Fertiliser Subsidy an Ineffective Policy Tool to Offer Low Prices of Basic Food Commodities

PIDE Knowledge Brief No. 31:2021
Author: Abedullah
Publication Year : 2021

Government of Pakistan is spending about Rs.200 billion each year on fertiliser subsidy to offer low prices of essential commodities (i.e. wheat, rice maize and sugar) for low income groups. The current policy brief attempts to evaluate the effectiveness of government strategy of keeping low prices through fertiliser subsidy. The analysis reveals that contribution of fertiliser subsidy in price reduction is negligible. An average family of 5 persons which consumes 15 maunds of wheat, 2 maunds of rice and 30 kg of sugar in a year will get monetary benefit of Rs.893 per annum (Rs.74/month) in terms of low prices against the subsidy of Rs.200 billion. Hence, it concludes that fertiliser subsidy is not an effective policy tool to offer low prices in Pakistan. However, by diverting the same resources towards R&D in sustainable manners could play a significant role in reducing prices.