Agricultural Producer Support Policy in Iran and Selected Countries

Article excerpt

Abstract

Agricultural policies in Iran have aimed at achieving self-sufficiency in food productions through the government various policies. The aim of this paper is to examine the current level of protection which may exist in agricultural sector in Iran and other countries. The results indicate that the PSE in Iran is much higher than the OECD and is close to Japanese and Korean PSE percentage (i.e. 58 and 64 percent). The broadest indicator of support representing the sum of transfers to agricultural producers (PSE), expenditure for general services (GSSE), and direct budgetary transfers to consumers, reached 83 billion Dollars per year in 2001-2005 which is almost equivalent to 13.4percent of Iran's GDP in this period. This is much higher than the OECD average and suggests a relatively high burden of agricultural support on Iran's economy.

Keywords: Iran, Producers, Support Policy, PSE, GSSE

JEL Classification: Q18

Introduction

Farming is one of the most important social and economic foundation stones of Iranian life and culture. Policy in the sector has been driven largely by the need to rely on domestic production to meet the needs of a rapidly increasing demand. Due to geopolitical considerations, Iran places emphasis on maintaining high levels of selfsufficiency in order to provide for food and security, ensuring farmers a decent livelihood and relying on imports from developing countries.

During the early period after revolution in 1979, the policy concentration was on the attainment of rapid economic growth to consolidate the economic base of the country upon which the socio-economic objectives were to be achieved. Policy in this sector has been driven mainly by self-sufficiency; import and export controls, together with domestic support, have been used to ensure that domestic supplies meet domestic demand. The agricultural sector has been shielded from foreign competition by tariffs and/or non-tariff barriers, including quantitative restrictions, import licensing, price controls (on inputs and final goods), and marketing restrictions. Due to geopolitical considerations, Iran places emphasis on maintaining high levels of self-sufficiency in order to provide for food and security, ensuring farmers a decent livelihood and relying on imports from developing countries. Thus, in addition to price supports and input subsidies to ensure remunerative prices for farmers and reduced costs of production, the Government has put in place procurement and distribution measures to ensure supply of essential foods to the population through a public distribution system.

The government of Iran through subsidy tries to reduce the price paid by farmers for inputs such as fertilizer, pesticides, feed, seeds, machinery, energy, water, insurance, credit and infrastructural facilities. The support of farm product prices, have often been viewed as an instrument for raising farm income. Farm Price Supports are said to improve rural welfare because farmers are believed to constitute the poorer section of the country. Another rationale for farm price policy support is to provide the incentive to farmers to increase production of given corps.

Price policy in Iran is also viewed as an instrument of stabilization and reducing mean of year-to-year price fluctuation. Price policy has also been viewed as an instrument to speed up the process of economic development. The most obvious effect of agricultural price policy is on the production of the affected crops. PSE is an indicator of the annual monetary value of gross transfers form consumers and taxpayers to support agricultural producers, measured at the farm-gate level, arising from policy measures that support agriculture, regardless of their nature, objectives or impacts on farm production or income. The PSE measures support arising form policies targeted at agriculture relative to a situation without such policies ,i.e.; one in which producers are subject only to general policies (including economic, social, environmental and tax policies) of the country. …