While the government’s concern for providing relief to farmers through a reduction in fertilizer prices is to be commended, the measures for achieving the highly desirable end do not seem sufficient for producing any worthwhile change.
The quantity and cost of urea consumed by farmers is not concretely inventoried. But a guess based on facts can be made. It is estimated that about 500 to 600 million bags of urea, each weighing 50 kg are annually put in to the crops by growers. With one bag priced at Rs415-Rs.420, the total adds up to billions of rupees.
It is possible to cut down the price of urea substantially and offer genuine, as compared to ‘academic’, relief to the farmers. Doing that would be in the interest of the country, a significant contribution to national resources and a move to cut down dependence on imports to meet the food needs of the populace.
Farmers use at least about one and a half bag of urea per acre each for wheat, cotton and rice and two bags for sugar-cane. Wheat is the widest cultivated crop of Pakistan. The per acre cost of urea for growing wheat stands at a minimum of over Rs600. This may be a small amount for many people in Pakistan but represents the distance between living barely above subsistence level and abject poverty for small farmers.
Taking cognizance of this reality, the Jamali government appointed a committee to provide relief to the agriculture sector. The deliberations of the committee and its efforts recently resulted in a meeting between officials and fertilizer manufacturers who are reported to have agreed to lowering the price of urea by about Rs10 to 15 per bag.
A new price is yet to be finalized but considering everything, such a reduction would be too little and too late. War clouds over Iraq are certain to cast dark shadows across the world and it would be unwise to expect that Pakistan would escape its fall-out.
Fuel prices are already on a spiralling streak and heading towards a higher point. The agriculture sector cannot do without pumping out underground water in view of water shortage and using diesel for mechanized implements.
The sector’s expenditure on urea has increased over the years and it seems to have risen steeply since end 1999 when the government of General Pervez Musharraf pledged to work for ameliorating the lot of poor farmers and raised the support price for wheat from Rs265 per 40 kg to Rs300.
That gave farmers hope. They responded by stretching their means— both labour and financial investment to the maximum. The result has been high yields for three years despite irrigation limitations and corruption ridden purchase system of the administration that found ways of depriving growers of their due share.
Only well connected members of the farming sector succeeded in selling their produce to the government’s purchasing machinery at official rates; small farmers had to be content with price ranging from Rs240,even less in many cases, to Rs260 for 40 kg of wheat. Still, higher yield left them with a percentage of profit that helped them clear backlog and look towards a better deal in the future.
That did not happen. Developments have in fact registered a negative direction due to higher cost of inputs. The government has problems raising the official price of agriculture produce, particularly wheat that is grown by a preponderant majority of farmers. Its price affects practically every member of the sector.
Urea is however not applied only to wheat crop that is cultivated on about 20 million acres but also to cotton on 7 million acres, rice on 7 m, sugar-cane on 2.7 m , and to other crops, most of them alternatively grown on the same lands. It is a basic component of every grower’s farming practice. It has become a regular major investment for farmers of all crops.
But they are unable to meet its high cost. The government is doing the right thing by trying to get the price of urea reduced. But a reduction, not even the size of a peanut, would not benefit farmers. A lot more needs to be done, both by fertilizer industry and the government.
The former, like most industries in the country, is tuned to high profits. Experts feel that the production cost of a 50 kg bag of urea cannot be more than Rs300, inclusive of GST. More than Rs100 per bag is profit making by skinning the customer. This can be scuttled by 50 per cent.
The government had given incentives to the domestic fertilizer industry by subjecting imports of the commodity to taxes. But instead of passing off the benefit to consumers, the industry used the advantage to establish a monopolistic hold and exploiting the consumers who were left with no option. This is not to suggest that imports should be made compatible with local fertilizer industry’s produce but to emphasize the need for a fair deal to consumers who are fulfilling a vital national requirement— providing food to the populace.
The government has also to look at its attitude. It is no less exploitative than the fertilizer industry’s operations. The Rs30 GST per bag was recently raised by Rs20, that is, to Rs50. That added to input cost of farmers. Agriculture inputs were subjected to GST in response to the donors’ prescriptions but the addition of another Rs20 has no justification.
The international agencies’ condition was met by imposing GST and the enhancement of the tax can be explained only in terms of a callous disregard for the sector and people who run it.
If the fertilizer companies reduce their profit margin and the government cuts down GST by Rs20, the price of a urea bag of 50 kg would automatically come down to around Rs. 325-230.
That, and nothing else can be relief for farmers.