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Subsidies, support price hike fail to boost farm sector

April 22, 2012


While wheat and sugar cane have seen bumper crops, the other two cash crops, cotton and rice, have declined over the past three years. - File photo


ISLAMABAD: Despite injection of huge subsidies and increase in support prices, the performance of agriculture sector has declined over the past three years and there are apprehensions that it may lead to long-term negative impact on economic growth and prospects of poverty reduction.

“Reversing the gloomy growth trajectory rates in agricultural sector is critical to escape the trap of slow economic growth and poverty,” says a three-year (2008-9 – 2010-11) performance report released by the ministry of finance.

Developing agriculture as a more diversified and technologically advanced sector, the report said, required a precise and thorough intervention in policies, adding that “such policies should provide crop insurance and storage facilities and increased investment in infrastructure to address water shortage issues, improve farm-to-market roads, energy and value chains through processing and cold storages”.

Almost one fifth of the country’s agricultural land was swamped with floods, causing massive disruptions to economic growth over the last two years. Agricultural sector acutely suffered and its growth rate shrank to 1.2 per cent in fiscal year 2010-11.

“In spite of its considerable significance, the agricultural sector remained neglected by the policy-makers,” the finance ministry said.

The sector, according to the report, has been missing its targets for the last two years. For example, it was estimated to grow at 3.5 per cent in 2009-10, but posted a paltry growth of 0.6 per cent. Major crops were targeted to post a growth rate of 2.7 per cent that year but showed a decline of 2.4 per cent and minor crops what were estimated to grow by 3.9 per cent posted a negative growth of 7.8 per cent.

The performance in the following year was no different. In the 2010-11 budget the agriculture sector was targeted to grow by 3.8 per cent, but the actual growth stood at a nominal 1.2 per cent. Major crops which were estimated to grow by 3.5 per cent registered a negative growth of 4 per cent. However, minor crops performed better than the target, growing by 4.8 per cent against the 4.1 per cent target.

The sector covers crops, livestock, fishing and forestry. Most people in the country depend directly or indirectly on income generated by this sector which provides employment to 44 per cent of the country’s labour force.

The report said the “agriculture sector witnessed a persistent decrease in its share in the GDP during the last three years from 4 per cent in 2008-09 to 1.2 per cent in 2010-11. Its growth fell to a record level of 0.6 per cent during financial year 2009-10”. Low productivity, rising seed and fertiliser prices and energy crisis remained major challenges in the agriculture sector over the last three years.

It said despite its undeniable significance for economic growth, exports and employment and food security, the performance of the sector remained under pressure.

“The major crops accounting for 33.4 per cent of GDP in 2008-09 declined to 32.8 per cent of GDP in fiscal year 2009-10 and further down to 31.8 per cent in 2010-11.”

The 2010-11 floods hit the cotton and rice crops hardest but overall the sector suffered largely because of water shortages, decline in availability of seed and lack of infrastructural invention. Due to persistent problems, the year-on-year growth area under cultivation of cotton, rice and wheat declined to 18 per cent, 13 per cent and 2 per cent, respectively.

While wheat and sugarcane production exceeded their targets, the actual year-on-year production under of the major crops of cotton and rice declined in 2010-11 while in 2008-09, three out of four major crops depicted a slow year-on-year production rate in rice, sugarcane and wheat.