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Low-level investment in agriculture

April 08, 2013

OVER the last five years, the agriculture sector received an impetus from support prices for food crops and removal of discords on water distribution among provinces.

But despite devolution of agriculture to the provincial level effective from FY10, public sector investment in agriculture remained low.

However, the market demands induced both local and foreign private sector investment in food and food processing, beverages, dairy and meat sectors.

For instance, last month, Nestle Pakistan completed a $104 million new milk powder drying facility in Sheikhupura, Punjab boosting production by 30,000 tonnes per year.

Executive Vice President of Nestle Joz Lopez, who performed the ground breaking ceremony of the project, told media that Nestle had plans to invest $50-$60 million more by December 2013. He said that growth in local demand of processed and packed milk was enough to continue to expand business here.

“Actually, public sector investment in agriculture almost always attract private sector investment as well,” says a senior official of Engro Foods, the company that has made multi-billion rupees investment in last few years in food, food processing and dairy sectors.

“Over the last few years the private sector has made sizable investment even though no big public sector investment has taken place.”

Growth in private sector investment in agriculture had contracted 2.6 per cent in FY08 but it leapfrogged 15.2 per cent and 11.8 per cent in FY09 and FY10 respectively before moderating to 5.7 per cent in FY11 and showed a decline of 6.1 per cent in FY12 chiefly due to base effect of previous years.

Over the last few years, private sector investment has gone in animal husbandry and livestock development, dairy farming, poultry birds-raising, meat processing, preservation of shelf lives of fruits and vegetables, ginning and rice milling, etc. Part of this investment has been made by businessmen-cum-politicians and part of it has come from new entrepreneurs. Foreign agencies like USAID have also sponsored, or cooperated with the initiators of new agricultural development projects. A recent example is that of giving129 motorbikes to young men in Multan who would be travelling in remotest areas under an artificial insemination project aimed at raising cows and buffalos capable of producing more milk. And an Australian company is training shepherds in Balochistan for better herding of goats and sheep.

But construction of modern silos for better storage of crops, on-farm water management and development of new high-yield varieties of seeds have not received enough investment either from the private or the public sector though some initiatives have been taken in this regard, particularly in Sindh and Punjab.

Public sector investment in agriculture had shown a huge decline of 43.5 per cent in FY08 but had fallen just 1.5 per cent in FY09. But it witnessed an impressive growth of 17.2 per cent in FY10 both due to base effect and also because of higher spending by the government in relation to rehabilitation of agricultural land and productivity after the July-September 2010 floods. However, in FY11 public sector investment in agriculture sector again fell 3.3 per cent but rebounded at 4.1 per cent in FY12.

So, on balance, behaviour of both public and private sector investments in agriculture has been erratic over the last five years.

A cursory look at foreign direct investment (FDI) inflows show that defying the overall trend of a decline in FDI in the last five years, inflows in food, food packaging and beverages industries have attracted $182m in FY09 and have never seen a net decline during FY08-12.

A $30 million agricultural project in Sindh under a joint venture with Competition Support Fund and a $40 million crop raising project in Balochistan sponsored by the UAE government are among some of the ongoing efforts for increasing agricultural productivity in provinces.

Punjab has taken lead in this area and the establishment of five model livestock development farms in the rangelands of Cholistan desert, on the basis of community-participation, has come up as a landmark project.

The Punjab government has also signed accords with a number of foreign companies from countries such as Australia, Malaysia, USA, UAE, Thailand and Turkey to boost farming outputs and for development of horticulture, dairy and meat sectors. In Sindh sizable local investment has been made in fish farming and meat processing.

In Balochistan, a federally-funded project is underway to run 800 out of the total 1500 tube-wells on solar energy. Going forward, Balochistan government is also considering installing 20 solar-powered water boosting pumps across the province.

In their 2013 manifestos, both PPP and PML (N) have laid out clear strategies as to what they will do to promote agriculture if they come to power. All the promises made are by and large practical and well-integrated. PML (N) has vowed to turn agriculture “into a fully viable economic industry by changing the policy framework and terms of trade in favour of the farming community.” It has specified a number of proposed measures to realise this objective. And PPP has resolved, among various other things, to set up agricultural markets at tehsil/taluka levels and to start issuing agricultural policy on the eve of every year wherein support prices of major crops and intended subsidies on farm inputs would be announced. — Mohiuddin Aazim