Blockchain: Combatting the challenges of Agricultural Subsidy Management System

agricultural subsidies
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Agriculture is the most engaging and essential industry in the world. The agriculture and its related industries contribute $992 billion to U.S. gross domestic product (GDP) in 2015, along with providing 11% of total U.S. employment, which is about 21.6 million jobs. Agriculture sector employs about 40% of the total global workforce. According to the Food and Agriculture Organisation of the United Nation, more than 60% of the world’s population depends on agriculture for their survival. The figure hovers over 90% in Latin America and sub-Saharan Africa countries.

agriculture gross domestic product

Blockchain technology has come up as the most robust and secure technology of present date and this underlying technology is bound to make inroads in every sector. Starting from the banking and financial sector, the technology is disrupting other prominent industries including healthcare, energy, retail, governance, supply chain,  and agriculture in the most unimaginable ways. In this blog, we will discuss the implications of Blockchain on Agricultural subsidies.

Blockchain on Agricultural subsidies

Blockchain in Agriculture

Blockchain technology has several opportunities to solve mammoth challenges plaguing the Agriculture sector. From managing the very complex multi-continental agricultural supply chain to transmitting real-time data about crops and livestock, Blockchain technology can provide consistency to wide areas of the Agricultural industry.

Blockchain in Agriculture

One of the most transparency requiring sector of Agriculture industry has been the system for disbursement of subsidies. Farmers across the globe are dependent on their government for subsidies. The big question on transparency still haunts the agricultural sector that is, whether the benefit of agricultural subsidies really reaches the farmers?

Role of Agricultural Subsidies for the farmers

The debate around agricultural subsidies is not new. For instance, $4.9 Bn, were allocated by the Indian government in the 2017-18 budget for agriculture-related subsidies to farmers. But what makes them this important for farm holders and nations? The Agricultural subsidies are necessary to reduce the dependence of nation to source food from across the border, thus, making it self-sustained when it comes to food. Also, most of the farmers in developing nations are smallholders and poor, providing subsidies to such farmers gives them access to consistent income. Agricultural subsidies also enable the government to control the food supply by ensuring that the farms produce the required amount of any crop or meat as per the requirement of the population. Every year governments across the globe distribute millions of dollar in the form of subsidies. But these governments are not transparent and accountable about the subsidy management process.

Agricultural Subsidies

Jaspreet Bindra, senior vice president of digital transformation at Mahindra Group says, “With 119 million farmers, 16% of the country’s gross domestic product and close to 8,000 farmer suicides a year, farming is in distress.”  He further says, “The reasons for this crisis are well known—ineffective subsidy management, lack of insurance and loans, small land holdings, lack of mechanization, and lack of information. The Blockchain is best suited to solve such problems.” Mr. Bindra narrates the tale of Indian subcontinent only wherease several other developing and under-developed countries face similar challenges in Asian and sub-African region.

Challenges of Present Agricultural Subsidy Management system

In the present subsidy management system, there are countless loopholes like lack of banking infrastructure which can leave a certain section of subsidy-eligible farmers deprived of their rights. Lack of data for ascertaining eligibility and lack of tools to track utilization of funds has also come up as the biggest of the threats infecting the whole Agricultural subsidy management for decades. The other major risk has been the probability of double-dipping where a farmer can receive benefits twice due to incorrect or flawed data.

Blockchain for subsidy management

Leveraging Blockchain technology for delivery, management, and utilization of subsidy can make the whole system more traceable and transparent. Any Blockchain enabled decentralized network brings with itself its inherent features like consensus, trust. immutability, smart contracts, and provenance. All these features can bring transformational changes in the Agricultural subsidy management process by making it decentralized, farmer-friendly and by establishing trust and transparency. A Blockchain enabled database that embraces smart contracts and automation on several accounts would facilitate the transfer of subsidy payments in a cost-efficient manner and instantly.

Self-compliance through smart contracts and the introduction of IOT on a Blockchain-powered network would make it easier for the leasing of private land. this can be done by establishing provenance and determine a more open compensation payment module, benefitting the poor small farmers. A platform which harvests the full potential of Blockchain and its inherent features would make distribution and delivery of subsidies more transparent. This will also result in targeted disbursement of subsidies plugging pilferages in the existing system.

The mammoth task of bringing together multiple stakeholders for collective and more productive farming would be a dream-come-true with the usage of the essence of Blockchain. Introduction of Blockchain in the disbursement of Agricultural subsidies would completely revamp an already bloated, unsophisticated tax burden system. This system doesn’t consider individual businesses’ financial circumstances or market conditions.

Indian Government leveraging Blockchain for Agricultural Subsidy Distribution

In June 2018,  NITI Aayog along with Gujarat Narmada Valley Fertilizers and Chemicals Limited (GNFC) have signed a Statement of Intent (SOI) to work towards implementing Blockchain technology for Fertilizer Subsidy management. These organizations intend to undertake research, interact with multiple stakeholders, exchange learnings, organize forums, develop Blockchain solutions, and disseminate learnings across their networks.

The parties believe that leveraging Blockchain into the system would make compensating farmers more efficient and that too without the extraneous validation processes. Rajiv Gupta, Managing Director of GNFC said, “With the adoption of Blockchain technology, it is expected that distribution will become efficient and subsidy transfer would be automated and in real time.

Conclusion: Blockchain and Agricultural Subsidies

Blockchain appears to be a panacea of the diverse issues which have been plaguing the agricultural and food sectors for countless decades. The integration of Blockchain technology will make the process of disbursement of agricultural subsidies more transparent, immune to leakages, and efficient. By providing a single database containing records of farms across the boundaries, Blockchain would minimize the strain of record-keeping and maintaining multiple record systems.

But with all these promises guaranteed by Blockchain and its applications, it is important to realize that Blockchain alone won’t uplift poor farm holders out of poverty. It would provide the technological infrastructure for digitization, automation, and tracking while introducing several new and small farm holders into modern agriculture. This new advancement will offer endless opportunities for the agriculture industry to grow and prosper.

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