Illustration by Abro

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.

Published in Dawn, Business & Finance weekly, September 21st, 2015

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