Disappointed farmers

Published January 28, 2019

THE farmers’ community seems to be dissatisfied with the measures announced in the second mini-budget of the fiscal year.

In his speech, Finance Minister Asad Umar announced a few steps to help the agriculture sector. He incentivised banks to offer agricultural loans by reducing the tax rate from 39 per cent to 20pc on their interest income. The proposed measures include reducing the Gas Infrastructure Development Cess (GIDC) for fertiliser units by half and the duty-free import of diesel engines for irrigation purposes.

The farming community believes the mini-budget will not benefit small landholders and that the “economic reforms agenda” is bereft of measures needed for a turnaround in the sector.

“The sector needs a reduction in the cost of production and an increase in the small farmers’ access to financing in the short run. The government should subsidise farm mechanisation as well as fix support prices at least for major crops in the long run,” says Khalid Mahmood Khokhar, president of the Pakistan Kissan Ittehad, the representative body of small landholders.

The agriculture sector requires policy-level interventions, like aggressive diplomacy to find new international markets’

Quoting a document of the Punjab government, he says the cost of production for basmati rice in Pakistan is 34pc higher than India. It is 37pc, 57pc, 44pc and 34pc higher in the cases of wheat, cotton, onion and gram.

Mr Khokhar argues that the country needs to allocate at least 1pc of the agricultural GDP against the present 0.2pc for research because the sector is prone to natural disasters and requires continuous research to improve farm yield and ensure protection from pests and diseases.

He notes that the two commodities that enjoy the support price facility — wheat and sugar cane — are in surplus.

His point is endorsed by Ebadur Rehman Khan of the Farmers Associates Pakistan. He says the growers need a better price for their produce more than they need subsidies on inputs. “Reducing the farm inputs’ cost is a good but temporary step. The sector requires policy-level interventions, like aggressive diplomacy to find new markets along with the revival of old ones on the external front and ensuring a fair and better price to the farmers on the internal front,” he says.

He says that even a reduction of Rs500 in the price of a bag of fertiliser will bring the small farmer a relief of only Rs1,000-1,500 per acre. But if the government ensures a stable market through a support price-like mechanism, the same farmer may increase his per-acre earnings by around Rs10,000.

Despite being uncompetitive internationally because of its higher production cost, some of the local produce may still find clients in the world market because of the unavailability of alternatives, he insists.

In reference to the lifting of ban on Pakistani rice by Qatar and China agreeing to import our rice and potato, Mr Khan says the government should continue its aggressive diplomacy to open new markets and revive the lost ones. “Our produce like basmati rice, kinno and mango are unmatched in the world because of their taste,” he says.

The Kissan Board Pakistan (KBP) believes a fair and just agriculture marketing system along with the timely payment of official rates to the growers is essential for the agriculture sector’s development. “Eliminate the role of the middleman by allowing the growers to directly sell their produce in the market. But no such step was taken in the two mini-budgets,” says KBP Punjab President Amanullah Chathha.

He says the authorities expect the farmers to turn to high-value crops like oilseeds without extending any guarantee about the procurement/marketing of the yield. At the same time, the government is allowing unchecked imports of poor-quality palm oil, he adds. “The government needs to revisit its palm oil and dry milk import policies to help the overstressed oilseed growers and livestock farmers.”

Some observers challenge the veracity of the projected relief to the farmers’ community.

“The tax incentive for banks won’t improve the farmers’ access to finance. Loans for agriculture production and agriculture processing units have been brought under one head since Dr Ishrat Husain’s stint as governor of the State Bank of Pakistan (SBP). In the name of agriculture, loans are now being offered to feed mills, hatcheries and other processing units,” says Kissan Rabita Committee Pakistan General Secretary Farooq Tariq. The duty-free import of diesel engines will likely be misused because such engines are already being manufactured locally, he adds.

Published in Dawn, The Business and Finance Weekly, January 28th, 2019

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