Agri
package: Old Wine in New Bottle
The
agriculture sector — which contributes over 21pc to the country’s GDP, employs
45pc of the national labour force, makes up around 60pc of our exports and yet
fails to meet its targets — deserved a big push.
Agricultural
growth has been moving in a narrow band of 1.8-3.5pc over the last decade.
For
the current fiscal, the government is expecting it to improve by 3.9pc to help
boost the GDP growth rate to 5.5pc.
Ahead
of local government polls in two major commodity-producing provinces (Punjab
and Sindh) in two weeks time, Prime Minister Nawaz Sharif announced a Rs341bn
relief package for the farm sector to facilitate its revival.
Even finance ministry
officials acknowledge that the numbers had been jacked up to Rs341bn by putting
many past and future plans together
The
package has attracted political criticism from opponents, who have termed it
the ‘biggest pre-poll rigging’. Yet only a few have noticed that most of the
measures announced by the prime minister at the farmers’ convention last week
had already been announced by his finance minister in his two consecutive
budget speeches for 2014-15 and 2015-16.
Sadly,
a large number of these initiatives remained unimplemented for the two years.
In fact, this was also acknowledged by Finance Minister Ishaq Dar in his
2015-16 budget speech.
“Despite
the resource constraints and the gigantic economic challenges, out of 34 new
initiatives announced in the previous budget, 20 have been fully implemented
while the work on the remaining is continuing,” he had reported to the
parliament this June.
Even
those in the finance ministry acknowledge that the numbers had been jacked up
to Rs341bn by putting many past and future plans together and that they would
come down to a pittance when seen in the context of the number of
beneficiaries.
They
point out that even if budgetary provisions for the current fiscal were taken
into account, the total package announced by the prime minister would amount to
Rs85bn spread over four categories.
This
includes a direct cash support of Rs5,000 per acre to all cotton farmers with
ownership/cultivation of an area of less than 12.5 acres. The subsidy will be
shared by the federal and provincial governments on a 50/50 basis. It will cost
Rs20bn and the food ministry is already consulting the provinces over the
disbursement procedure.
Another
Rs20bn worth of direct cash support — Rs5,000 per acre — is for all rice
farmers with holding sizes of less than 12.5 acres, with the cost to be equally
shared by the federal and provincial governments. Over the past three months,
the provincial and federal governments have been working on its disbursement
modalities.
The
second portion of the package relates to reducing the cost of production, with
an estimated expenditure of Rs45bn. Of this, Rs20bn has been allocated for the
creation of a fund (with equal contribution by the federal and provincial
governments) to provide DAP fertiliser to farmers on reduced rates as a
one-time intervention.
The
ministries of food and industries and production are still working on its
implementation mechanism. This would provide Rs500 per bag subsidy on the
imported product, which would be distributed through the National Fertiliser
Marketing Ltd. The cost of a DAP bag is around Rs5,000. How many farmers
benefit from this will need to be seen.
Also,
Rs25bn has already been budgeted by the federal government to provide
subsidised imported urea to farmers. The Trading Corporation of Pakistan had
been authorised a couple of months ago to import the fertiliser and three
tenders of 150,000 tonnes of urea have already been floated, with one ship
having arrived and two on their way.
Here,
too, the Saudi facility for fertiliser support seems to be already on a
declining mode and the quantities would need to be procured from the open
market. Its distribution mechanism also needs to be overhauled so that farmers
in the field get the benefit instead of a few influential landlords or
middlemen.
While
the government has focused on cotton and rice, the long-term policy problems
have mostly remained unaddressed. The country has substantially higher surplus
stocks of rice and wheat but is finding it really hard to get international
buyers in view of the price disadvantage. Over Rs100bn are reported to be stuck
up in these stocks, without any tangible solution to liquidate them.
The
higher support price for wheat (at around Rs1,300 per 40kg) has offered little
benefit to the farmers, who have been finding it hard to get a miller to buy
the produce even at Rs1,100 as international prices have stayed below local
prices.
A
major part of the package — worth over Rs185bn — involves loans to be extended
by the Zarai Taraqqiati Bank Ltd to landholders with less than 12.5 acres of
land and would benefit around 60,000 farmers. But the specialised bank is
charging mark-up as any other scheduled bank.
Interestingly,
a few major schemes, like the credit guarantee scheme for small and
marginalised famers, insurance schemes for crop loans and livestock, and the
agriculture credit scheme were announced by the finance minister in his 2014-15
budget speech. These were then repeated in the 2015-16 budget speech, with the
addition of a scheme for interest-free loans for solar tube-wells. These have
now again been announced by the prime minister.
Similarly,
the flat electricity tariff of Rs10.35 per unit for agricultural tube-wells was
announced and signed by Punjab Chief Minister Shahbaz Sharif in Islamabad last year; this was again repeated by the prime minister
