“The package is most likely to arrest the spiking cost of production and improve farm production,” said AgriForum Pakistan chairman Ibrahim Mughal.
The government has proposed in the budget to raise the subsidy on DAP fertilizer to Rs1000 per bag from Rs470, remove general sales tax (GST) on pesticides and fertilizer, abolish five per cent federal excise duty on crop insurance and 10 per cent customs duty on imported rice seed, allow duty free import of bulldozers and laser levellers, etc. In addition, the government will spend Rs1.5 billion for the development of the dairy sector under its White Revolution programme.
“Farmers will save Rs30-Rs35 billion if the subsidy on DAP is fully passed on to them. It will push the use of the fertilizer and increase crop output, which is essential for food security,” said Mughal. He said the subsidy on DAP had risen in real terms to almost 30 per cent after the increase announced in the next budget from around 20 per cent given last year. Some farmers insist that the subsidy has not increased in real terms because of the substantial rise in the market price of the fertilizer.
The global price of DAP – Pakistan imports almost 70 per cent of this fertilizer to meet its annual requirement of 35 million bags – has been rising since 2006 and its rate in the local market has gone up to almost Rs3400 per bag from Rs925 in over two years. The increased cost of DAP reduced its use by 9.8 million bags during the previous Rabbi season, and is said to be one of the main factors responsible for the low wheat output. The government has already decided to import 2.5 million tons of wheat to meet the domestic needs.
Agriculture grew by just 1.5 per cent during the outgoing year as against the target of 4.5 and 3.7 per cent growth recorded last year. The dwindling contribution of the agriculture sector is blamed as one of the major factors responsible for the lower Gross Domestic Product (GDP) growth this year. The GDP has grown by just 5.8 per cent this year, down from 6.8 per cent the previous year. The GDP target of 7.2 per cent for the outgoing year was missed.
“The problem with the subsidy given on fertilizers is that the manufacturers and importers do not pass it on to growers fully,” said a progressive farmer from the South Punjab, Maqbool Khan Khichhi. “If the government is serious about subsidising the production cost of farmers, it should evolve leak-proof mechanism to ensure that the subsidy is passed on to them and is not swallowed by manufacturers and importers,” he said.
Mughal said the government, as a first step in this direction, could instruct manufacturers, importers and dealers to print the price on the bags. “Also the agriculture departments should be told to time and again monitor the market to see if farmers are getting subsidy or not,” he said.
Khichhi said the government had been moving in the right direction by focusing on the development of the agriculture sector. “If you make agriculture profitable, you’ll achieve higher economic growth. I’m not opposed to helping the industry, but the growth in the agriculture sector gives immediate results. The package given in the budget will start producing results in six months if it is implemented in letter and spirit to reduce the farmers’ production cost,” he argued.
Both Mughal and Khichhi hailed the government proposal to remove GST on pesticides and fertilizers, saying it would also help bring down the farm input costs and boost production. “Small farmers are unable to use pesticides to protect their crops from pest attacks because of the higher prices. The removal of the tax will definitely reduce its price and encourage even the small farmers to use pesticides and insecticides to protect their crops against pest attacks,” said Khichhi.
Mughal was of the view that the farmers would save around Rs5 to Rs6 billion provided the GST was totally removed from both insecticides and urea fertilizers. He was also appreciative of the other incentives for agriculture suggested in the budget, but said the government should have allocated more funds for the livestock and dairy sector development.
He said the improvement and development of livestock sector would help the government effectively attack rural poverty and reduce the country’s dependence on food imports. “We can actually export milk and meat worth billions of rupees if the government seriously focused on the livestock and dairy sector development,” he maintained.
Farmers are also happy that the government has set aside Rs75 billion for building new dams and improving the existing irrigation network. “Water shortages are largely responsible for the decline in crop output. If the government manages to spend the allocated money on building new water reservoirs and improve the irrigation network, it will greatly boost the agriculture production.
The government should realise the critical importance of the now abandoned Kalabagh Dam and revive and build the project on a priority basis in the best interest of agriculture,” said a farmer from Multan. He did not want to give his name because he is opposed to the scrapping of the Kalabagh Dam project.
Mughal said the government had to encourage mechanisation of the agriculture sector by reducing the prices of tractors and other implements. “Tractor prices are extremely high and a major roadblock in the way of mechanisation of farming,” he said.
He opposed removal of the duty on imported rice seeds, saying it would discourage cultivation of basmati. “If the decision is not reversed, we all will be eating hybrid rice sooner than later,” he said.
Khichhi said the government should also have written off small loans obtained by small farmers in order to allow them some breathing space. “Small farmers, who could not pay their loans, are in great distress. The lenders are taking over their small landholdings and auctioning them to recover loans of Rs5000 to Rs10000. This is going to increase poverty and unemployment in the rural areas.
The government must realise the seriousness of this issue and provide some relief to the small borrowers,” he said. “Support the small farmers. That will improve production, reduce poverty and unemployment and boost the economy,” he argued.