KARACHI, July 8: The ceiling on the size of individual farm holdings set by land reforms in 1972 may be lifted to promote corporate farming by local agriculturists under a package being evolved by the Board of Investment.

BoI sources said the relevant Martial Law (ML) regulation that fixed the maximum size of individual holdings is proposed to be amended to provide for unrestricted corporate ownership and management of agricultural lands. The proposal is on the official agenda.

Although there is no land ceiling for joint stock companies under the company law, the amendments in the ML regulation will clear up doubts of about legal lacunas, if any. There is no formal corporate ownership in agriculture.

Currently, an individual cannot possess land in excess of 150 acres of irrigated or 300 acres of un-irrigated land or a combination of the two types with an area equivalent to about 15,000 produce index.

The withdrawal of ceilings on land holdings is a sensitive issue for the government and a decision on the issue has been held in abeyance for sometime now because of the misunderstanding created among local agriculturists that corporate farming was intended merely for foreign companies. Farmers protested, viewing the move as a return of the East India company.

The sources say that the proposal for fresh incentives package for corporate farming was revived at the recent Kissan conference by Board of Investment Chairman Waseem Haqqie in the presence of President Pervez Musharraf and officials of the ministry of agriculture.

It was agreed to proceed with the preparation of the package, which according to the current year's budget speech of Finance Minister Shaukat Aziz, would be announced shortly.

A BoI official told Dawn that once the ceiling on landholdings was relaxed, the family members and neighbours of farmers would be facilitated to form joint stock companies. Individual farm holdings put at the disposal of the corporates could form equity for sharing of profits and dividends.

Officials are of the view that professionally managed corporate farming would mean easier access to bank credit for purchase of tractors, harvesters, implements and inputs. Bankers prefer to deal with corporate clients rather than individuals.

Corporate farming will help achieve production on economies of scale required to face global competition and undertake exports under the WTO regime. Unlike many other countries, local farmers have a competitive edge as there is no subsidy on farm output, including on major crops like wheat, rice and cotton.

Yet, farm yields are low by international standards as the cultural practices in the countrywide are a snag in raising output per acre. Of course, there are some progressive farmers who run their family farm as informal joint stock company. But they can be counted on finger tips.

Under consideration is also the issue of tax exemption on profits and dividends of the corporates as agricultural income tax falls within the jurisdiction of the provinces, says BoI officials.

The provinces may continue to collect taxes on farm incomes. The provincial governments have also been advised to evolve a uniform land-leasing policy for corporate farming on state lands.

Earlier, to develop state lands, Continued from the government had announced wide-ranging incentives, including exemption for five years on corporate tax, income tax and customs duty.

For foreigners, 100 per cent equity, with no investment limit, free remittances of capital, profits and dividend was offered with the promise of easy credit and a 99-year land lease.

The objective was to attract foreign investment for developing about 9.1 million hectares of land fit for cultivation but remaining unused for lack of interest, water and finance. The four provinces identified 6.7 million acres of state land for cultivation, according to the BoI officials.

Investors from China, Germany and the UAE are initially reported to have indicated some interest but no real progress has been made as yet. Perhaps, the foreign investors may be attracted only after some success stories of local farmers, says an investor.