforced.

The roundtable discussion on the role of subsidies in sustainable phosphorus management concluded with the identification of the following knowledge gaps, policy orientations and possible future activities:
Knowledge gaps: (i) There is a need to have actual data on costs and benefits of subsidizing fertilizer as there is the possibility of fertilizer overuse and decreasing yields. (ii) Good practices of soil management (including e.g. manures) around the world and conditions for success have to be identified if efficient and effective subsidy programs shall be developed.

Policy orientations: (i) The principle should be the support of farmers and not the support of the product (fertilizer). (ii) The support of the use of specific fertilizer has to be based on the assessment of local soil conditions. (iii) There is the need to widen the range of policies for supporting farmers - there is the possibility of supporting yields (food production), infrastructure (road, storage, etc.) and education (so that farmers are able to choose appropriate measures). Bundling of various kinds of subsidies might also be helpful.

Future activities: (i) Designing an arrangement for supporting rational decisions of farmers - the possibility of a redesign of the extension system has to be considered. (ii) Testing ideas in specific context and understanding the conditions for success. (iii) Identifying methods to introduce new technologies for the benefits of people.