As growth in agriculture sector tanked to 0.85pc in the current fiscal year against the target of 3.8pc, the PTI government plans to spend Rs280bn on this sector during its five-year term. The purpose is to help recover growth in agriculture with the help of provinces in whose administrative domain it falls.
In the outgoing fiscal year, a paltry sum of Rs21bn was spent on agriculture against the original allocation of Rs63bn under the federal Public Sector Development Programme (PSDP). For FY20, an amount of Rs78.6bn has been set aside for this sector, budget documents reveal.
But higher allocation does not mean actual utilisation. So, the relevant question here is whether agriculture sector would actually receive Rs78.6bn in FY20 as promised? Given the fact that the PTI government has set a very ambitious revenue collection target of Rs5.5 trillion for FY20, a slippage in the target would naturally bring the PSDP under axe. And, as political confrontation is growing with every passing day, a more important question is: whether federal and provincial governments would be able to work together for promotion of agriculture—or for that matter any worthy cause—in the next fiscal year and beyond?
Agriculture sector’s growth slumped below 1pc in FY19 for a host of reasons. But the Economic Survey 2018-19 cites shortage of irrigation water and lower off-take of fertiliser as two main factors. The third most important reason was an obvious lack of working relationship between PTI that is in power in the federation and in Punjab—and Sindh where PPP is in the government.
After Punjab, Sindh has the largest share in the country’s agricultural output and for agriculture to grow there has to be a productive working relationship between the federal and Sindh governments. That seemed missing in FY19.
Now PPP and PML-N are up against “selective accountability” of their leaders under the PTI government and PM Imran Khan consistently holds the leadership of these two parties responsible for all conceivable ills in Pakistan economy and politics. In this environment, can PTI, PPP and PML-N work jointly for promotion of agriculture in Sindh where PPP is in power or in Punjab where PML-N is potentially a pain in the neck of PTI’s government? The key to agricultural growth prospects lies in the answer to this question.
Since agriculture is a provincial subject, what FY20 holds for it in store would become obvious only after the presentation of provincial budgets. But the federal budget envisages many measures that may have a telling impact on this sector.
Unfortunately, a number of the budgetary steps may negatively impact on agriculture. And, only a few can benefit farmers or boost the sector’s growth even if the much-required political harmony between the federal and provincial governments is achieved magically.
Let’s have a look.
Higher PSDP allocation for agriculture and for construction of dams, if not subjected to as deep cuts and in FY19 budget, should help accelerate growth in agriculture. State Minister for Revenue Hammad Azhar mentioned in his budget speech that in addition to constructing dams out of federal expenses, the federal government would help provinces build water conservation projects and provide research and technical assistance funds for increasing yields of wheat, rice, sugarcane and cotton.
He said that federal funds would also be available for harnessing untapped potential in fisheries and for undertaking development initiatives in livestock sector. He assured the nation that the federal government would continue subsidising agricultural tube wells and financially facilitate crop loan insurance scheme.
Apparently all these measures, if undertaken with sincerity of purpose and with active involvement of provincial governments, can help boost agricultural productivity across the country. He, however, did not reveal any details of how Pak-China cooperation in agriculture under the umbrella of CPEC would contribute to agricultural growth in future. In fact, he touched upon CPEC quite briefly and named agriculture as one of the areas added to the scope of CPEC along with socioeconomic and industrial development.
The federal budget is inflationary in nature. If the parliament approves the budgetary measures, prices of fuel including the most commonly used CNG will increase. That will add to the cost of production and transportation of agricultural produce and ultimately impact negatively on agriculture.
Proposed phasing out of direct and indirect subsidies and concessions will also affect agriculture and will make agricultural inputs costlier. With consumer inflation already above 9pc and the rupee’s depreciation is continuing, the cost of output in all sub-sectors of agriculture including livestock and fisheries would go up.
This seems a real possibility also because a slippage in ambitiously projected revenue target and further fall in the rupee value cannot be ruled out, due to an obvious lack of political consensus on revenue collection measures and structural imbalance in external sector.
In FY19 (up to June 12) the rupee has already lost about 25pc value against the US dollar fuelling inflation and adding to the cost of production of everything including farm produce. (On June 12 this year it closed at 151.57 per dollar against 121.50 at the end of June last year).
The budget FY20 is silent on what PTI’s federal government would be doing to help provinces in fixing structural problems that affect growth in agricultural sector. Water distribution has remained a thorny issue and Sindh complains that it receives lesser irrigation water than its due share that affects its agricultural growth. Sea intrusion is eating away thousands of acres of arable land in coastal areas of Sindh.
And, rapid environmental changes have made the entire Pakistan vulnerable to abrupt flooding. The state minister did not touch upon such important issues from the federal government’s perspective and promised nothing to address them.
One should hope that PTI would soon come up with details of federal initiatives designed to help smaller provinces tackle these and other challenges that affect agricultural growth. -- MA
Published in Dawn, The Business and Finance Weekly, June 17th, 2019