Farmers oppose MFN status for India

Published Dec 09, 2012 11:08pm

Neither Pakistan policy-makers nor its farmers have any idea what is the exact size of subsidy regime in India. -Photo by APP

AS Pakistan rushes towards formalising the most favoured nation status for India, the provinces and farmers keep counselling restraint. Painting a scary picture post-MFN scenario, they want Pakistan to calculate cost-benefit ratio before taking a decision.

They also wonder why the government of Pakistan, especially the ministry of commerce, is in haste.

A recent meeting, convened by the ministry of commerce, made the anti-MFN consensus, in its current formation, clear when all provinces showed their reservations on the current pace and format. They all drove home one point: farmers on both sides of the border don’t have a level playing field. In India, both agriculture and food are massively subsidised. In Pakistan, they are heavily taxed. That is the point from where all fears flow for provinces and farmers, who could be potentially direct sufferers. Punjab, being the biggest producer and host of 55 per cent population, is leading the way.

Luckily for the government, the current debate about, and opposition to, trade liberalisation with India is about the mannerism, and not the idea itself. Neither farmers nor their bodies are opposing trade with India per say. They concede that in an era of high fuel prices and even higher freight charges, regional trade makes more economic and commercial sense for states like Pakistan. It should be promoted. But, they insist, that decision should be collective and based on calm and cool calculations that make economic and commercial sense rather than political (being pursued by a particular government) or bureaucratic (pushed by a particular set of bureaucrats). This sounds to be a valid concern and should be given a patient hearing before embarking upon a course that may have social and economic pitfalls.

The bureaucrats are trying to make a case against farmers. The say the MFN process has been going on for the last two years and the farmers have started making noises only now when it is nearing its conclusion. However, the farmers disagree. They insist that they having been raising objections and writing to the ministry of food and agriculture (Minfa) for the last as many years. Unfortunately, as the 18th amendment took hold of governance, the ministry was dissolved. The ministry of commerce is now pushing the decision down their throats instead of initiating new consensus-building initiative by getting stakeholders on board and removing their fears.

The farmers still insist, as they had been for the last few years, that granting MFN should be based on three factors: results of comparative study of subsidies regime on both sides of the border, scrupulously calculated cost-benefit ratio of such an action and, finally reciprocity on both sides. The current rush of diplomatic blood on part of Pakistan to grant status to India belies all three of them. Neither Pakistan policy-makers nor its farmers have any idea what is the exact size of subsidy regime in India.

The media reports suggest varied figures, which, even if partially true, scare the framers out of their wits. According to the media reports, the Indian subsidy regime (hidden and declared) ranges between $27 billion to $66 billion. If the former figure is true, Indian subsidy regime runs closer to the entire budget of Pakistan. If the latter is true, it is more than double of Pakistan’s budget.

Another figure floated in the media is (Indian rupee) Rs1,163 billion for agriculture and another Rs367 billion for food.

Farmers justifiably get scared when they compare it with situation in Pakistan. On this side of the border, the farmers are slapped with taxes that make inputs costlier by roughly 27 per cent. The Pakistani farmers thus suffer double disadvantage: massive subsidy amounts that makes input cheaper in India than their international prices and Pakistani farmers paying 27 per cent more than the international prices.

The cost of cartelisation and weakening writ of the government is in addition to that. This is how it practically affects the input prices. The urea price in India is Rs550 (in Pak-rupee denomination) per bag as compared to Rs1,700 in Pakistan. The DAP costs Rs2,700 in India and Rs4,000 in Pakistan. Diesel costs Rs77 per liter in India and Rs111 in Pakistan. Electricity costs Re1 in India and more than Rs8 per unit here. Due to this difference, Pakistani farmers pay Rs115 billion more than their Indian counterparts on only one crop: sugarcane. Pakistan sows it on 2.4 million acres and the total cost of the crop is Rs200 billion. If on a crop of Rs200 billion, Pakistan farmers have to invest Rs115 billion more than their Indian competitors, what chance do they stand in free trade situation?

The farmers assert that the policies of each state around the world are designed to get three targets: ensure sustainable growth (agricultural, industrial and economic), keep their cost of living at a relatively acceptable social level and take benefit of comparative advantage in production of agriculture and food items.

Which of these objectives Pakistan would be able to achieve by opening its borders to India as being conceived and advocated, the policy-makers need to explain to the people and farmers, they ask resolutely. In its current format, the opening of border would not only hit agriculture but industry (83 per cent of Pakistan industry is directly dependent on

agricultural raw material) and also employment situation, as 40 per cent of labour force is surviving on the sector.

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Comments (6) (Closed)


Akram
Dec 12, 2012 08:09pm
mere bhai, you forget that Pakistan only granted india MFN because india blackmailed us regarding European tariffs. Pakistan accepted giving india MFN in return for india staying quiet whilst we get favourable treatment on our exports. There will be give and take, you have to see the whole picture to understand what the government is doing, however the farmers have a point. We should slow the process and ensure we get the best out of it before any implementation.
Virendra
Dec 12, 2012 11:15pm
Pakistani farmers can never compete with any other like sized country in agriculture. All the countries including EU subsidise agriculture as it is more of a necessity to get food rather than industry. Pakistan should stay away from MFN with India and infact India should also revoke the status given to Pakistan - what is the point if nobody is reciprocating. There are bigger and better economies willing to discuss FTAs with India, let them go to ASEAN etc.
Ashoka
Dec 13, 2012 03:34pm
Lets assume that this fear is valid for a moment and that Indian government subsidises Indian farmers. So lets say the cost of 1 kg potatoe is Rs 20 and the Indian government provides subsidies to the farmer to the extent of Rs.10 per kg through fertilizers, fuel and electricity. So the cost to the Indian farmer is now Rs 20 - Rs 10 = Rs 10. Now if this produce is sold by Indian trader to a Pakistan trader at Rs.12 and eventually get sold in Karachi or Lahore market at Rs15, what is the harm? Simple maths from the above show that Pakistan's trader made a profit of Rs 2, the Pakistani consumer got his daily food Rs 5 less per kg!. On the Indian side, the trader made a profit of Rs 2 and farmer made a profit of Rs 2. The Indian government through providing subsidies made a huge loss of Rs.10 per kg!!! Its current account deficit will become larger eventually forcing the removal of subsidies. So what is the harm if Indian government provides subsidies? Just ensure that Pakistani farmers are provided with equal level playing subsidies to be competitive. Thats it. Please don't mix politics with simple economics. If trade between India and Pakistan is promoted then there will be lasting peace, mutual prosperity and an opportunity to overcome suspicions of the past. Think of it deeply!
Saurabh
Dec 14, 2012 05:39am
What India's MFN to pakistan in mid of 90s?
Muhammad slaleem
Dec 10, 2012 02:33pm
Pakistani farmer can never compete with highly subsedised Indian agriculture products.it seems present govt is bent upon demolishing whatever is left of pakistan.realy shameful .give us level playing field and then have complete free trade .
Iqbal AZIM
Dec 18, 2012 01:22pm
Agricultural subsidy has been a part of Indian Democracy, ever since her formalization of governance and constitution. Unlike other countries, India has a concept of 'Welfare State', providing Food Security, Education, Health, and social benefit programs by 'Subsidy' and fully funded programs are few but not limited measures through Central, State and Local governmental agencies. The volume and quantum of funding on of social welfare programs, subsidies – could be in double figure of entire fiscal budget of Pakistan! This is again purely at jurisdiction of Pakistan to decide on 'MFN' status to India - again for the prime objective to the access to cheaper Indian Agricultural and Industrial products at competitive price vis-à-vis other import sources due to high fuel price and ocean freight. Undoubtedly, Agriculture of Pakistan is non-comparable with Indian counterparts on various parameters, be it magnitude, techniques, quality of fertilizers, equipment and machinery, number and quality of crops, yet competition as envisaged would uplift the standard of Pakistani Agricultural standard and would impact on overall improvement of productivity. Moreover, the market economy shall benefit by local movement of surplus agricultural produce from both the nations, aiming to lower the final price of retailing to common household. Looking at global and futuristic prospective – enhanced economic cooperation between India and Pakistan, shall be good for the entire sub-continent while serving to welfare of people at lowest social strata.