IN ITS MAY 21, 2022 cover story on India, the Economist noted that the Indian government used a direct, real-time, digital welfare system to pay $200 billion over three years to about 950 million people. How did this come about?
In January 2013, the government of India introduced the Direct Benefit Transfer or DBT scheme to streamline the transfer of government-provided subsidies from various Indian welfare schemes directly into the beneficiaries’ bank accounts. This has been one of the most ambitious financial inclusion initiatives ever seen anywhere in the world, bringing over 330 million people into the formal financial sector.
By 2020, 318 subsidy schemes from 53 ministries have been directly transferred to the farmer beneficiaries. And the program is so successful that India is now a wheat and rice exporter.
Here in the Philippines, we also provide subsidies to the farmers.
In a Nov. 9, 2012 press release, then Senator Franklin M. Drilon allayed fears of tobacco farmers and workers in Northern Luzon about the supposed drawback of the sin tax reform bill on their livelihood.
“Our farmers can be assured of a variety of assistance from the government once this sin tax bill is passed. We will double the safety net being provided under the law to help them augment their income and to support alternative livelihoods for the farmers,” stressed Drilon, the acting chair of the Senate Ways and Means committee. Under Republic Act 7171, tobacco farmers are entitled to a 15% share of the incremental tobacco revenue collected from the excise tax on tobacco products.
In a May 22, 2022 press release, the Department of Finance noted that in the first three years of its implementation, the law liberalizing rice trading has earned a total of P46.6 billion in rice import duties, which directly benefited palay (unhusked rice) farmers through a P10-billion annual fund created to finance programs that will sharpen their global competitiveness by way of farm mechanization, high-quality seeds, access to credit, and training.
Under Republic Act (RA) No. 11203 or the Rice Tariffication Law (RTL), tariffs collected from rice imports go to the Rice Competitiveness Enhancement Fund (RCEF). Collections in excess of the P10-billion fund go to the Rice Farmer Financial Assistance or RFFA. The law took effect on March 5, 2019.
The big difference between India and the Philippines is that the subsidies in the Philippines are not in cash deposited directly to the bank accounts of farmer beneficiaries. Instead, they are coursed through an intermediary, the Department of Agriculture. The Department of Agriculture was mandated to procure the agricultural inputs and, more importantly, advise the farmers on their proper use. The expected result in the case of the rice farmers is that with the added advantage of a 35% tariff on imported rice, they could compete against the rice imports.
Alas, such has not been the case. Our agricultural sector continues to be a drag on our economy and, judging from the complaints of the farmers, the Department of Agriculture has not made them competitive in rice as well as in numerous other agricultural commodities.
We argue that we should follow the Indian model of converting all agricultural subsidies into cash for direct deposit to the bank account of the farmer beneficiaries.
In the interest of efficiency, modern technology now allows us to bypass the middleman. We are no longer reduced to the unpalatable alternative of continually shoveling good money to the middle man in the forlorn hope that they will exceed our modest expectations.
But there are more compelling policy, nay, moral, issues that should compel us to adopt the Indian model. Under the present system, the government in effect tells the farmer, “I will help you only on condition that you continue to be a farmer no matter your talent or inclination. Hence, I give you agricultural inputs and this middleman and not cash.”
Far better for the government to tell the farmer, “I am depositing this cash into your bank account. As an adult you may use the money to improve your farm or explore another livelihood or send your children to school. That is your choice.”
Critics will argue that many farmers will now abandon farming. I agree. Surveys indicate that many farmers do not wish their children to follow in their footsteps and become farmers. For me this is not an unwelcome outcome.
In 1900, 40% of the US population were farmers. By 2016 only 1% were farmers. And yet this 1% of the population produces more than enough food to feed the more than 300 million Americans and a good portion of the world, the Philippines included.
Apparently unlike the Philippine Department of Agriculture, the US Department of Agriculture did not define its mission as sustaining the teeming number of farmers to subsist in a marginal livelihood, but rather to nurture a group of progressive and entrepreneurial farmers who have astounded the world with their productivity.
Dr. Victor S. Limlingan is the chairman of the Cristina Research Foundation, Inc., a public policy advisory firm, and the Regina Capital Development Corp. He is presently a Regent of the Board of Regents of the Pamantasan ng Lunsod ng Pasig. Among the books he has written are The Overseas Chinese in ASEAN: Business Strategies and Management Practices and The Visible Hand and the Developing Economy. As public policy adviser to the legislative branch, he advised on legislation such as Kalakalan 20, Overseas Workers Development Fund, the charter of the Banko Sentral ng Pilipinas and the EPIRA Law.