Becoming a Farmer

High yielding seeds, water and good fertile soil the three principal imperatives for agriculture.  The rests are necessary either to enhance efficiency of the operation or protect the crops being produced. 

Great strides have been made in developing high yielding disease resistant hybrid seeds.  Waters saving micro-irrigation technologies have been developed.  But when soil fertility or plant nutrition is concerned, the pendulum on whether or not to use mineral fertilizers keeps swinging. 

Going organic is a good proposition but the question is whether we can supply all the nutrients requirement of crops with organic manures to produce profitable economic yield.   

Unless a farmer harvests a profitable economic yield, proposing youths to take up farming is a defeating proposition. 

Different soils have different capacity to supply plant nutrients to crops being grown.   

When a crop is harvested, varying amounts of major nutrient elements and micro-nutrients are removed from the soil.   

When a rice yield of 8 Mt is harvested from one hectare land, it removes 152 kg Nitrogen, 37 kg Phosphorus, and 270 Kg Potassium.   

Similarly, when a maize yield of 9.5 Mt is harvested, it removes 150 Kg Nitrogen, 27 Kg Phosphorus, and 37 Kg Potassium.  

Besides micro-nutrients including Sulfur, Calcium, Magnesium, Iron, Manganese, Copper, Cobalt, Zinc, Molybdenum, Boron, Silicon, Sodium and Chlorine, are also removed. 

Any of the plant nutrients either major or micro, becomes a yield limiting factor if the soil is not able to supply the full amount required by the crop.  This was declared by Justus von Liebig in his books published in 1840 and 1855 declaring the Law of Minimum. 

It was declared with a barrel concept demonstrating that whichever plant nutrient is minimum limits the crop growth and yield.

For instance, Boron is deficient in the soils of Bhutan where apple is grown and apple is sensitive to Boron deficiency.  Farmers apply Borax to apple trees to meet the requirement of Boron.  Because Boron is not there in the local soils, it is also not there in the organic manures also.  For this reason, applying organic manures to apple trees does not solve the problem of Boron deficiency.  

Such micro nutrient deficiency cannot be corrected otherwise and therefore must be applied through external source.

Just as apple is sensitive to Boron deficiency, mandarin orange is sensitive to Zinc deficiency.  Similarly, cauliflower is sensitive to Molybdenum deficiency and that is exactly the reason the cauliflower heads are much smaller than they would have been.   

Similarly different crops are sensitive to different micro nutrients deficiency.  To correct such micro nutrients deficiency applying micro-nutrients to horticultural crops is important.  It will enable farmers to produce more and earn more income.

Applying micro-nutrients to crop makes fruits and vegetables in particular more nutritive and have no negative impact to environment.

The question is does all the soils have the capacity to sustain the supply of required amount of plant nutrients to enable the farmers to harvest high economic yield years after years.  The answer is not.  If it is not, the farmers have to apply the additional supply from organic manure produced within the farm and from external sources. 

Meeting the additional requirement of plant nutrients along with organic manure is undoubtedly a sound proposition.  But on an average the cow manure contains 0.6% Nitrogen, 0.4% Phosphorus and 0.5% Potassium. 

The chicken manure contains 1.1% Nitrogen, 0.8% Phosphorus and 0.5% Potassium.  

The question is then; would the farmers be able to produce huge amount of organic manure to meet all the nutrients requirements, both major and micro-nutrients,  particularly the major nutrients which are required in large amount? 

Applying mineral based synthetic fertilizers does not outright pollute the environment or negatively impact human health. 

The question is how we apply and how much we apply matters. 

The best answer is to apply synthetic fertilizers judiciously and in integrated manner based soil test results and available organic manure. 

Maintaining soil health is as good as maintaining human health.  Testing soil to decide how much fertilizers and /or manure to apply is same as the medical doctors examining the patient and prescribing the medicine.  

Soil testing is yet to be part of agricultural practice in Bhutan.   It is unheard by the farmers about its importance and implication in crop production. 

Growing crops continuously without letting the soil to regain its plant nutrients supplying capacity naturally or without fully replenishing plant nutrients removed by successive crop has led to low crop yield and  soil degradation.   

Without full replenishment of plant nutrients being removed with every crop harvest,  farmers cannot continue to harvest high economic yield for ever. 

Synthetic fertilizers, when used judiciously along with organic manures in an integrated manner, help farmers to harvest high economic without posing environmental or human health concern.   

But prices of fertilizers in Bhutan is prohibitive which increases the cost of production and reduce the profit margin. 

The price of fertilizers in Bhutan is more than 100% compared to price across the border in India.  

For instance the cost one bag (50 kg) of Urea or SSP is just over Rs 400/= in India, while price of same stuff in Bhutan is Nu 895/=.  

High cost of fertilizers and similarly all other agricultural inputs increases the cost of production and the Bhutanese farmers loses the competitiveness against the Indian farmers.    

In India from where fertilizers are brought, just as the LPG gas, fertilizers are also subsidized and controlled items.  Ever since LPG sales is done by private sector, while fertilizer purchase and sale is done by civil service agency.  

The causes of huge price difference between that is India and in Bhutan remains mysterious.  Could the difference  triggered by subsidy factor, GST factor or some other unknown factor, which are never understood.  

Subsidy on fertilizers has always been a hard choice to agriculture policy makers.  During 1971 to 1981, agricultural growth in Asia has been much higher (19.6%) with subsidy in fertilizers and less (10.2%) without subsidy.  

In all developed and developing countries, providing subsidy to agriculture is a common practice.  

The level of subsidy in developed countries is much more greater than in developing countries, and the form in which it is provided differs.  

Generally in developed countries the products are subsidized while in developing countries inputs are subsidized.  

In the annual budget of India for 1015-16 the amount of subsidy for fertilizers alone is Rs. 73,500 crores (73.5 billions). 

Historically, agricultural subsidies have dominated the agricultural policy agenda in all economies -developed, developing and transitional.  In developed countries the subsidies have been mostly in the form of price support for both domestic and exports. 

Unlike the developed countries, developing countries have relied more heavily on input subsidies.  Fertilizer subsidies became popular for both political and economic reasons.  Politically, they became an instrument of pleasing farmers in the rural sector, and economically, the benefits out-weighted the cost of fertilizer subsidies.  

So long the benefits outweighs the cost of subsidy, the economist and policy makers should willingly support.  After all the WTO too under the Agreement on Agriculture (AoA) allows subsidy (up to 10% of the Agriculture GDP).

The economic and social benefits of subsidizing fertilizers and their assumed negative impact, which results only from excessive use and misuse, are least researched.  The policy is being framed either only on political reason or on misinformed information or both and this has been the cradle of problems. 

Also the move for going organic looming large not letting to practice balanced crop nutrients management and therefore starving crops for want of adequate major and micro-nutrients for producing economic yield.  Not using or applying micro-nutrients like Sulfur, Zinc, Boron Molybdenum, Calcium or Iron, which are needed by plants just as human being, is limiting yield of different crops. 

The first step towards going organic is reducing the current level of use of fertilizers and conversely using them judiciously.  The technology available for reducing the use of fertilizers in vegetables and fruit crops is being left to take up on its own.  

The drip irrigation to which the fertigation technology is integrated delivers plant to the roots of the crops only just as life saving liquid is injected to seriously ill patients in hospitals.  But the dilemma is that neither drip irrigation system with fertigation option nor plant nutrients have received due attention.  

Since drip irrigation saves water op to 70%, with same amount of water vegetables and other dry land crops can be grown during winter and spring months in mid altitude and low altitude ares which otherwise considered impossible.

Drip irrigation provides solution to revive the citrus industry and in achieving vegetables self sufficiency yet there is no prescribed investment support for promoting drip irrigation.

With drip irrigation along with fertigation there is a scope of saving 90% Urea (Nitrogen: -fertilizer), 80% MOP (Potassium: -fertilizer) and 45% SSP/DAP (Phosphorus: -fertilizers) currently being used for vegetables.  This will be a quantum leap towards going organic. 

Indian agriculture policy is probably the best among developing nations which subsidizes production technologies like green house, drip irrigation and others by both central government and state governments.  The extents are up to 25% by central government and 50% by state governments.  Besides in state like Punjab the government gives free electricity if a farmer goes for drip irrigation in large scale.  It is true that the subsidies are often given for political reason but it cannot shadow the economic reason for the purpose of diversifying production, import substitution, saving water, and reducing the use of synthetic fertilizers. 

In Bhutan practicing green house production is the most expensive proposition.  The primary cost of green house as such is high and to the base price 30% tax (custom duty and sales tax) is levied if imported from third country and 10% if imported from India.  The poly film needs to be replaced on a regular interval and to the poly film alone when imported, 40% tax is levies.  This is the scenario against up to 75% subsidy being given in India on protected cultivation. 

It is true that the issue of agricultural input subsidy and support mechanism are complex.  But we have huge institutional set up where large number of well qualified researchers are working who can do much needed policy research.  It is impending as more than ever the policy makers need guidance on how to resolve the possible conflicts between the need to encourage farmers to increase agricultural production realizing agriculture as a profitable enterprise and the hosts of issue including tax on production technologies and inputs, removing or not providing subsidies to high yielding hybrid seeds, green house, drip irrigation and similar others and going organic on its own right.

In Asia region, the country like Singapore which has over 6 millions population does not have villages, farms or rural societies, and imports all its foods.  It imports basic items from neighboring countries like Malaysia or Thailand, where the private sector of Singapore is engaged with local private sector.  The food standards are very high and so is production processes.  The production process for examples in Northern Thailand does not bar use of fertilizers.  Whatever plant nutrients are needed by the plants to produce high economic yield is provided to the plants in a manner that does not exceed the limit and standards so as to produce healthy food for healthy human health. 

Three things: good human health, serine environment, and high economic return, are the production principles pursued by Singaporean investors.  We too should actually aim at.  To achieve these three, we need wisdom and skills. 

Due to high input costs, the Bhutanese farmers lose competitiveness against their fellow counterparts across the border in India.  For instance the potato farmers across the border buy 50 kg SSP fertilizer bag at Rs 400/= per bag while Bhutanese farmers buy the same bag at Nu 895/= per bag.  

The Indian farmers across the border do not use herbicide for simple reason that potato is grown after rice and therefore the weed pressure is low.  The Bhutanese farmers use very expensive herbicide called Metribuzin, and Glyphosate banned in many countries, to control weeds in their potato crop.   

In spite of all, the average yield of potato in Bhutan is around 15 Mt per hectare where there is more than six month growing period, while across the border the Indian farmers harvest 30 Mt per hectare where the growing period is just over 3 months (90 to 100 days).  

It is not only high labor cost but the hosts of high input costs increases the production cost of Bhutanese farmers.

Low profitability of Bhutanese agriculture is mainly due to high input cost which is responsible for high prices of local produce.  It poses dilemma that rising urban population want cheap food as they spend substantial portion of their income on food. 

The question with regards to high input cost is; should farmers alone be forced to bear the cost, when society-at-large benefits from increased production, lower food prices, and a sustainable natural resource base. 

If Bhutanese farming has to sustain rural livelihood and provide employment opportunity to job seeking youths, the only option is to bring down the spiraling input costs.

The cost of fertilizers can be immediately brought down if fertilizers are grouped with LPG gas and imported in the same manner as LPG gas is imported MOEA at a subsidized cost, subsidized by the Government of India.  And by letting private sector to transport, distribute and sale just as LPG gas, the civil service agencies currently buying and selling fertilizers will be freed to do important development works.  In no countries in the world buying and selling of seeds, fertilizers, pesticides and other agricultural inputs is done by civil service agencies and there is no reason to be different.

Buying and selling hybrid vegetables seeds is just as buying and selling cars.  Different companies have different branded and patented products.  The product is continuously upgraded, and hybrid seeds cannot be reproduced.  If buying and selling of notified hybrid vegetables seeds is deregulated to private sector, the private sector entities competing in the market would supply more efficiently.  And the civil service agency involved in importing / purchasing and selling hybrid vegetables seeds upon adding profit could be meaningfully engaged in producing, supplying seeds of food crops such as rice, maize and others, supporting the goal of food self sufficiency.  

High cost of production technologies like green house could be reduced straightway by 30% by removing the custom duty and sales tax. 

Subsidy on drip irrigation is genuinely justified for it increases production, saves water and reduces the use of fertilizers and promotes organic practices. 

Reducing the use of fertilizers is the first step towards organic farming.  Most SSP, the phosphorus containing fertilizer is used by potato farmers.  Most Urea, nitrogen fertilizer is used by maize farmers of eastern Dzongkhags.   Currently around 3000 mt fertilizers are imported annually.  It is important that how we can bring down its price and use them most judiciously for maximum benefit and minimum impact.

The farmers of western dzongkhags use the herbicide Butachlor (5% granules) to control weeds in rice for which around 400 Mt is imported annually.  ver since Butachlor 5% granules was introduced in early 1980s no alternative has been found till date and no herbicide is promoted for controlling Sochum weed in rice for which farmers spend as high as Nu. 15000 per acre to control this weed.

The objective of agriculture has been to increase production but little attention is given in bringing down the cost of inputs which increases the income / profit even when the crop yield is not increased.  


The other pivotal area which have to be focused and supported is the cooperative marketing, a topic that warrants separate article.  

Customs Tariff and Sales Tax on Agriculture Inputs

Customs Tariff and Sales Tax on Agriculture Inputs

 Bhutan Trade Classification: Customs Tariff and Sales Tax Schedule (5th Edition, January 2012) imposes custom duty and/or sales tax or both on import and sales of seeds, green house, spare parts of agricultural, horticultural and forestry machinery, drip and sprinkler irrigation system and green house.  

Hybrid seeds increases production but their seeds are expensive.  Leveying 50% custom duty of hybrid seeds from third country makes the seed exceedingly expensive which actually denies the farmers from growing high quality hybrid seeds.  

Green house production increases labor productivity.  Low labor productivity is the real problem of Bhutanese farming.  Green houses are expensive but on top of high cost of it, 20% custom duty and 10% sales tax are charged.  To the polyethylene covering when imported for replacement, 40% tax is levied.

To the farm machinery custom duty and sales tax in not levied but anything listed as spare parts 10% custom duty and 5% sales tax are levied making them more expensive.
 
Fiscal Incentives 2010 (Second Edition), Section 3.1 says custom duty and sales tax are exempted only if agricultural inputs are imported for self consumption.  It means farmers have to import individually for their own consumption only.  This is completely absurd as every individual Bhutanese farmer cannot import what he needs.

The custom duty and sales tax levied on agricultural technologies and inputs imported for sale are making agricultural inputs expensive, uneconomic and unaffordable to the farmers.

Considering agriculture is the primary sector of our economy which engage 70% of our population and has the immense potential to increase production to substitute import, increase export and provide job for the youth the following points come to my mind: 

1.    Industrial tariff rates should not be applied to agriculture.

Duties and taxes of agricultural technologies and inputs will have direct negative impact on profitability.  It will not allow agriculture to be a viable livelihood alternative or create jobs or attract youth to practice agriculture.

2.   Custom duty and sales tax levied on agricultural technologies and associated inputs contradict with the policies of supporting agriculture development.

3.    Imposing customs duties and sales tax on agricultural technologies and inputs outstrips revenues that can be realized from increased production.  It will not help import substitution and export.  It hinders achieving agricultural growth targets.

4.    The current tax structure of agriculture technologies and inputs is affecting small land holding farmers more and much more in more remote areas.

5.    High taxes in agricultural technologies and inputs;
 
     (i)  lead to decline in agricultural production, productivity and       profitability.

       (ii)  increases food and agricultural commodity prices and give way to      poverty.

       (iii) poses impediment to creating employment in agriculture.

       (iv) leads to decline in production and export of agricultural products    

The impending task for supporting agriculture production growth is to review tax currently imposed of on agricultural production technologies and inputs.

The provisions of Bhutan Trade Classification: Customs Tariff and Sales Tax Schedule (5th Edition, January 2012) imposing custom duties and sales taxes needs to reviewed and revised in light of importance of agriculture sector is realizing economic growth with job for all and sustainability of the economy, food security and nutrition. 

The Fiscal Incentives 2010 (Second Edition) related Agriculture Sector should either be annulled completely or revised and align with Bhutan Trade Classification: Customs Tariff and Sales Tax Schedule.

 The department of agriculture is uniquely involved in buying and selling agricultural input as civil servants are involved in trading business which actually private sector should be doing.  

The fertilizers are needed even in organic farming though not the chemical fertilizers.  With zero input the output too is zero and in nature too there no magic.  Though organic farming is promoted Bhutanese farmers do use chemical fertilizers and farmers pay exceedingly high price.  A 50 kg bag of Urea or single super phosphate (SSP) cost only Rs. 400/- at Siliguri, India and the same bag cost Nu. 895/- at Phuentsholing, Bhutan.  

Imposing high taxes of agricultural technologies and inputs effectively leads to higher input prices and this will have two possible effects:  

First, farmers at the margin will not be able to meet the additional cost and they are compelled to practice low labor productivity and less profitable agriculture.  

Secondly, farmers who can afford to meet the increased cost of technologies and inputs will ultimately have higher cost of production and they may not like to invest in agriculture as the profitability is low.

Imposition custom duties not only increases the cost of production but also increases the food prices and reduces the competitive in export market.

The multiplicity of effects is likely to have significant negative implications on food security and income distribution.    

Indeed the tax on agricultural input will raise revenue but discourage agricultural production.  

Should we raise the revenue or discourage agriculture development?  

Economist should advise and we should listen to them.  

Economist should tell us how much revenue we collect with tax on agricultural inputs and what we gain with agriculture development spurred by removing the tax on agricultural inputs.

One thing is sure that we must incentivize investment for development of agriculture.  

Definitely tax on agricultural production technologies and inputs will discourage capital investment by private sector and farmers equally. 

High cost of production technologies and inputs influence the decision of a farmer to the extent whether to stay in the farm and continue farming.  

The economists maintain their views that "If a country wants to achieve faster agricultural growth, faster economic growth, and fewer poor people, it should stop taxing agriculture relative to other sector (Maurice Schiff & Alberto Valdes - World Bank)".   

In deciding taxation in agriculture, either inputs, export or otherwise, a fair assessment of revenue lost from no longer taxing agriculture is of great importance. 

Of late the custom duty and sales tax on Seeds and Micro Irrigation Systems  Systems (Drip and Sprinkler Irrigation Systems) are exempted but on green house and spare parts remains.