With our country’s widely speculated hazy future under a six-party coalition federal government, more responsibility has devolved to the two relatively developed provinces ruled by majority parties to address current economic problems.

Securing majorities in provincial assemblies, PML-N and PPP have once again assumed power in Punjab and Sindh. The two parties are also key allies in the federal setup. This tends to strengthen political stability.

The question is: Will this stability be used to bring about transformational change or be wasted in defending the faltering status quo? To recall a quote by Zulfikar Ali Bhutto, “trying to defend the status quo as if it is immutable is to hasten the collapse of the status quo.”

However, many expect the provinces to focus on the untapped revenue potential from Agriculture Income Tax (AIT) for much-needed investment to increase farm productivity.

Updating the status of provinces from administrative to federating units can help the Center improve governance

To quote the Deputy Governor of State Bank Saleem Ullah, “the development of crop farming, livestock and fisheries can save $8-9 billion annually by cutting on imports of $10bn agricultural products.”

“In fact,” he added, “the agricultural development could address several crucial problems in the country’s economy, including limited economic development growth, inflation, unemployment and food security.”

The crop yield per acre in Pakistan is very low. For example, per hectare wheat yield is five tonnes in Indian Punjab against three tonnes in Pakistan’s Punjab when both regions, says an analyst, face the same climatic conditions and historical legacy.

Punjab’s Chief Minister Maryam Nawaz has promised to turn her province into an economic hub, which is not possible without increasing agricultural output to feed the manufacturing sector with raw materials at competitive prices. Agriculture as a subject was missing in the initial agenda she outlined.

Similarly, some fear that the election of Syed Murad Ali as the chief minister of Sindh indicates that it would be business as usual. As it is, Punjab and Sindh are major producers of agricultural products.

As the cash-strapped federal government has stopped funding a major chunk of provincial development projects, it is also time for the sub-federations to raise their own resources more rapidly for development spending.

This would be a much better way for the sub-federations to support the Centre rather than providing budget surpluses to reduce bulging federal fiscal deficits. Pakistan could thus move towards significantly reducing its trade deficit and unsustainable foreign debts. And no less important, the country could exercise its sovereignty to make such delayed decisions as building its portion of the Iran-Pakistan gas pipeline.

On Feb 23, the government decided to start building an 80-kilometre-long gas pipeline from the Iranian border to Gwadar to ward off potential penalties of $18bn by Tehran. The delay was caused by US sanctions against Iran, some of which have lately been ignored by some countries without any consequences.

It is also important that the federation should allow the provinces to function smoothly. The Center’s latest move to restrict the Indus River System Authority’s (Irsa) decision-making powers distorts its federal structure and denies representation to the provinces when agriculture is a provincial subject.

A summary sent recently to President Arif Alvi envisaged the appointment of a non-member Irsa chairman empowered with technical, administrative and financial autonomy. The President did not approve the proposal, which violated the Constitution.

To improve the country’s governance, it is necessary to end the tussle between the contending forces of centralisation and devolution. The need to gradually change the status of the provinces, considered administrative units, to that of federating units that delegate authority and responsibility to the federation to manage their common interests is long overdue.

It would be prudent for the provinces not only to work towards uplifting themselves but also for the common interest of all sub-federations through available avenues and forums. Developed regions should try to help less developed areas to end income and asset disparities.

To improve AIT revenues, there is a growing view that collection should be devolved to the district level and its revenues be spent in the rural district from where it is raised. It is argued that this would encourage farmers to pay AIT dues.

Notwithstanding the fact that provinces have performed much better than the federation in the collection of tax on services since it was devolved, there is room for significant improvement.

The low farm productivity in Pakistan is also attributed by a report of the Food and Agricultural Organisation (FAO) to the largely unrecognised vital contribution of women farm workers in the country’s agriculture sector, food security and the economy at large.

The FAO survey highlights heavy workloads of between 12 and 18 hours per day, lack of access to land, credit, water and technology, a lack of agriculture-related technical education and training opportunities and limited access to advisory services for female farm labour. The current understanding, says the FAO study, is that the farmers are those individuals who own the land they work on.

Other listed challenges include a lack of minimum wage and collective bargaining in the agricultural sector, as well as delayed payments by contractors.

Published in Dawn, The Business and Finance Weekly, March 4th, 2024

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