Frustrated farmers on the streets of Islamabad

Federal Finance Minister Ishaq Dar in a meeting on June 18 with Federal Minister for National Food Security and Research Sikandar Hayat Bosan and the Minister for Defence Production Rana Tanveer Hussain, who is representing the agriculture community. The next day, Dar announced a Rs20bn fund for providing subsidy to farmers on fertiliser, reduction of GST on pesticides to non-adjustable 7pc from 17pc, among other measures.—APP

THE smoldering frustration among the farmers seems to be boiling over. In the last three months, they have taken to roads thrice on a single agenda: the rising cost of inputs that makes their livelihood increasingly difficult.

In March, first of three instances, police blocked their way on Lahore-Multan Road, baton charged, booked and held them under the law but ultimately the Punjab government held negotiations and assured them of taking appropriate measures to prevent them marching to, and picketing, outside the Punjab Assembly.

Early June, just before the federal budget, the farmers were on the same road again. This time, they were, however, were able to enter Lahore before police stopped them just outside the main city precinct. For next nine hours, the farmers kept one of the busiest road in the country blocked as the Punjab government hurried its law minister to negotiate with them. By the evening, a loose but written agreement, as happened in March as well, was agreed upon, and the farmers vacated the road.

Hardly two weeks down the line, the farmers arrived in front of the federal parliament because Punjab informed them that some their demands, like GST on inputs, was a federal subject. In front of the Parliament, the farmers spilled thousands of litres of milk to highlight their plight. They were able to reach the parliament because they changed their tactics; instead of leading a protest procession, they arrived there quietly and individually. Once there, they were able to make their point before the only farmer minister Sikander Khan Bosan was able to persuade them to disperse.

Farmers becoming politically active and taking to streets for their demand heralds a new trend. For the last six decades, it has been quiet villages that kept the semblance of social tranquility while the governments were able to focus on the relatively noisy and politically active urban dwellers.

The rising cost of input prices — the cause of farmers’ protests — has two major sources; the general sales tax (GST) regime and receding writ of the government. Both have played havoc with the inputs market. The urea prices have risen by 150pc, DAP prices by 100pc, the pesticides prices by almost up to 50pc because of taxes that government applies and increases every year to balance its books.

The farmers are now caught between two hard realities, both eating into their livelihood — the ever-increasing cost of production and ever-sliding prices of their output

The second layer is added when the government machinery is unable, or unwilling, to control hoarding of inputs and tackle the issue of squeezed supplies at critical times of their applications; this adds hugely to the price of these inputs.

Since most of the input market is credit based, the seller adds huge mark up to the cost. The cumulative impact of these factors have taken most of these inputs out of farmers reach and hit the agricultural economy adversely. That is why agriculture growth is hobbled to less than three per cent for the last few years.

The farmers were able to absorb the impact of GST and governance blues as long as cereal price in the world market were high.

The Pakistani farmers are now caught between two hard realities, both eating into their livelihood — the ever increasing cost of production and ever sliding prices of their output. Since cost of production is so high, it is almost impossible to find international market for primary commodities. The increasing stocks of rice and wheat stand witness to it.

These international trends (low oil and cereal prices) are likely to hold for a while, critically impacting life of farmers.This should serve as eye opener for the Pakistani planners. It is time to rethink and revise the strategy and tax regime. Most of the farmers persuasively argue that by taxing inputs, the government is squeezing the yield and life of farmers. With application of inputs decreasing every season, the tax collection on them is also suffering. That is one of reason why the FBR misses its collection targets.

The government would be much wiser if its shift the tax burden on outputs rather than inputs. With inputs become cheaper, the farmers would be able to use them according to the requirement of the crop and increase their yield. As their arguments goes, most of the agricultural production are raw material for industry — cotton for textile, cane for sugar, wheat for flour millers and rice for processors and exporters. If the government taxes these outputs, it would be much easier for it to collect taxes, both from the farmers and millers and revenue would surely increase with increasing commerce.

Why has government been insisting taxing inputs, keeping the productivity low and missing revenue targets and now risking much wider social chaos?