OAG report reveals misuse of farm subsidy in Karnali

Every year, the Karnali Province government distributes different subsidies to boost production and productivity in the agriculture and livestock sectors.

The provincial government has been implementing these subsidy programs through the Ministry of Land Management, Agriculture and Cooperatives, and its subordinate agencies, as well as through local units. However, the Office of the Auditor General (OAG) has pointed out in its annual reports that subsidies for agricultural technology promotion, agricultural infrastructure development, procurement of farm equipment, and the promotion of livestock businesses have failed to yield the desired results. Moreover, it said that the provincial and local governments have not conducted follow-ups to gauge the effectiveness of these programs.

The annual reports of the OAG from fiscal years 2017/18 to 2022/23 clearly state that no study or analysis has been conducted on the contribution of subsidy programs in increasing production and creating employment. This has raised questions about the effectiveness of the millions of rupees invested in farm subsidies.

According to the OAG’s annual report for the fiscal year 2022/23, the Ministry of Land Management, Agriculture, and Cooperatives distributed Rs 138.46m for the promotion of agricultural technology, agricultural infrastructure development, expansion of livestock health services, and procurement of agricultural equipment, among other purposes, in 2022/23. Additionally, it provided farmers with another Rs 46.94m as a subsidy for insurance premiums. Subsidies have also been provided by the federal government’s Prime Minister’s Agriculture Modernization Project.

In its report, the OAG has directed the provincial and local governments to study the effectiveness of such subsidy programs. “There is no system for inter-agency coordination in the distribution and use of subsidies,” the report said, adding, “Due to a lack of coordination with local units, the use of subsidies has not met expectations.”

No list of beneficiaries 

The ministry has developed procedures for the distribution of farm subsidies. However, the targeted farmers in Karnali have not been properly listed. Consequently, the subsidies provided by the government have not reached the intended recipients. According to the report, the provincial government provided Rs 39.67m in interest subsidies for Rs 712.15m worth of concessional loans taken by 1,227 agri-entrepreneurs in 10 districts of the province. However, there is no certainty that the loans were used to run industries as the provincial government has not submitted any supporting documents, the report states.

The report has urged public offices to regularly monitor the subsidies and measure the achievements to ensure that the loans provided are used for the specified purpose.

Similarly, the ministry has provided Rs 220m to 20 subordinate offices for the procurement of farm equipment, promotion of vegetables and fruit farming, distribution of cattle of improved breeds, and youth self-employment programs. These programs are also being implemented by the federal government and various agencies under the provincial government and local units. There is a lack of inter-agency coordination for the implementation of these programs, according to the OAG report.

During the same year, the Agriculture Development Office, Dolpa, distributed Rs 9.16m as subsidies to 47 profit-oriented farms and individuals. Likewise, the Agriculture Development Directorate, Surkhet, provided a subsidy of Rs 17.88m to 162 profit-oriented firms and individuals. The report states that the directorate has not maintained records of the subsidies distributed.

Irregularities in subsidy distribution

The Veterinary Hospital and Livestock Service Office, Dailekh, provided a subsidy of Rs 7m to the Rural Agriculture Multipurpose Organization to implement a program for distributing 100 cows of improved breeds to farmers. In its proposal, the organization stated it would distribute Holstein and Jersey cows and cover any budget shortfall through internal resources. However, the OAG report indicates that the organization distributed cows of local breeds to the farmers.

Furthermore, the organization collected Rs 15,000 from each beneficiary farmer and also received a Rs 500,000 subsidy from the concerned local unit.

Multiple subsidies for the same program

According to the OAG report, the ministry provided a subsidy of Rs 850,000 to a local cooperative to build a cold storage facility. However, the cooperative also received a Rs 5.85m subsidy from the Raising Incomes of Small and Medium Farmers Project. Additionally, the Agriculture Development Directorate provided another Rs 6.65m subsidy to the cooperative for the same purpose. The OAG report for the fiscal year 2019/20 stated that farmers have not received any benefits from these subsidies and called for a necessary investigation.

Subsidies to Private Firms and Companies

The ministry provided subsidies ranging from Rs 200,000 to Rs 500,000 to nine profit-oriented business firms and companies in the fiscal year 2017/18. The report noted that the ministry provided a total subsidy of Rs 2.2m to private firms and companies, violating the provision that subsidy amounts can only be provided to consumer committees and beneficiary communities.

The number of people dependent on agriculture in Karnali is significant. However, in terms of production, Karnali has not been able to become self-reliant. Government statistics show that only 30 percent of households in Karnali are self-reliant in their own production. According to the National Agricultural Census 2021, 70 percent of households engaged in farming do not produce enough to sustain themselves year-round.

Devendra Godara, a leading farmer from Dungeshwar Rural Municipality-6 in Dailekh, said that the agricultural subsidies provided by the government have not been utilized effectively. “The subsidies received by genuine commercial farmers seem to be well-utilized, but those who get subsidies based on political affiliation and access misuse the subsidy amounts,” Godara said.

He also called on the government to revisit its subsidy program. “Subsidies should be given based on the area of land cultivated or the number of livestock. Only then will the subsidy program be effective, production will increase, and the living standards of farmers will also improve,” he added.