Is the amount of subsidies issued to farmers acceptable?

Is the amount of subsidies issued to farmers acceptable?

Economy
04 September 2019, 15:39 133
Starting next year, agricultural subsidies will be issued according to the coefficients determined by Azerbaijan’s Council of Agricultural Subsidies. According to the Ministry of Agriculture, the council made the corresponding decision in accordance with clause 2.4 of the "Rules for subsidizing agricultural production" approved by the decree of the president of Azerbaijan on the distribution of crop production and crops by region, production and seed ratios, quotas for seedlings and determining the need for sowing.
As per the decision, the sowing coefficients and the amount of subsidies for agricultural plants are to be determined at a base cost of 200 manats in the following order, starting from 2020. According to the council’s decision, the following orchards with drip irrigation system are referred to as intensive fruit orchards:
- apple trees, pears, cherries (sweet and sour cherries), plums, peaches (nectarines), apricots, cherry plums and almonds - a garden with a density of vegetative seedlings of at least 650 units per hectare;
- persimmon and pomegranate - a garden with a density of seedlings of at least 450 units per hectare;
- lemon, orange, mandarin and feijoa - a garden with a density of seedlings of at least 650 units per hectare;
- hazelnuts - a garden with a density of foci of 330 units per hectare;
- medlar, dogwood, silverberry, figs, walnuts, olives and others - gardens with a seedling density of at least 330 units per hectare.
Subsidies for grape and intensive fruit orchards will apply to orchards established since 2019. Other subsidies for planting will be issued with a coefficient of 1.2, provided that the density of seedlings is not less than 90 per hectare.
According to the decision, the rice coefficients are applicable to Aghdash, Aghsu, Astara, Bilasuvar, Goychay, Lankaran, Masalli, Salyan, Samukh, Ujar, Yevlakh, Sheki and Zardab districts, and are equal to zero in relatio to other districts.
Cotton coefficients are applicable to Aghjabadi, Aghdam, Aghdash, Aghsu, Beylagan, Bilasuvar, Jabrayil, Jalilabad, Fuzuli, Goranboy, Hajigabul, Imishli, Kurdamir, Neftchala, Saatli, Sabirabad, Salyan, Samukh, Tartar, Ujar, Yevlakh and Zardab districts, and are equal to zero in relation to other districts.
Tobacco coefficient is applicable to Aghstafa, Balakan, Gadabay, Goranboy, Ismayilli, Lerik, Masalli, Oghuz, Gakh, Gazakh, Gabala, Sheki, Tovuz, Yardimli and Zagatala districts, and equals zero in relation to other districts.
Hazelnut coefficient is applicable to Aghstafa, Balakan, Zagatala, Khachmaz, Gakh, Gabala, Guba, Sheki, Oghuz, Gusar, Gazakh, Shabran and Ismayilli districts, and equals zero in relation to other districts.
Tea coefficient is applicable to Astara, Lankaran, Masalli and Zagatala districts, and equals zero in relation to other districts.
The council decided to issue subsidies in the amount of 100 manats per ton of cotton, 50 manats per ton of dry tobacco, 5 manats per ton of wet tobacco, and 4 manats per ton of sugar beet handed over to processing facilities. The issuance of subsidies for these coefficients will begin in 2020 and will be carried out through the Electronic Agriculture Information System.
But are these coefficients acceptable?
According to agricultural specialist Nijat Nasirli, the quotas and coefficients are acceptable. "As a management tool in agriculture, subsidies will enable the targeted and transparent management of funds. The subsidy program covers 400,000 farmers. The creation of this mechanism will, first of all, eliminate bureaucratic and subjective approaches. So far, about 1,350 commissions have been involved in determining subsidies. These commissions were formed in three stages - in villages, district centers and in the ministry. But now, with the help of an electronic system, subsidies will be determined in the absence of people, in accordance with both cultivated areas and the capacity and quality indicators of these areas. Previously, farmers had to collect documents annually that would at times be sent back by the commissions. That is, there will be full transparency now. The subsidy program has been in place since 2007 and has been an important tool for agricultural stimulation over the years. The new rules propose improving quality indicators as the main strategic target because both livestock and crop productivity are below the world average. Another target is the price issue that worries every consumer. The subsidy program will allow regulating the market prices. As for the coefficients, the amount per hectare starts at 200 manats. The maximum amount is set at 700-800 manats. 200 manats is the amount of subsidies and concessions per hectare that the government has given to farmers so far. Therefore, the coefficient is 200 manats.  In general economic terms, the coefficients and quotas are set to cover 70% of the 1 hectare of cultivation at the state’s expense. As you know, the state’s support for farmers is 70%. That is, farmers cover 30% of the expenses themselves.  In this sense, the noted figures are fully realistic. When calculating coefficients, especially for perennial plantings and intensive gardening, funds are estimated at around 2,800 manats. This is a fairly standard figure for cultivating a hectare of land. It is noted that this amount will be paid in the first 7 years as in many perennial plantings crops come to fruition in 7-8 years. This means that the state will support farmers until the harvest.  The coefficients will be reduced once the product enters the market and the farmer’s income is formed. I believe this is a rather rational approach. Overall, this means that the state's participation in the costs required to build a farm is 70%. In this sense, I assess the quotas and coefficients in the market economy as standard,” the specialist said.
Agricultural specialist Kadir Bayramli said every step taken to promote farmers' activities should be positively assessed. "It is particularly important that this incentive is implemented in the form of subsidies. Farmers are in serious need of such incentive mechanisms. As long as these needs are met, it will ensure the long-lasting activities of farmers. State attention and care towards agriculture has been growing in recent years. The work done is gradually bringing positive results and world experience is being studied in this area. But the subsidy mechanism can be considered the beginning of reforms. The main issue is implementing these subsidies locally. Often there are problems with the implementation of state decisions locally. It is now important to apply these coefficients locally and to educate farmers. Successful results can be achieved if equal conditions are created for every farmer and there is transparency. In other words, generally these figures are quite reasonable and can be regarded as the basis for agricultural reform,” he noted.
Economic expert Rashad Hasanov pointed out that farmers need support. "The agrarian sector is regarded as a risky sector. At the same time, agriculture is a sector that has comparative advantage. If we look at the structure of exports, we can see that about 30-40% of exported non-oil products are agricultural products. Also, if we consider food safety in the country, subsidizing is a positive step. However, there are also some drawbacks to this mechanism. For example, granting subsidies for sown areas is not a correct approach. It would be better to give subsidy for the end product as there might be cases of abuse. If subsidized according to the end product, farmers will aim to produce more. As for the coefficients, I can say that these figures require thorough research. It is too soon to say whether these indicators are acceptable,” said the expert.
Shabnam Mehdizade