Fertiliser prices started rising following a recent gas price hike, pushing up the cost of inputs for farmers of major and minor crops.

According to newspaper reports, fertiliser companies have raised urea prices by up to Rs130 per 50-kilogram bag, thus passing on the impact of the increase in natural gas prices. In the first week of October, the government notified an increase of 10-143 per cent in gas prices for various kinds of consumers. For fertiliser producers, the rate of increase was 30pc for fuel stock and 50.4pc for feedstock.

Market watchers say the price of a 50kg bag of urea has shot up from around Rs1,570 to Rs1,700. This is in addition to two smaller hikes, one of Rs100 per bag and another of Rs50 per bag during the last quarter of the previous fiscal year. At that time, growers’ lobbies such as Farmers Association of Pakistan, Pakistan Kissan Ittehad, Agri Forum Pakistan and Sindh Abadgar Board protested against both price hikes and demanded their reversal. Fertiliser producers had linked those hikes to sharp rupee depreciation and a rising trend in international urea prices.

Seeds of vegetables and other minor crops recorded a sharp price increase in the first four months of the current fiscal year

In less than four months of this fiscal year, the rupee has lost 10.2pc of its value against the dollar in the open market. Prices of imported seeds that had already become costlier in the wake of about 16pc rupee depreciation in the last fiscal year continue to rise accordingly. Prices of locally produced seeds are also moving upwards due to a general inflationary pressure in the economy following repeated rupee depreciations and fiscal belt-tightening.

But in the absence of an integrated price-monitoring system for seed markets, it is difficult to assess how much farmers are actually paying for seeds. Provincial seed corporations maintain records of subsidised prices of seeds that they give to farmers. They usually boast about the extent to which these prices are subsidised. Average market prices for the last Kharif season and the ongoing Rabi season cannot be independently verified.

But farmer groups complain of a higher cost of seeds: by up to 30pc in the case of paddy seeds in Sindh where water scarcity has also hit farmers, and by up to 20pc in both Sindh and Punjab in the case of wheat and maize seeds. Rice, wheat and maize are staple food crops. Prices of grains go up when their costs of inputs increase. Domestic markets suffer and export competitiveness is also affected.

Seeds of vegetables and other minor crops, including those of pulses, sorghum and millet, recorded a sharper increase in their prices during the past one year and, more noticeably, during the first four months of this fiscal year, officials of Pakistan Kissan Ittehad, Sindh Abadgar Board and Agri Forum Pakistan say.

Minor crops’ seeds are bought in smaller quantities. They come in smaller packaging, which is made up of plastic material. Prices of packaging material have risen after the rupee depreciation and the imposition of higher import and regulatory duties. This has made packaged seed bags and pouches all the more costlier, they say.

The same is true in the case of insecticides and pesticides that have mostly imported raw material. They are sold in bulk and their retail packaging is made up of mostly imported material.

In the past few years, the share of locally operating companies, including multinationals, has increased in seed, pesticide and insecticide production. But since local producers also rely on imported raw material for both products as well as packaging, they quickly raise prices of branded seeds and insect and pest killers.

A vast majority of our farmers uses machinery, including tractors, combined harvesters, tube wells, threshers and mechanised water sprinklers, on rent. Hourly and daily charges of such machinery continue to rise and farmers suffer in silence.

Prices of agricultural machinery and smaller tools and implements have increased in the wake of the rupee depreciation, higher fuel charges and import and regulatory duties. However, those who rent out machinery not only pass on the impact of higher costs, but also overcharge small farmers who use rented machinery and tools. But again, no integrated system for rent tracking is available. Perhaps provincial agriculture departments, Ministry of IT and Telecommunications and private-sector investors can join hands to implement real-time price-tracking systems in all areas of agricultural activities.

One way of assessing the extent of inflation for agricultural inputs is to keep an eye on the price movements in agricultural and food items of the Wholesale Price Index (WPI). Better still, authorities can bifurcate the WPI on a rural-urban basis, incorporating more agricultural items in the former.

There is a direct relationship between the costs of agricultural inputs and local and export prices of food items. The time lag varies from three months to a year. So it will be difficult for the government to keep food prices in check during the current fiscal year. Even promoting food exports will be a challenge once the hike in electricity tariffs finally takes effect. — MA

Published in Dawn, The Business and Finance Weekly, October 29th, 2018