Farm productivity and pricing

Published September 14, 2015
Prime Minister Muhammad Nawaz Sharif chairing a high level meeting to 
deliberate upon a relief package for farmers at the PM House Islamabad 
last Thursday./ —PID
Prime Minister Muhammad Nawaz Sharif chairing a high level meeting to deliberate upon a relief package for farmers at the PM House Islamabad last Thursday./ —PID

THE federal government is working on an agricultural relief package in the backdrop of sliding prices of food commodities, which is at the core of the current crucial discussions about farming reforms.

New support prices for food crops and targeted subsidies for key farming activities are expected to be part of this package. Besides, the government will introduce a mechanism to share financial losses that the growers of cotton and rice have reportedly incurred during the recent price slump, according to media reports.

A three-member committee under the chairmanship of Finance Minister Ishaq Dar has been tasked by Prime Minister Nawaz Sharif to recommend what can be done to arrest the decline in prices of primary commodities at the farm gate.

The committee members are federal Food Minister Sikandar Hayat Bosan and food secretary Seerat Asghar. The committee has also been asked to suggest ways to reduce the cost of inputs and boost agricultural productivity.

“We are examining lots of issues related to the agricultural economy, of which commodity pricing is but a part,” a source privy to the committee told this writer over phone from Islamabad.

“Low inflation is welcome, but if it is obtained in large part through depressed prices of commodities in whose production millions of people are involved in, then that becomes a bit trickier.”

Commodity-pricing is becoming trickier day by day, not only in Pakistan but elsewhere in the world as well.

On the one hand, companies are coming up with a vision of fully automated farms and are developing prototype robots that would take over many manual farming jobs in the near future. On the other, farmers across the world are struggling to get fair prices for their produce and are seeking enhanced levels of state protection.

A delicate balancing act is, therefore, required at the governmental level to keep the farmers happy at a time when empty state coffers call for minimising subsidies and creating space for productivity-enhancing technology.

In Pakistan, issues relating to supply-chain management and a lack of investment are also stifling agricultural growth and denying fair returns on farming activities.

According to World Bank data, the per-hectare production of cereals (rice, wheat, maize and other food grains) rose marginally during 2010-2013, from 2,611kg to 2,722kg.

This yield of cereals is lower than that in India, Bangladesh and Sri Lanka, whose population growth rates are also slower than Pakistan’s. And foreign sales of rice, wheat and maize account for 8-9pc of our total export earnings.

“A complete devolution of agriculture to the provinces from FY10 has made it difficult for the federation to come up with an integrated agricultural policy of its own,” says a source privy to the Dar-led committee.

“Primary budgetary allocations for agriculture come from provincial resources, and taxation of agriculture has always been a provincial subject. The federal government can do things only in the context of national food security. And this is a limited role.”

Agricultural research — critical for farm modernisation, which is badly required for boosting productivity and ensuring a fair return for farmers — is currently being carried out more at the federal level and lesser in the provinces. “This, too, is a problem,” said the source.

The support prices of commodities are being eroded by the rising cost of inputs and taxes, says a senior analyst who has an insight into the agricultural economy. During the Zardari era, the support prices of commodities were increased frequently, but this was offset by an increase in input prices (a result of a withdrawal of subsidies).

“So the issues of the agricultural economy in our country are quite complex,” says an official of the Sindh Chamber of Agriculture.

“The local private sector is shy of investing in agriculture in a big way, chiefly because our own businessmen prefer rent-seeking and investment-hopping rather than committing themselves to see agriculture progress. And foreign investors find it too difficult to invest in the agriculture sector as it is very loosely documented and there is little attention on the development of domestic farm markets here.”

Whereas these and other perennial issues marring agricultural progress would take time to get addressed, the Competition Commission of Pakistan (CCP) is toying with the idea of introducing farmer super markets (FSM) where the growers can sell their produce at reasonable prices and where wholesale prices of commodities can be monitored.

CCP officials believe that the monitoring of wholesale prices would also help check profiteering at the retail level, where sudden and big arbitrary price hikes are often attributed by the retailers to higher prices at wholesale level.

Published in Dawn, Business & Finance weekly, September 14th, 2015

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