Economic Effects of Fertilizer Subsidy on Major Crops Productivity in Pakistan

Abstract

Based on time series data set (1990-2022) this study was conducted to estimate the economic effects of fertilizer subsidies on major crops productivity in Pakistan. Majority (90%) of the farmers having small land holding size are not in a position to apply inputs like fertilizer which incurred 15-20% of total cost of production. Three types of analysis were employed i.e., Trend analysis, Correlation analysis and Regression analysis. The trends in growth rate of fertilizer use along with trends in growth rate of respective crop yield have been sketched with different trends. The correlation analysis between fertilizer subsidy and yield (kg ha^-1) of major crops i.e. wheat, rice, sugarcane, cotton and maize has been calculated with positive correlation coefficient values as 0.459, 0.468, 0.351, 0.224 and 0.551 respectively. The simple linear regression analysis depicted that a rupee of one billion PKR subsidies is significantly increased the crop fertilizer usage (000 tons nutrients) of wheat (37.10), rice (14.97), sugarcane (13.60) and cotton (40.12) as well as increased the crop yield (mound acre^-1) of wheat (0.26), rice (2.04), sugarcane (32.93), maize (62.17) and cotton (0.19) respectively which indicated that the yield of the crops is also positively affected by fertilizer use and fertilizer subsidy. The elasticity of yield with respect to fertilizer subsidy also confirmed the regression analysis results. Although yield is inelastic to subsidies; however, one % increase in fertilizer subsidy resulted in 0.043, 0.061, 0.044, 0.022 and 0.207 (%) increased in yield of wheat, rice, sugarcane, cotton and maize respectively. Based on positive values of coefficients, it is concluded that the fertilizer subsidies should be distributed more efficiently to enhance the productivity of crops.