19702404 Strategies to Be Used for Agricultural Development in Pakistan

8/4/2019 19702404 Strategies to Be Used for Agricultural Development in Pakistan

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STRATEGIES TO BE USED FOR AGRICULTURAL

DEVELOPMENT IN PAKISTAN:

Agriculture is the backbone of the economy. It is, therefore, warranted that thegovernment reviews the performance of the agriculture sector in its entirety and sets apolicy which promotes its development and does not transfer resources from poor farmersto other sectors and urbanites.

The poverty trend can only be reduced if the farmers get remunerative prices fortheir produce may it be wheat, cotton, sugarcane, rice or any other crop. If theagriculture sector improves, it would also improve the health of the economy through itsmany forward and backward linkages.

The Agriculture Policy Institute should be made independent and provided withadequate resources and above all competent leadership to provide in-depth analysis of the

emerging challenges and issues for policy formulation. The method of estimation ofcrops, and their demand projections also need to be reviewed by competent people.

Increasing the amount of food available is necessary to feed the increasingpopulation. The Green Revolution of the 1970s and 1980s, produced huge improvementsin output largely due to the cultivation of high-yielding varieties of rice and wheat, theexpansion of land under production and irrigation, increased use of fertilizers andpesticides and greater availability of credit.

In many countries these gains have reached their limit and there are social andenvironmental issues to be addressed.

Further increases in food production depends on: better integration of traditionalknowledge with research; improving farming practices, through training and use ofappropriate technology to increase outputs from current land without further loss ofproductive land; land reform to provide secure access to land for more people; andprovision of low-cost finance to assist farmers invest in improved seeds, fertilizers andsmall irrigation pumps.

Genetically modified seeds are being hailed as a means of improving crop outputsbut there are also concerns about the ownership of seeds, adequate compensation fortraditional knowledge and possible side effects.

Since much of the limited groundwater, if applied through conventional will bewasted through percolation in sandy soils, therefore, drip irrigation has great potentialwhere water is applied directly to root system of salt tolerant crops like fruits, vegetables,forest trees, range species etc., as is being successfully done in the sandy deserts of AbuDhabi, Israel, the US, Australia, India, and China.

The government should also establish drip irrigation demonstration sites with the


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Chinese help in our sandy deserts of Thal and Cholistan in Punjab; Thar in Sindh; Chagi-Kharan in Balochistan; and desert tracts of southern NWFP. It should also consideradopting well established Chinese high mountain irrigation technology which has greatpotential of bringing a large cultivable area along the high banks of streams and rivers inthe mountain areas in North and North-West of the country.

Other areas where Pakistan can benefit is the use of Chinese wheel type combinegrain planter which does sowing of seed, fertilization and soil pressing in one operationthus reducing cultivation cost. This technology can be used on medium and large farms,while two-wheel hand-driven diesel Chinese tractor commanding 12 hectares can be usedon small farms. It reduces the cost of cultivation by land preparation and sowing of cropin one operation by increasing the yield by 20 per cent.

Cultivable waste is that cultivated farm area which is fit for cultivation but wasnot cropped. The reasons may be lack of water availability, lack of interest, financialresource constraints to buy proper equipment and inputs for cultivation of crops, remote

areas from the villages/cities, etc. Cultivable waste area is almost half of the cultivatedarea. Hence development of this area is not only better for investment but also havepotential to contribute to increase in agricultural production. The objective of this step isto commercialize the agriculture sector. Besides identifying the harnessing of cultivablewaste land areas, government also pinpointed fisheries sector, production of muttonthrough rising of sheep and goats, dairy farming, dehydration of vegetables, off-seasonvegetable production, animal feed mills, and fruit juice making plant, solvent oilextraction from rice bran, tomato paste production and sunflower hybrid seed production.

Proposals relating to foreign investment in agriculture sector would be processedby the Board of Investment (BOI) in consultation with respective provincial governmentsand later would be approved by the competent decision making authority.

In this connection, an Investment Policy for the Agriculture sector was alsoannounced by BOI recently under which the import tariff on agricultural machinery (notmanufactured locally) will be zero rated.

There will be no upper ceiling on land holding for registered agriculturalcompanies. However, income of these companies would be taxable. Activities includingLand development/Reclamation of barren, desert and hilly land for agriculture purposeand crops farming; Reclamation of Water front areas or creeks; Crop, fruits, vegetables,flowers farming/Integrated agriculture (cultivation and processing of crops);modernization and development of irrigation facilities and water management; Plantation,Forestry and Horticulture would be available for foreign investment in agriculture sector.

For this purpose the land for agricultural purpose can be obtained on lease basisfor long period, i.e. initially up to 30 years, extending for a further period of 20 years.While, foreign company, allowed for investment in agriculture sector, will not be allowedto transfer such land to any other foreign company unless specifically permitted by theFederal and the concerned Provincial Government.


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The cultivable waste land: According to the experts of MINFAL Pakistan has atotal geographical area of 79.6 million hectares. Of this 9.1 million hectares land iscultivable waste which is fit for cultivation but was not cropped due to lack of wateravailability, lack of interest, financial resource constraints etc. Saying that cultivable

waste area is almost half of the cultivated area, the experts said that development of thisarea is not only better for investment but also have potential to contribute to increase inagricultural production.

About half of the cultivable waste area (4.87 million hectors) is in the province ofBalochistan from total 9.14 mh while there are 1.74 mh cultivable lands in Punjab, 1.45mh in Sindh, 1.08 mh in NWFP and NWFP.

Cultivable waste land in Balochistan is mainly in the Kalat Division followed byQuetta, Nasirabad and Makran Divisions. In Punjab, cultivable waste area is mainly inthe Divisions of D. 0. Khan, Bahawalpur, Rawalpindi and Lahore. In Sindh, cultivable

waste area is located in Hyderabad, Mirpur Khas, Sukkur and Larkana Divisions. InNWFP, cultivable waste area is located in D. I. Khan, Hazara and Kohat Divisions.

About half of the cultivable waste area is in the province of Balochistan.Province-wise break up is as follows:

1.CULTURABLE WASTE AREA

(MILLION HECTARES)Pakistan 9. 14Punjab 1.74Sindh 1.45NWFP 1.08Balochistan 4.87

Cultivable waste land in Balochistan is mainly in the Kalat Division followed byQuetta, Nasirabad and Makran Divisions. In Punjab, cultivable waste area is mainly inthe Divisions of D. G. Khan, Bahawalpur, Rawalpindi and Lahore. In Sindh, cultivablewaste area is located in Hyderabad, Mirpur Khas, Sukkur and Larkana Divisions. InNWFP, cultivable waste area is located in 0. I. Khan, Hazara and Kohat Divisions.

2. PRODUCTION ASPECTS

Pakistan's climate is conducive to grow a variety of crops, vegetables and fruits.Major crops produced are wheat, rice, cotton, sugarcane, maize, gram, onion, potato, rapeand mustard seed, and sunflower.

Major fruits produced include apple, dates, citrus, mango, grapes and guava.

Once the cultivable waste lands are developed, there are bright Prospects that


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production of all the above crops could be started. The requisite technology, manpowerand inputs to produce the crops are already available in the country.

3. MARKETING ASPECTS

Pakistan is deficit in food production and approximately Ps. 84 billion (US$1.9billion) is spent annually on import of wheat, edible oils, pulses, tea and other foodproducts. Thus there is already available market for these products in Pakistan. There isalso potential for exports particularly of cereals, vegetables and fruits.

OFF-SEASON VEGETABLE PRODUCTION

1. PROSPECTS

Demand for off-season vegetables is tremendous and it has vast market in side thecountry and out side in-Middle east and Europe.

Pakistan has technical know-how to produce off-season vegetables. Trainedmanpower is available and the required greenhouse structure/material is also available. Itdoes not require very sophisticated greenhouses.

Vegetables such as tomatoes, cucumbers and sweet pepper can be produced. Thiswork can be started on a small piece of land near cities where it has market and can alsobe exported promptly.

Temporary greenhouses can be built using polyethylene sheets and bamboo oriron bars, or pipes. Water supply is assured through tube wells.

2. PRODUCTION ASPECTS

Production technology is not so complicated. All fertilizers and inputs areavailable locally. Labour is cheap and readily available. Supervisory technical staff isalso available. Training of staff can be provided and other technical assistance can besought from National Agricultural Research Centre, Islamabad.

Land is available on reasonable rates which can be taken on lease or can be

bought as per requirements. Off seasons vegetable production project can be started atsmall level in the beginning and expanded further as a when required. Initially it issuggested to start the project on S acres given the provision for expansion upto 25 acres.

THE MIDDLEMEN:


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The middlemen sometimes secure up to 50 per cent or even more by exploitingextreme conditions in the market. Farmers cannot sell their produce directly toprocessors, factories and markets due to strong network of middlemen. If farmers taketheir produce directly to markets, they have to face many problems due to close links ofmiddlemen with brokers, commission agents, transporters and market committees.

Commission agents refuse to buy produce from the farmers due to self-created lowdemand.

For resolving the problems faced by farmers, the following steps need to be taken:

1. Strict marketing policy: The government has to go for new marketing policy to copewith the challenge of new markets with special focus to streamline the role of middlemanand introduce regulations, which bind the limits of margins. The small producers shouldbe included in market committees. The government should also try to encourage directlinkages between farmers and business houses to increase profit margin for farmers.

2. Bargaining power: If farmers unite, they can easily minimize the role of contractors inthe supply chain. With the farmers union, farmers can have a stronger voice to bargaincollectively. Other options could be commodity exchanges and commodity boards.

3. Improvement in infrastructure: Due to poor infrastructure, farmers often havedifficulty in taking their produce to bigger markets and have to sell their produce at lowercost in the local markets. With improvement in infrastructure, they can not be connectedto wider areas which could help them make more choices to sell wherever they get abetter price.

4. Vicinities: Better access to bigger markets in near vicinities can provide farmers withan opportunity to establish relations with bigger businesses and retailers. They would nolonger have to rely on middlemen and get their right share of profit. Markets in the nearvicinity would also reduce the cost of transportation.

5. Linkages: Establishing linkages with factories, processors and retail chains would takeaway burden of middlemen off the farmers shoulder. Not only would farmers benefit outof it but also factories, processors and modern retailers would greatly benefit sincemiddlemen have been acting as a buyer and seller between the two ends and makingmore than 50 per cent of the profit. Efforts should also be made to make arrangements sothat growers of vegetables and fruits in the peri-urban areas can have direct contact withthe ultimate buyers.

6. Regulations: Since middlemen have established networks in the market, they rule themarket. The government should play its role as a watch dog in the market so that forcesof demand and supply can act freely in determination of prices.

Fertilizer Prices


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The increase in fertilizer prices has come amidst increase in gas prices and slowergrowth in agricultural credit. That makes the farmers quite uneasy, not knowing how tokeep them afloat

Laser technology and irrigation efficiency

There are numerous factors of depletion of soil fertility and productivity. Amongothers, unleveled fields cause significant loss of fertilizer nutrients in the process ofleaching. Irrigation water and rainwater flows toward low lying areas along with nutrientsand subsequently moves downward. Resultantly, fertilizer use efficiency is considerablylower in the cultivated fields. Irrigation water that is crucial input for raising crops iswasted contributing to poor irrigation efficiency as well. Uneven field become lessproductive compared to leveled fields. Unleveled fields also give rise to salinity andwater-logging problems.

In this context, leveling of fields is essential to maintain soil fertility and

productivity and to save irrigation water. Under the devised programme, the Punjabgovernment would provide 2,500 laser sets in irrigated areas for the development ofagriculture sector. Another important feature of the programme is the involvement of theprivate sector. Public-private joint venture would not only improve service delivery inthis field but also contribute to capacity building of farmers and operators for sustainabletransfer of technology to the farmer community.

It is estimated that the provision of laser units to farmers under the programmewould help curtail irrigation application losses up to 50 per cent. Besides, about 7.5million acres within a period of 10 years will lead to cumulative water saving of about5.62 million acre feet. It is an important step towards conservation of water and land

resources essential for sustainable agriculture and food security.

Statistically, the program will help enhance crop yield by 20 per cent, control ofwater-logging and salinity, facilitation in efficient use of agricultural machinery andproductive utilization of seed, fertilizer and other non-water inputs. Leveled fields ensureuniform germination of seed. Cultural practices like hoeing, weeding, spraying andharvesting become easier when crop plants are of equal heights. Pre and post harvestlosses are also minimized if crop matures uniformly.

By leveling of fields, crop harvest could easily be enhanced that is much lesserpresently owing to a number of constraints, mainly shortage of irrigation water. It is

because unleveled fields causing wastage of land and irrigation water could be efficientlyutilized. Increased farm produce would help to alleviate rural poverty that is endemic.Moreover, land leveling would help in minimizing the cost of operation, ensures betterdegree of precision in much lesser time and save irrigation water.

Issues to be resole in Agricultural Policy


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The agricultural policy needs a revision. Pakistan must evolve a strategy toreplenish soil fertility through shifting emphasize to forestry and livestock fromcultivation. Meanwhile, water resources should be managed to ensure supplies duringdry-months.

The government should stop subsidies available to agriculture sector (to anysector whatsoever) and divert credit supplies from crops to forestry and livestock.Meanwhile, crop management policy should be brought forth while taking intoconsideration the water availability in different parts of Pakistan.

Agricultural pricing is a subject of lively debate. It has evoked divergent views,ranging from a forceful advocacy of support prices for key agricultural commodities andsubsidies for major inputs to complete liberalization of prices and reliance upon themarket mechanism to achieve efficiency and competitiveness.

Successful integration with the international economy has also been considered an

important factor.

An objective analysis of the issues involved in this debate is necessary so thatappropriate policy prescriptions can be adopted.

Agriculture is critical to economic growth and poverty reduction. It accounts forclose to a quarter of the GDP and employs over 44 per cent of the workforce. Theaverage annual growth of agricultural output at more than four per cent has been quiteimpressive.

Future growth will, however, largely depend upon increasing productivity whichin turn requires major changes in systems, policies and institutions for agriculture. One ofthe key government policies, which directly impact upon agricultural growth, relates topricing.

Agricultural price policy refers to governments role in influencing prices ofagricultural inputs and outputs. Output pricing includes fixation of support orprocurement prices of various agricultural crops, while input pricing refers to subsidieson seeds, fertilizers, pesticides, machinery, water, electricity, fuels, and farm credit.These two aspects of pricing are inter-related as cost of production is an importantelement in the determination of output prices.

Agricultural price policy, being a sub-set of the overall macroeconomic policy,impacts upon the allocation of resources, income distribution, industrial productivity andexports.

The rationale of input pricing policy is to provide production incentives toencourage adoption of new technology and greater investment by farmers. It is arguedthat high output prices may be diverted to consumption rather than investmentexpenditure. This policy continued throughout the 1960s and 1970s.


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Subsidies on fertilizer, pesticides, seeds and farm mechanization have beenphased out since the mid-1980s. A significant subsidy on canal water, however, remains,together with some subsidy on electricity used by tube-wells in Balochistan.

Evidence suggests that the benefits of the subsidies are mostly availed by big farmers asthey make larger use of modern inputs than small and medium farmers who facenumerous constraints. This has led to a realization about the inadequacy of subsidies as apolicy instrument and a greater focus on augmenting timely supplies of inputs.

It is in this context that output pricing policy is considered a more feasible option. Theconcept of a minimum guaranteed price, known as support price, has been introducedsince the early 1980s to protect the farmer from price fluctuations and ensure a minimumreturn in view of post harvest glut, fragmented commodity markets, and poor holdingcapacity of the farmer.

Advocates of price support system argue in terms of farmer protection against pricefluctuations of agricultural commodities due to(a) Low price elasticity of demand;(b) Biological cycle of production in that production cannot be adjusted to price changesowing to time lag;(c) Seasonal nature of output in that prices are depressed at a time of glut and rise off-season when farmers due to lack of holding capacity had sold off the crop;(d) Distress sale by small farmers, who account for 80 per cent of total farms, to meettheir consumption and investment needs;(e) Fragmented commodity markets dominated by middlemen and processor cartels; and(f) Uncertainty on account of the weather factor.

The support price program primarily aims at providing a floor to market prices inthe post-harvest season and initially covered eight crops, namely wheat, rice, cotton,sugar cane, potato, onion, gram, sunflower, safflower, soybean and canola. Theimplementation of support prices of various crops has evolved over time and undergonepolicy and institutional changes. There was a strong implementation of the programduring the 1980s.

The importance of agricultural price policy has dwindled with the onset of marketand price liberalization as an integral part of the economic reforms since the early1990s. Since 2001, support price for only four crops i.e. wheat, rice, cotton and gram isbeing notified. The policy of selective intervention on need basis to protect the farmeragainst extreme price volatility is being followed and market forces generally allowed afree play.

The relative efficiency of input subsidies and output pricing has been debated byexperts. The role of output support price in enabling producers to use inputs flexibly hasbeen underscored, while input subsidies encourage the adoption of certain technology andhigher use level of inputs. Output prices at the same time are relevant only for those


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having a marketable surplus, while input subsidies benefit all those using the technology.

It would be worthwhile to dwell on the rationale and implications of the policy ofprice liberalization of outputs and inputs being followed as part of economicliberalization since the early 1990s, and the policy recommendations that flow from it.

The support price policy is considered inadequate in terms ofa) Its contradictory objectives of providing incentive to the producer and subsidizing theurban consumer;b) Leading to allocative inefficiency in resource use and giving rise to trade distortions;andc) Mismanagement by public sector procurement agencies and fiscal cost.

Empirical studies of nominal protection coefficients ratio of domestic tointernational prices prior to price liberalization have shown an implicit tax on wheat,cotton, and basmati rice, a subsidy on sugar cane and no tax on IRRI rice. Since the early1990s, however, relative prices of wheat, cotton, and basmati rice have improved and

subsidy on sugar cane reduced.

As a result, transfer of surplus from agriculture sector has reduced since the 1990s due toprice, trade and exchange rate liberalization. There is a shift from implicit taxationtowards improved prices of outputs. It may, however, be stated that productivity impactof policies is not easy to determine as complex interactions are involved.

As we press ahead with the policy of price liberalization of both agriculturaloutputs and inputs as part of our overall economic reform strategy to improve efficiencyand to facilitate integration with the world economy, we should not lose sight of theground realities faced by the farmer. One, farmers in the developed world are stillbenefiting from huge subsidies. Second, agricultural market structures are far fromcompetitive and marred by glaring imperfections. Third, the peculiar nature ofagricultural production, price volatility of agricultural commodities, and lack of vitalstorage and marketing infrastructure are serious constraints in effecting a full transitiontowards market based policies.

A host of policy measures need to be effectively implemented to realize the positiveoutcomes of price and market liberalization and to lessen the pain of adjustment.First, market and storage development is critical. The government should provideincentives to the private sector for storage development which is critical to price stability.Adequate support to develop private marketing channels for greater competition shouldbe provided.

Second, small farmers should be provided greater access to credit to improve theirproductivity. Third, periodic government intervention to hedge against extreme pricevolatility should continue. Fourth, the prevalent system of general subsidies, which leadsto leakage of benefits to the non-deserving, should be replaced by targeted subsidies topoor and indigent consumers.


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Finally, effective policies for income redistribution should be pursued to ensuring thatthe long-term benefits of structural adjustment reach the lower segments of society.

New hope for agriculture

It is heartening to learn from a Business Recorder report from Islamabad that thegovernment has given initial approval to Rs 3.1189 billion Public Sector DevelopmentProgramme (PSDP) for the Ministry of Food, Agriculture and LIVESTOCK (Minfal),with a marked increase of Rs 1,700 million in the volume of Agricultural SectorDevelopment Loan (ASDL).

It will be noted that the major chunk of this allocation - a little over Rs 2,000 million -which would go to ASDL in 2004-05 would far exceed the Rs 300 million allocated inthe current year's budget.

The big increase in the volume of farm loans this time has been attributed to the

government's concentration on improving the lot of small farmers. The report underreference also has it that the allocated amount would be transferred to the provinces, asthe provision of loans to the farmers is a provincial subject. All this sounds quite well but,perhaps, the uncertainty about the share of each province in its distribution as nowprevailing can delay the process of efforts desired to be made through these loans.

The Minfal is stated to have demanded over Rs 3 billion for PSDP in the next, primarily,out of its keenness to build up a diversified plan to take up 21 new schemes to developagricultural infrastructure and to ensure availability of inputs and pesticides.

After its thorough discussions, the Finance Ministry, Planning and Development Division

and the Minfal have agreed in principle to approve the PSDP. Moreover, the prioritycommittee held various meetings on the public spending plan, which is 100 percenthigher than the last year's allocation of over Rs 1.5 billion. Now it will have around Rs1,300 million in local currency and Rs 1,450 million as foreign currency component,while Rs 140 million would be met from own resources.

The total number of development projects planned by the ministry with a total cost of Rs1.1189 billion reportedly stands at 43. The plan envisages loan to the growers as a majorcomponent, which is presently being provided by commercial banks, besides ZaraiTarraqiati Bank Limited (ZTBL).

The sources said the PSDP also includes allocations for 32 ongoing projects. Accordingto the report, the Planning and Development Division has approved 11 new schemes.

According to an earlier report, Minfal had identified various areas to focus investment inthe sector and aimed at increasing economic growth, with public sector support andparticipation of the private sector.

These include storage facilities, improved research, quality control laboratories, seed,


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water and LIVESTOCK sectors, fruits and vegetables, marketing, integrated pestmanagement and aquaculture, besides corporate farming.

Enormous possibilities were also noted as existing for co-operation and support frominternational financial institutions and developed countries. Some of these areas will be

open to foreign private investments. As for storage facilities, it was pointed out thatPakistan has been suffering heavy post-harvest losses in agricultural produce, which itwould seek to address through scientific approach in accordance with modern trends.

Reference, in this regard, was made to a number of incentives for the private sectorinvestment for construction of improved grain storage facilities. Moreover, considerableemphasis was laid on research on hybrid breeding, which has remained limited only for afew crops, namely oilseed and maize, thus stressing the need of encouraging investmenton hybrid seed production.

Reference was also made to incentives announced in this regard by the State Bank of

Pakistan (SBP) and the government for investment in this area, pointing to the prospectsof overseas private sector making investment in improving research facilities for thispurpose.

With regard to corporate farming, attention was focused on the announcement ofcorporate agriculture farming scheme, which is aimed at bringing more area undercultivation on lands lying barren, to overcome the land fragmentation problem as well.

It had also been observed that corporate farming would not only help improve the qualityof produce but also serve the purpose of value addition to farm produce, thereby, spurringdevelopment of modern and competitive agriculture.

All this put together, would point to a new hope for the long depressed sector. It will,however, be noted that the allocation of Rs 300 million in the last budget was not fullyutilized, thereby, suggesting lack of timely and full utilization of the allocations.

MALIK FARRUKH [email protected]

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19702404 Strategies to Be Used for Agricultural Development in Pakistan