Believing in miracles

June 03, 2019

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Ignoring past patterns, Punjab came up with a growth strategy last week that aims high. As far as agricultural is concerned, the strategy aims to increase the current 1.7 per cent growth rate to 5.5pc in the next four years.

According to the roadmap outlined, growth rate will double to 3.6pc in the next fiscal year before climbing up to 4.8pc in 2020-21 and 4.9pc in 2021-22. In 2022-23, the province will finally reach the growth rate of 5.5pc.

To achieve this tremendous growth, the strategy aims for structural reforms, modernisation of farm management and increase in water and fertiliser availability. These changes are expected to bring twin benefits: increase in total factor productivity by 300pc and creation of 1.26 million jobs by 2023.

Punjab’s agricultural growth strategy envisages increase in total factor productivity by 300pc and creation of 1.26 million jobs by 2023

History, however, is not on the side of these strategies.

In the last 10 years, two years (2009-10 and 2015-16) saw a negative growth rate of 0.4pc. There was a year (2013-2014) when the agricultural sector in Punjab grew by 0.4pc. For four years (2010-11, 2012-13, 2014-15 and 2017-18) the province witnessed a paltry rate of above 2pc but less than 3pc. Only three years (2008-09, 2011-12 and 2016-17) saw respectable rates of 3.3pc, 4pc and 5.6pc respectively.

Putting the agricultural sector at a decisively positive trajectory for the next five years will take a miraculous effort on the part of planners. How would they realise these plans?

They have drawn up a roadmap that claims that ensuring efficient use of water, reducing volatility of input prices (especially fertiliser) and developing mechanisms to ensure farm upgradation will bring about desired results.

Other measures include promotion of public-private investment through easy access to farm credit. The government will also work towards strengthening commercial agriculture, making marketing more efficient, rewriting old laws and enlisting help from information technology.

Increase in investment on research to 0.4pc of the gross provincial product is also intended. Part of this investment will be diverted to developing techniques of climate-smart agriculture for which an institution — Institute of Climate Smart Agriculture (ICSA) — will be established.

Additionally, the strategy took note of substandard sanitation which coupled with scant market infrastructure costs 30 to 40pc in post-harvest losses.

Punjab’s agricultural growth rate will double to 3.6pc in the next fiscal year before climbing up to 4.8pc in 2020-21

Furthermore, middlemen grab 60-70pc share of the value addition chain. The document observes that the development of value addition chains is crucial for sustained growth and promises to build them for the benefit of farmers.

Speaking of plans for maximising usage of information technology for devolution of knowledge, improving efficiency of extension services and involving private partners and civil society in the effort, the strategy mentioned e-vouchers for transferring subsidies directly to farmers’ accounts.

By taking these steps the Punjab government hopes to overcome challenges listed in the strategy document quickly and put the sector on a positive growth launching pad. Six major challenges have been identified.

Firstly, the possibilities of input-driven growth have become exhausted while water and land constraints have become tighter. The approach for the future thus has to be different from the past.

Secondly, water is now the key determinant for growth as its productivity has been declining over the last three decades. The only viable strategy going forward is ‘more crop per drop’, which calls for investments in the efficient use of water.

Thirdly, the cropping pattern in the province does not conform to comparative advantage and realities of the world market. Five major crops account for half of the cropped area. Cotton, where the province has a clear comparative advantage, is losing out to sugar cane. These factors need correction.

Fourthly, Punjab suffers from a considerable yield gap. The gap between an average farmer and a progressive farmer is 50pc. This gap is higher for cotton (up to 62pc) and maize (up to 80pc). This indicates that farmers have not been fully able to exploit the input mix. This gap needs to be closed in the next few years to unleash production potential.

Fifthly, over the last 50 years the distribution pattern of landholdings has changed to the detriment of the sector. Of the total cultivable land (6.2 million acres) around 14pc farmers have less than one acre of land. Over 77pc of farmers own up to 12.5 acres of land with only 9pc owning more than 12.5 acres. Small landholdings make it difficult and costly to upgrade farm practices and modernise production techniques.

Finally, the strategy document says that pricing policy of wheat works as a disincentive for storage building. The government fixes price at the pre-harvest stage that deters the private sector from building storage.

The document also touches on the China Pakistan Economic Corridor as product processing, storage and transportation will be developed along the corridor. Furthermore, the plan envisages developing disease prevention centres along the road along with promotion of drip irrigation and other new initiatives.

Published in Dawn, The Business and Finance Weekly, June 3rd, 2019