Rewarding the harvest: Why Sri Lanka must shift from input subsidies to output incentives

FOR decades, Sri Lankan agriculture has been shaped by a culture of expectation. Successive governments have conditioned farmers to wait for handouts—especially fertiliser subsidies—before a single seed is planted. While politically irresistible, this model has bred dependency, distorted markets, and ultimately failed to lift national productivity.

- By Bandula Nissanka

As the country now attempts a deeper policy reset, we must confront an uncomfortable but crucial question: Should public funds continue to subsidise the act of farming, or should they reward the results? The answer points squarely toward a shift to Output-Based Aid—a system where incentives are tied to verified production, not inputs, and enabled by robust digital infrastructure.

Input subsidies such as cheap fertiliser artificially suppress the real cost of production. This creates a harmful economic illusion: a lower break-even point that encourages farmers to “settle” rather than maximise yield. For instance, a paddy farmer enjoying subsidised fertiliser might meet their profit target at 1,800 kg per acre. Without the subsidy cushion, they would push toward the land's true potential—around 2,000 kg.