The Budget and Finance Committee of Parliament on Wednesday dated the Civil Society Agriculture Network (CISANET) on whether the Farm Input Subsidy Programme (FISP) is adding value to the country amid the chaos that has characterised it over the past years.
The input from CISANET will help the committee contribute meaningfully to the National Budget set to be debated early September in the National Assembly, said committee chairperson Rhino Chiphiko.
The committee was scheduled to meet Secretary to Treasury on Thursday on a briefing on the framework on the National Budget for 2014/15 after government decided to operate on a provisional budget of K210 billion which was approved in July.
CISANET National Director Tamani Nkhono-Mvula presented findings of the Farm Input Subsidy Programme Budget Tracking Study which were released in April 2014.
He explained that FISP is one of the major priority food security policy interventions implemented by Malawi Government over the past nine years whose aim is primarily improving productivity and production levels of the staple food (maize) crop among the smallholder resource poor farmers.
FISP, allocated US$130 million, is the largest agriculture sector programme in recent years in terms of expenditure and beneficiaries. Over 50 per cent of the agricultural sector annual budget is allocated to the programme alone targeting almost 1.5 million smallholder farmers annually.
Nkhono-Mvula observed that while the programme is generally acknowledged as important to ensuring food security in Malawi, its expenditure have been increasing substantially with no indication of stabilising or being reduced.
“Thus questions have been raised over the sustainability of the increasing expenditures against the overall objectives and benefits of the programme,” he said.
On the findings, Nkhono-Mvula stated that the allocation and expenditure for the FISP in the Ministry of Agriculture, Irrigation and Water Development recurrent budget continues to increase both in terms of amounts and share of the aggregate budget.
He however expressed worry noting that this is causing crowding out effect in terms of resource distribution to other equally prioritised programmes that the Ministry implements which are experiencing notable decreases in their budgetary shares.
“The long term effect will be unbalanced performance of the sub-sectors, with the crops sector doing well at the expense of others programmes such as livestock, land resources conservation and research among others,” he said.
The CISANET National Director then made suggestions based on the findings of the study, among them, that it is possible for Government to reach out to more beneficiaries if it can adjust the subsidised prices upwards.
“Alternatively, Government can use the savings in other priority programmes in the agricultural sector such as land resources, research services or livestock production, or Government can use the saving from increased subsidised price for other equally important programmes outside agriculture i.e. those priority programs in health, education or transport sectors.
“Note also that the downward adjustment of subsidised prices from K950 in 2005/06 to the current K500 was a political decision and not based on any economic analysis of the actual agricultural incomes,” said Nkhono-Mvula.
The study recommends that the Ministry of Agriculture should seriously consider balancing allocation of resources in the agricultural sector, particularly between the FISP and the other equally important interventions, said Nkhono-Mvula.
“Government should revisit the FISP fertiliser components which is consuming over 90 per cent of the total FISP cost. This pattern will likely make the FISP virtually unsustainable for a resource poor country like Malawi.
“Complementary programmes like zoning of fertiliser distribution to focus to very need areas, intensification of the use of inorganic fertiliser and promoting the planting of crops that demand little or no fertilisers as food crops is of paramount importance,” he added.
He also explained that as a cost sharing mechanism, and to ensure sustainability of the programme, government should increase farmer contribution from the current K500 per 50kg bag of fertilizer.
“The study has also shown that the contribution of Government to the program is in excess of 96 per cent. There is a need therefore to increase the contribution so that the contribution of Government to the programme is reduced. The study recommends that Government should be contributing about 65 per cent of the subsidised prices and the targeted farmers should be contributing about 35 per cent,” said Nkhono-Mvula who drew the detailed attention of the committee.
CISANET has also recommended that Government should improve on the inefficiencies along the input supply chain and logistical aspects of FISP particularly the procurement processes of suppliers, the beneficiary registration process, verification, coupon distribution process in terms of months that these activities are done.
Government need to improve on payments to suppliers to avoid paying penalties which could increase the program cost unnecessarily. Payment within 30 days of receiving invoices would be reasonable to both parties.
He concluded by urging Government to encourage investments in fertiliser manufacturing locally.
“This would less the importation and transportation cost of fertilisers thus contributing to reduction in programme costs,” he said.
Chiphiko, on behalf of the committee, thanked CISANET for sharing findings on the FISP study which he said would greatly contribute to the formulation of the 2014/12 National Budget.
Other members of the committee that attended the discussion are John Chikalimba, Ralph Jooma, Maxwell Thyolela, George Kamwanja and Collins Kajawa.