Public Expenditure Review of National Agricultural Input Voucher

Scheme (NAIVS)

September 2013

• Study conducted by:– Department of Policy and Planning (MAFC)– Policy Research for Development (REPOA)– World Bank

• Purpose:– Review gains achieved– Evaluate gains relative to costs– Summarize lessons

Objectives of NAIVS

1. Raise domestic grain production in order to:– reduce the probability of imports in the face of

the 2008 global price increase, and

– reduce the rate of food price inflation

Global (and regional) maize prices had sharply increased in 2008

Rising grain prices

NAIVS initiated

Objectives of NAIVS

2. Increase adoption rates of improved seed and fertilizer

– Introduce potential new adopters to improved seed and fertilizer

– Share the risks of experimentation with these inputs

– Encourage successful graduation to commercial purchases

Global fertilizer prices (e.g. urea) had increased even more

Rising fertilizer prices

Households Targeted• Full time farmer

• Household cultivates less than 1 ha maize & rice

• Farmer willing to use inputs following recommended practices

Farmer willing and able to pay 50% of the input costs (top-up)

• PriorityPriority given to female headed households, & farmers not using improved seed & fertilizer in previous 5 years

ie. “middle class”, not the poorest

Regions Targeted2009 Planned 2013 Actual

Iringa MbeyaRuuvuma RukwaArusha KilimanjaroKigoma TaboraManyara MaraMorogoro

Iringa/Njombe MbeyaRuuvuma Rukwa/KataviArusha KilimanjaroKigoma TaboraManyara MaraMorogoro

Mtwara LindiTanga PwaniDodoma ShinyangaSingida GeitaMwanza Kagera

From 2009, the program was being expanded into drier parts of the country, and more outlying areas

NAIVS Strategy

1. Farmer receives 3 vouchers (for 1 acre) – Maize or rice seed– Basal fertilizer (50 kg)– Top dress fertilizer (50 kg)

2. Bring 50% cash top-up to local agro-dealer and trade with voucher for inputs

3. Agro-dealer gets voucher countersigned by DALDO, and redeemed for remaining 50% of input costs at National Microfinance Bank

4. Farmer ‘graduates’ after 3 years of assistance

NAIVS Coverage and Costs

Season Number of Households Targeted

Cost Share of MAFC budget

World Bank support (targeted 3 years)

2008/09 737,000 Tsh 50 b (?) 42% 0

2009/10 1,500,000 Tsh 115b 50% 50%

2010/11 2,011,000 Tsh 122 b 44% 50%

2011/12 1,780,000 Tsh 127 b 49% 80%

2012/13 940,783 Tsh 64 b 27% 15%

In addition, World Bank funding under the Accelerated Food Security Project supported i)strengthening of seed production systems; ii)training of agro-dealers; iii) independent impact surveys.

Implementation Challenges

• Delays in printing and distribution of vouchers (esp 2011/12 season)

• Delays in delivery of inputs

• Delays in payment of agro-dealers & seed & fertilizer suppliers

• Misallocation/misuse of vouchers

Did the NAIVS improve national food security?

• 2009/10 to 2012/13 (last 4 years) – Approximately 2.4 million t additional maize

• Worth about Tsh 840 billion (farmgate = Tsh 350)• Worth about Tsh 1.34 trillion (import parity =Tsh 560)

– Approximately 71,000 t additional paddy• Worth about Tsh 42 billion (farmgate = Tsh600)

Did the NAIVS improve maize and paddy yields (kg/ha)?

• Average yield gain across all households– maize 420.3 kg/acre [ave vouchers redeemed 2.5]– rice 286.5 kg/acre [ave vouchers redeemed 2.2]

– Because • vouchers were late (or not delivered)• Inputs were late• Vouchers were shared• Voucher were sold

But is the use of improved seed and fertilizer

profitable?

NAIVS input package is unprofitable for “average farmer” at 2012 prices

Benefit cost ratio

Maize•At commercial farmgate prices: -20% to +93%

ie. No immediate investment return

•At import parity prices: -12% to +501%

PaddyAt commercial farmgate prices: -29% to +50%

Maize Yield Frequency Distribution – 2010/11

17Fertilizer is profitable Fertilizer is not profitable

Paddy Yield Frequency Distribution 2010/11

18

Did farmers successfully graduate?

• 60% of expected graduates (after 3 years) still received vouchers a fourth year– Another family member enrolled?

• Graduates purchasing inputs without vouchersPreviously tried inputs Not previously tried inputs60% bought improved seed 47% bought improved seed44% bought fertilizer 19% bought fertilizer

Key Factors Influencing Return on Investment

• Fertilizer Use Efficiency (kg grain per kg N)

• Farmgate cost of inputs– High transport costs; High costs of Late Payment

• Farmgate Price of grain product– Surplus vs deficit region

– Time of sales after harvest

Conclusions

• NAIVS offers a positive rate of return if this reduces purchases of expensive imported grain – esp maize

• NAIVS offers little or no return based on domestic farmgate prices for grain surplus households

------Use the subsidy to reduce dependence on imports,

but not to expand exports

Conclusions

• NAIVS offers a negative rate of return if the subsidy displaces commercial input purchases which would otherwise have taken place

---

Once farmers understand the value of a new variety or fertilizer, and can use these inputs

well, they should find then profitable, and pay for them on their own

Conclusions

• NAIVS has contributed to improving adoption of improved seed and fertilizer – based on continuing purchases after graduation

-----Commercial seed and fertilizer companies are

optimistic about further commercial market growth

Conclusions

• Fertilizer is not financially profitable unless fertilizer use efficiency is high – e.g. for better farm managers– Need more extension support– Better targeting of nutrients

------Investments in speeding the adoption of improved

seed offer much higher rates of return than investments in speeding fertilizer adoption

Conclusions

• Graduation can also be facilitated with improvements in marketing efficiency

E.g. – bulk purchase of inputs to reduce cost; – sell inputs when crop sold; – strengthen credit supply; – improved product market efficiency leading to

improved prices: warehousing, auctions, etc

One of many input subsidy investments

2010-2011 Input Subsidy Cost in TZS % of Total Crop Subsidy Cost

Crops Fertilizers for Maize and Paddy 91,749,331,000.00 62 (NAIVS)

Improved Maize Seeds 35,185,120,000.00 24 (NAIVS)

Improved Paddy Seeds 594,840,000.00 <1 (NAIVS)

Sunflower Seeds 54,560,000.00 <1

Sorgham Seeds 305,440,000.00 <1

Improved Cotton Seeds 1,537,400,000.00 1

Cotton Agrochemical 8,518,350,000.00 6

Cashew Agrochemical 6,890,850,000.00 5

Improved Coffee Seedling 1,800,000,000.00 1

Improved Tea Seedling 1,800,000,000.00 1

Livestock Veterinary Support Data not available Data not available

Source: Ministry of Agriculture, Food and Cooperatives

86%

Footnote: Returns to Seed

• 290,000 households given 2.5 kg sorghum seed• Cost of delivery Tsh 402 million• Average yield gain 10%• Value of yield gain Tsh 870 million

• Benefit cost ratio 216% in year one[but benefit cost ratio for same OPV variety in year

two is negative]Returns to public investment in getting newnew varieties

to farmers are very high