IF agricultural forecasts are to be believed, 2013 would be, at best, a below normal year for the sector — if not worse. There are a number of factors that would determine how this year goes for agriculture.
It is an election year which has its own political and social dynamics. During such time, rural areas are normally neglected, so are their dwellers. In run up to elections, the entire development focus shifts to urban areas, where swing vote resides.
Voters in rural areas are normally taken as a ‘beholden vote bank’, enslaved by traditional layers of society — cast system, feudal influence and social, political and sectarian divisions; all supporting to traditional powerful families or individuals.
Thus entire focus of political governments goes to urban areas, where voters, relatively speaking, are free to vote for a candidate for performance or personal qualifications.
The Rs70 billion Lahore Rapid Bus Service project is one such example, and the distribution of 200,000 laptops another. Both of them are designed to pandering to urban voters in run up to election. They were quickly conceived, and implemented even faster to finish them off before elections. In such a scenario, rural areas cannot expect much.
Once the election process gets completed, it would already be mid-year. With a new government just taking over by the end of June, the budget-making exercisewould be a hurried business, leaving little time for the new set-up to thrash out priorities and allocate financial resources accordingly.
Here again, big and powerful lobbies have a better chance to get greater pound of flesh. Farmers and farming, in no way, fall in the category of such lobbies, and would suffer. Once resources are committed in the budget, the farmers would not be able to do anything till next budget in 2014. Both these factors are source of worry for farmers.
Third problem, which basically is an extension of first two, would be that once focus of the state shifts to election management, with entire state machinery committed to election process, markets would go berserk. Everyone in the business of seeds, pesticides, fertiliser and implements would try to make windfall profits.
They made it when governments were in place as pointed out by the Competition Commission of Pakistan in its recent report about fertiliser manufacturers. The fertiliser sector was castigated only because it was investigated, otherwise the situation is the same for implements, seed and pesticides sectors. Had they been investigated, like the fertiliser, they could have also been held accountable for unfair profits. Recently, one of tractors manufacturers unilaterally increased the price of its tractors by Rs40,000 to Rs80,000, without assigning any reason.
This was the situation when federal and provincial governments were in place. Once they are out, the market players would have a run on farmers. In administrative vacuum, how market actors behave is the third biggest fear of farmer.
The fourth source of farmers’ fears is that lenders and international financial institutions are able to sneak some of their men in the interim set-up, and if they opt for monetary policy review, like increasing tax base and additional taxes, farmers would again be in trouble. Taxation policies conceived by bankers and implemented by bureaucrats have little social sensitivity.
They go for easy targets (formal sectors) for tax collections, like manufacturing (tractors and other implements).
All these taxes ultimately hit farmer adding to their cost of production. It has happened in the past and it can happen in near futures as well.
The fifth and biggest fear is granting most favoured nation status to India, which was mercifully delayed at nick of the time in December.
If the government grants this status before leaving office, the agriculture sector would be in for a huge trouble.
Pakistani farmers would be asked to compete with highly-subsidised agriculture of India. It would put Pakistani farmers on an uneven ground, and they might end up losing even the domestic market, leave alone capturing international markets for Pakistani products. In a recent calculation, the farmers claimed that on one crop of cane, they invest Rs120 billion more than Indian farmers because of heavy taxation in Pakistan and heavy subsidy in India. This leaves no chance for them to compete with Indian farmers unless playing field becomes even. If Pakistan grants MFN status to India during 2013, a bad year for agriculture would quickly assume more serious proportion.
The last, but not the least, is falling rupee value. For the last five years, rupee has lost almost 40 per cent value against dollar — making agriculture inputs correspondingly expensive. Since Pakistani markets are manipulated, farmers don’t get fair price of their crops. Take the example of cotton. For the last two years, it has been traded below the officially calculated cost of production due to cartelisation in the textile industry.
The prices have recovered a bit of late, but only after two years of continued losses. With inputs becoming expensive with the fall of rupee, prices of output remain either constant or slide if industry so decides.