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Farmers oppose MFN status for India

December 09, 2012

Neither Pakistan policy-makers nor its farmers have any idea what is the exact size of subsidy regime in India. -Photo by APP

AS Pakistan rushes towards formalising the most favoured nation status for India, the provinces and farmers keep counselling restraint. Painting a scary picture post-MFN scenario, they want Pakistan to calculate cost-benefit ratio before taking a decision.

They also wonder why the government of Pakistan, especially the ministry of commerce, is in haste.

A recent meeting, convened by the ministry of commerce, made the anti-MFN consensus, in its current formation, clear when all provinces showed their reservations on the current pace and format. They all drove home one point: farmers on both sides of the border don’t have a level playing field. In India, both agriculture and food are massively subsidised. In Pakistan, they are heavily taxed. That is the point from where all fears flow for provinces and farmers, who could be potentially direct sufferers. Punjab, being the biggest producer and host of 55 per cent population, is leading the way.

Luckily for the government, the current debate about, and opposition to, trade liberalisation with India is about the mannerism, and not the idea itself. Neither farmers nor their bodies are opposing trade with India per say. They concede that in an era of high fuel prices and even higher freight charges, regional trade makes more economic and commercial sense for states like Pakistan. It should be promoted. But, they insist, that decision should be collective and based on calm and cool calculations that make economic and commercial sense rather than political (being pursued by a particular government) or bureaucratic (pushed by a particular set of bureaucrats). This sounds to be a valid concern and should be given a patient hearing before embarking upon a course that may have social and economic pitfalls.

The bureaucrats are trying to make a case against farmers. The say the MFN process has been going on for the last two years and the farmers have started making noises only now when it is nearing its conclusion. However, the farmers disagree. They insist that they having been raising objections and writing to the ministry of food and agriculture (Minfa) for the last as many years. Unfortunately, as the 18th amendment took hold of governance, the ministry was dissolved. The ministry of commerce is now pushing the decision down their throats instead of initiating new consensus-building initiative by getting stakeholders on board and removing their fears.

The farmers still insist, as they had been for the last few years, that granting MFN should be based on three factors: results of comparative study of subsidies regime on both sides of the border, scrupulously calculated cost-benefit ratio of such an action and, finally reciprocity on both sides. The current rush of diplomatic blood on part of Pakistan to grant status to India belies all three of them. Neither Pakistan policy-makers nor its farmers have any idea what is the exact size of subsidy regime in India.

The media reports suggest varied figures, which, even if partially true, scare the framers out of their wits. According to the media reports, the Indian subsidy regime (hidden and declared) ranges between $27 billion to $66 billion. If the former figure is true, Indian subsidy regime runs closer to the entire budget of Pakistan. If the latter is true, it is more than double of Pakistan’s budget.

Another figure floated in the media is (Indian rupee) Rs1,163 billion for agriculture and another Rs367 billion for food.

Farmers justifiably get scared when they compare it with situation in Pakistan. On this side of the border, the farmers are slapped with taxes that make inputs costlier by roughly 27 per cent. The Pakistani farmers thus suffer double disadvantage: massive subsidy amounts that makes input cheaper in India than their international prices and Pakistani farmers paying 27 per cent more than the international prices.

The cost of cartelisation and weakening writ of the government is in addition to that. This is how it practically affects the input prices. The urea price in India is Rs550 (in Pak-rupee denomination) per bag as compared to Rs1,700 in Pakistan. The DAP costs Rs2,700 in India and Rs4,000 in Pakistan. Diesel costs Rs77 per liter in India and Rs111 in Pakistan. Electricity costs Re1 in India and more than Rs8 per unit here. Due to this difference, Pakistani farmers pay Rs115 billion more than their Indian counterparts on only one crop: sugarcane. Pakistan sows it on 2.4 million acres and the total cost of the crop is Rs200 billion. If on a crop of Rs200 billion, Pakistan farmers have to invest Rs115 billion more than their Indian competitors, what chance do they stand in free trade situation?

The farmers assert that the policies of each state around the world are designed to get three targets: ensure sustainable growth (agricultural, industrial and economic), keep their cost of living at a relatively acceptable social level and take benefit of comparative advantage in production of agriculture and food items.

Which of these objectives Pakistan would be able to achieve by opening its borders to India as being conceived and advocated, the policy-makers need to explain to the people and farmers, they ask resolutely. In its current format, the opening of border would not only hit agriculture but industry (83 per cent of Pakistan industry is directly dependent on

agricultural raw material) and also employment situation, as 40 per cent of labour force is surviving on the sector.