June 16, 2008	Monday	Jamadi-us-Sani 11, 1429

THE budget 2008-09 is a grim reminder of our neglect of the agriculture sector. The sheer fluctuation of figures of growth per annum during the last two decades show the kind of apathy that successive governments have shown towards this sector: The growth has ranged between 1.5 per cent and nine per cent.

Apart from natural causes, which affect this sector to certain extent, human error has been persistent. The failure to build dams, as water plays crucial role in agriculture, cannot be deflected on the Mother Nature. The governments have also not been able to help develop new high-yielding seeds, bring in technology and add value to our products.

The sector has the potential to take the economy out of the current budgetary crunch by generating employment, alleviating poverty, bringing food security and providing raw industrial materials. The recent World Bank report maintains that investment in agriculture produces four times better outcomes than in any other sector of economy. In spite of such proven results of investment in agriculture, the previous regime neglected this sector.

Figures exhibit the cost of neglecting agriculture and its allied sectors, like horticulture and livestock. Pakistan is importing food items worth Rs150 billion this year and subsiding imported wheat with over Rs100 billion. It is also importing millions of bales of cotton.

Despite this staggering cost, the next year’s budget proposals did not do much. The government was content with increasing subsidy on DAP, withdrawing general sales tax on fertiliser and pesticides. It also increased agriculture credit by Rs30 billion, without realising that its last year’s target of Rs200 billion was not met by banks.

The government has to have a paradigm shift in policy to develop agriculture. This sector must be taken as a social responsibility aimed at alleviating poverty in rural areas. After all, 70 per cent of the population is directly or indirectly involved agriculture. If the government, as a policy matter, had put money in the pockets of dwellers of large cities through consumer finance, it should now find ways to put money in farmers’ pockets.

To revitalise the agriculture sector, the government should try to balance terms of agriculture trade. .

The budget lacks bigger picture of the sector to include big water reservoirs, through there are proposals to build smaller dams. In order to energise the sector, the government needs to make huge budgetary allocations and provide more incentives.

The government did well to withdraw of general sales tax on fertiliser and pesticides for it would benefit the farmers to the tune on Rs4 to Rs5 billion. But it should put up an effective mechanism to ensure that tax withdrawal actually reduces the prices of these inputs.

A host of indirect taxes affect the sector. These taxes have rigged terms of trade against farmers. It is not to argue that agriculture be exempted from taxes but only to underscore the need to rationalise them. There is a need to review the entire tax regime on agriculture and its inputs. Instead, the government can make direct tax regime on agriculture income more stringent.

Credit regime for the sector also needs official microscopic review. The government has increased the credit line by Rs30 billion. But it also should have looked into the causes why the formal sector failed to meet Rs200 billion credit target for last year, with lending limited toRs130 billion. Even if the formal sector next year provides the targeted Rs160 billion, it would meet only 30 per cent of the demand of farmers for credit. The rest 70 per cent would again come from the informal sector (middle men), at exorbitantly high interest rates and contribute to the rural poverty.

On the one hand, cities and district headquarters are getting saturated with banks, but most of the villages remain out of the bound. The credit procedure is mired in almost impossible legalities, making hard for farmers to benefit from it. Interestingly, credit like building a cold storage is also being treated as agricultural loan by banks to avoid State Bank’s penality for failure to meet agriculture target.

The sector needed over Rs500 billion till last year when input prices were 50 per cent of what they cost now. The government should review the need of the sector and arrange money for it. Given the magnitude of import (Rs150 billion) and subsidy on wheat (Rs100 billion), arranging Rs500 billion credit for farmers must not have been as big a problem as being made out by the formal sector, especially the government

The absence of quality research has kept the sector hobbled to its basics. It should have come under sharp focus with a clear aim of producing high yielding varieties of seeds and enhancing per acre yield by at least 50 per cent. All necessary regulatory and fiscal arrangement must be put in place to achieve this target within next five years.

In the absence of international quality compliance mechanism, Pakistan is only adding value to two to three per cent of horticulture products against 40 per cent in other countries of the region. With 40 per cent post-harvest losses, it loses billion of rupees in the field just after harvesting because it has no infrastructure to save those crops.

The government had provided some incentive for rural industrialisation but it was, unfortunately, totally silent on farm mechanisation. We need to mechanise our farms to save 40 per cent post-harvest losses and save 40 per cent income of farmers. This step alone can bring farmers out of poverty.

In spite of being the fifth largest producer of milk, the country still imports milk products because there is no mechanism for value-addition.The present budgetary allocation of Rs1.5 billion for this sector is too meagre to make any difference.The country needs a mechanism to bring over 70 per cent of milk to the market, which is otherwise kept in homes.