Crop prices are falling, as opposed to the rising cost of farm inputs. This is eroding farmers’ earnings and savings and is bound to impact the pace of investment required to modernise agriculture and improve productivity, and will make it more difficult for primary commodities to become globally competitive.
It will also result in the cash-strapped government being forced to continue to subsidise the export of surplus wheat and sugar etc, while domestic prices remain higher than the international rates.
In the absence of adequate storage facilities and modern supply chains, a significant quantity of grains stored in open grounds would also be lost. The government has failed to come up with a policy to stimulate the private sector or farmers to invest in logistics.
No doubt, the increase in support prices of wheat — a staple food serving as a benchmark for the pricing of other crops — along with rising bank credit and micro-financing, have raised growers’ incomes. But it has also provided an opportunity to the manufacturers and dealers of fertiliser, seeds, tractors etc to manipulate the rural market at the cost of the farmers.
This has resulted in a significant transfer of resources from agriculture to industry and trade, and provided an impetus to agri-business, as indicated by the number of agri-business companies being registered by the Securities and Exchange Commission of Pakistan (SECP). Yet, the commercialisation of agriculture is slower than is required to put the farm economy at an even keel.
Tough the inefficient mode of crop-sharing between the landed gentry and the peasant-tenant is gradually getting out of fashion, its replacement by cash contracts needs to be speeded up to increase farm productivity through mechanisation. The provincial governments do provide subsidy on tractors, but a whole range of farm implements are required to modernise agriculture.
The rural market cannot be opened up much for private sector/farmers’ investment without the creation of a market for the sale and purchase of agricultural lands for corporate farming. The computerisation of land records can help move in this direction and encourage banks to lend money. But the provincial revenue departments are taking things easy on this front.
However, corporate farming should not come at the cost of small farmers. Sometime back, there was a move to encourage small farmers to join corporate farming, with their equity commensurate to their share in the corporate landholding. But nothing is being heard about it. The proposal should be revived to ensure an inclusive agricultural economy.
Somehow the government’s pro-farmer policies get to benefit big growers much more than the smaller ones. No doubt, some specific schemes have been introduced recently by the State Bank/government for financing small cultivators. But this is not enough. There is a strong need to establish clusters of common facilities in the private sector to provide modern farm implements on rent to small farmers who cannot afford to buy them.
In the realm of marketing, a major barrier to boosting investment and productivity in agriculture is the conflict of interest between farmers, trade and industry — with each trying to benefit at the cost of the other, rather than cooperating mutually to boost ‘agricultural manufacturing’. Forgotten is the message of the IT era: sharing in the value-chain is a win-win for all.
The industry is dependent on agriculture for raw materials and rural markets for the sale of its products. This serves as the basis for cooperation between rural folks and urban dwellers. Currently, agriculture’s share in national income is in the range of 21-22pc, and about 44pc of the country’s population depends on farming and livestock for its livelihood. This indicates the level of rural poverty and the low purchasing power of the rural dwellers.
The prosperity that the industry radiates owes much to agriculture. One of the ways in which the underutilised domestic manufacturing capacity can be utilised is by turning the rural market — which has already become an attractive one for motorcycles and home appliances — more prosperous.
To sum up, the overarching goal should be to establish a modern, prosperous, inclusive, globally efficient and competitive ‘agriculture manufacturing’ economy. Agriculture should be at the centre of the development strategy. The survival and growth of the country’s traditional industries like textiles, sugar and leather goods can be traced to agricultural raw materials.
And now, food processing is coming up fast because of both domestic demand and export potential. In a way, agriculture is serving as the foundation of the industrial economy.
Published in Dawn, Economic & Business, April 6th, 2015