Does subsidizing seed help farmers? Nepal's rice seed subsidies

Motivation

Improved seed adoption can increase yield, enhance food security, improve livelihoods, and reduce poverty. Although many governments in the global South use seed subsidies to achieve these outcomes, the success and efficiency of input subsidies is subject to debate.

Most smallholders in Nepal lack information and finance to access improved technologies, including improved seeds. To address this, Nepal's universal seed subsidy programme (SSP) began in 2012. SSP offers participants up to 50% off the price of rice seed from improved varieties.

Purpose

We evaluate the impact of SSP on farmer participants five years after its inception. Until now, the programme had not been evaluated.

Approach and Methods

We compare rice-growing households receiving subsidized seeds (treatment group) with those that do not (control group). We match the two groups using propensity scoring. We compare rice yield per hectare for the two groups, looking at aggregate and heterogeneous treatment effects. Primary data come from a 2019 survey of 157 treated and 173 control farm households in the Terai lowlands.

Findings

We find no evidence of SSP impact on rice yield in the aggregate. One potential explanation is that the programme tended to promote seed of a long-standing open-pollinated variety (OPV), rather than newer, higher-yielding OPVs and hybrids. Examination of heterogenous impacts, however, shows higher yields among treated households who were either on low incomes or remote from agro-dealers and agricultural extension offices.

Policy implications

Given the lack of impact on yields of SSP, sustaining the programme in the same form is neither advisable nor justified. We suggest targeting households on low incomes and in remote areas; subsidizing only the more recent high-yielding varieties; and considering cost-effective approaches to administer the programme, such as seed vouchers. To improve last-mile seed delivery, SSP needs to engage more with private seed providers and be more transparent in its operations. Results from this study may have broader implications for other long-standing agricultural subsidies in Nepal and other developing countries with universal subsidy programmes.