The Chinese government has pledged to earmark 10 billion yuan (US$1.21 billion) this year from its grain risk fund to directly subsidize grain farmers.

Premier Wen Jiabao said Friday at the opening of the Second Session of the Tenth National People's Congress that problems concerning agriculture, rural areas and farmers were top priority in all government work this year.

Wen outlined plans for direct subsidies to farmers in the major grain production bases of 13 provinces, who have suffered long-term falling output and slow income growth.

From 1997 to 2003, the per capita income of farmers rose 4 percent annually on average, in sharp contrast to an 8-percent jump in the disposable income of urban dwellers. Last year, the per capita income of rural residents was only 2,622 yuan (US$316), less than one third that of city dwellers.

"The policy will revive farmers' motivation for grain production," said Jin Renqing, Minister of Finance.

In a two-year trial of the policy in east China's Anhui Province, farmers earned an average 20 yuan (US$2.4) in subsidy for each mu (0.067 hectare) of grain cultivation.

This year, the policy is to cover 13 provinces, including Heilongjiang, Jilin and Henan, which are designated as the country's major grain production bases. Farmland in the 13 provinces is 69 percent of the country's total, and their grain output accounts for 72 percent and their annual sales of corn, wheat and rice amount to 85 percent.

"Better protection of these farmers will ensure a stable national grain supply," Jin said.

The former centralized system provided subsidies to state-owned grain enterprises to purchase grain at protected prices, usually higher than market prices, which succeeded, to some extent, in protecting farmers' interests.

However, farmers benefited a little from the subsidies, as most of the money was pocketed by intermediate purchasers.

The government had ordered local financial departments to open special accounts for direct subsidies under the supervision of the agricultural development banks, in a bid to ensure the money goes directly to the farmers, Jin said.

The local governments had also been urged to publicize the policy among rural residents and publish specific subsidies for each household to enhance transparency.

(People's Daily March 6, 2004)