Journal of Economics

In transition countries, such as a net tax declined from an average of 15 to 4%, but within this group of countries there are significant intercountry differences. Some of them went to the protectionist measures against agricultural sector (Indonesia, India, Malaysia and Thailand), others have continued to impose his taxes, albeit at a lower level than in 1980. (Egypt and Senegal). Zimbabwe – the only country in this group, which had a higher net tax in this sector of the economy, mainly because of strong overvaluation of the currency. There was also a significant shift in the relative level of support in favor of the agricultural sector, in contrast to the nonagricultural sectors of the economy, but noted the desire to avoid significant bias.

There are differences in agricultural exports and imports. Transition countries for the period between 1980-1984,.and 1 in 2000-2004 on average, slightly reduced the protective measures against agricultural imports from the value of the customs tariff of 13 to 11% and reduced the export tax from 29 to 13%. The net tax for countries in Latin America, especially in the first period under consideration, may be understated relative to the actual value because the assessment does not take into account inflated exchange rates. (The calculation for each time period using the official exchange rate).

As developing countries become wealthier, they tend to reinforce measures to protect agriculture. Both China and India over the past three decades have significantly reduced the distortions in agricultural policy, both directly and indirectly through the weakening of the favored treatment for the manufacturing industry. These trends are very similar to the situation in more developed economies of Northeast Asia when they had the same level of per capita income. China loosened the discrimination of the agricultural sector at a later stage of economic development in comparison with India, but in both countries there is a tendency to increase support to agricultural production as compared to non-agricultural sectors of the economy (measured by the index of the relative level of support – PMO). Joining in 2001, the WTO, China has frozen customs duties on agricultural products at a relatively low level. The challenge now is to maintain a preference for certain sectors to insignificant levels without causing any increase of protectionist measures in agriculture, as has happened in other countries, when they were on the same stage of economic development.

Note. The relative level of support for agriculture is

100 * [(100 + LVC-agrarn.t) / (100 + LVC-neagrarn.O - 1]

Where NFA-agrarn.t have a nominal level of support to producers of agricultural export industries,

and NFA-neagrarn.t is a nominal level of product support non-agricultural industries (mainly mining and manufacturing).

Lower the index value is -100 and reaches zero at the same nominal level of support for both agricultural and nonagricultural sectors.

Nominal level of support (NFA) of farmers defined as the difference between the price of the product in the domestic market (plus any subsidy on output) and its price at the border, expressed as a percentage of the price at the border (ie, taking into account transport costs, differences in quality etc.). This nominal figure measures the difference in prices of export products, however, distortion may occur at the level of production costs. To detect such distortions in the countries where they are significant, the nominal rate adjusted (and is expressed as the equivalent of the export price) to account for direct payments to production factors and differences in international prices for them and the prices that farmers pay for them. If a country allows for distortions in the foreign exchange market, efforts are made to account for the difference between the exchange rates used by importers (may be the existence of parallel exchange rates) and exporters (calculated weighted average value of the parallel and official exchange rates), and establish an approximate equilibrium exchange rate.

In India, where 55 to 60% of irrigated land use groundwater reserves, the supply of electricity, providing water pumps for work, are important. Most state governments deliver it to farmers at subsidized price of a single, and often for free. However, the quality of the service is low because of the instability and limited supply and voltage drops, which leads to loss of crops due to failure of pumping equipment and lack of irrigation.

In addition, subsidies for energy supply of the agricultural sector are devastating from a financial point of view and are harmful to the environment. In Punjab, the volume in 2002/03 reached 7% (low) cost of the state. Coupled with other measures, encouraging the (farmers) to grow moisture-loving crops such as rice subsidies for energy leads to over-exploitation of groundwater. About 60% of their resources in the state already overstretched – the level of water extraction exceeds the level of fill – and the situation in this area, clearly, is unstable.

From a technical and economic point of view common step would be to raise the prices of electricity and the establishment of water measuring devices, but politically it is still feasible. Obviously, the subsidies benefit more from large-scale farmers, who also have political influence, but the problem could be addressed in a broader context.

Introduction of subsidies followed the mass peasant protests against the increase in electricity prices in the eighties. Under current conditions, the continuation of this practice is a response to the growing income disparity between agricultural and non-agricultural sectors, compounded by relatively low growth rates of the first. Free electricity – it’s politically convenient way to move income in the agricultural sector. In contrast to other policy instruments, it does not require participation in the performance is often inefficient public administration. Farmers who buy water from pump owners – and in most states, their number is quite significant – potentially also benefit from subsidies, which increases the attractiveness of this political tool for politicians to win election in his state.

Joint address to the problem of power quality and cost is a key element of reforming subsidy policies. However, due to large scale theft of energy and its loss of the state administration does not enjoy sufficient credibility in order to improve the quality of its supplies in exchange for higher prices. One option could be a decentralization of power supply to the level of local governments or community groups, with the laying on them greater responsibility for improving its quality. Although the problem of non-strengthening of the power elite in this case continues to remain valid, option-oriented community, could be the solution to the impasse. It hath revealed to an example of a compromise between the potential costs of losses due to cancellation of economies of scale in the case of decentralized electricity supply and the lack of any progress at all.

In Zambia, agriculture takes about 5% of the national budget. In FY 2005, over half of agricultural appropriations have been spent on program support the fertilizer market (37%) and market crops (maize) under the Agency’s food resources (15%). Only 3% of (agricultural) of the budget went into the development of irrigation and other rural infrastructure, and 11% in operating costs, which included agricultural research and extension. Expenditure on R & D in agriculture declined from 1.2% of agricultural GDP in 1985 to about 0,5% in 2000

Why is fertilizer subsidies so significant? There are no powerful groups who would receive benefits from their removal, although the subsidies are unproductive use of public resources. This contrasts with the earlier reforms in the field of grinding corn when the private sector will benefit from privatization, and provided substantial support for reform. The program subsidizing the cost of fertilizer often benefit traders.

Household survey in 2002/03 showed that fertilizers have gained only 29% of the farmers, of whom 59% had done so through private dealers, and 36% through a government program to support the fertilizer market.Representatives of both groups belonged to the wealthier and richer farmers and lived near the village gudronovyh roads and district centers. However, those individuals who received fertilizer through the government program, were mostly salaried civil servants, despite the fact that the program was aimed at the poor. Its benefits were also various members of parliament, sometimes conveyed to farmer groups that they can not return received for the purchase of fertilizer loans.