Punjab Economic Report 2007

Punjab Economic Report 2007


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Table of Contents Study Team ..............................................................................................................................................i Acronyms and Abbreviations ................................................................................................................ ii Statement .......................................................................................................................................... vii Preface ............................................................................................................................................ix Executive Summary ...............................................................................................................................xi 1 Introduction .........................................................................................................................1

1.1 Vision 2020...................................................................................................................1 1.2 Structure of the Report..................................................................................................1

2 Assessing the Economy’s Performance: Growth, Poverty and Employment.....................3 2.1 Punjab’s GPP ................................................................................................................3

2.1.1 Share in National Economy .............................................................................3 2.1.2 Structure of GPP ..............................................................................................4 2.1.3 Sectoral Growth Trends ...................................................................................6

2.2 Employment..................................................................................................................7 2.2.1 Employment by Sector.....................................................................................7

2.3 Poverty .........................................................................................................................9 2.3.1 Non-income Determinants of Poverty – Progress Towards the MDGs.........10 2.3.2 Relationship between Money-Metric Poverty Status and Access to

Public Services...............................................................................................11 2.4 Conclusion ..................................................................................................................11

3. Agriculture .......................................................................................................................13 3.1 Trends, Structure and Performance of Agriculture.....................................................13

3.1.1 Composition of the Agriculture Sector in Punjab..........................................14 3.2 A Theoretical Framework for Analyzing the Sources of Growth in Agriculture..............15

3.2.1 Sources of Growth – A Framework ..............................................................15 3.2.2 Yield Gaps in Punjab ....................................................................................17

3.3 Bridging the Agricultural Research Gap – Status and Prospects................................18 3.3.1 Lack of Co-ordination between Federal and Provincial Research Systems ..18 3.3.2 Low Funding Levels ......................................................................................18 3.3.3 Reasons for Ineffectiveness of Research Institutions ....................................20 3.3.4 Proposed Strategy ..........................................................................................20

3.4 Bridging the Extension Gap – Status and Prospects ..................................................21 3.4.1 Institutional Issues .........................................................................................21 3.4.2 Critical Weakness ..........................................................................................22 3.4.3 Proposed Strategy ..........................................................................................23

3.5 The Role of Input Use and Delivery system in Agricultural Growth .........................23 3.6 Agricultural Diversification – The way forward.........................................................25

3.6.1 Developments in Livestock and Dairy Farming ............................................25 3.6.2 Characteristics of the Livestock Sector .........................................................25 3.6.3 Constraints to Livestock Development..........................................................26 3.6.4 Proposed Strategy ..........................................................................................26 3.6.5 New Institutions and Agricultural Diversification ........................................28 3.6.6 Off-season vegetables (Tunnel) Farming - a move toward Non-traditional

Products. ......................................................................................................28 3.7 Conclusion ..................................................................................................................29

4 Rural Development ................................................................................................................31

4.1 Sources of Livelihood in Rural Punjab.......................................................................31 4.2 Key Policy Options.....................................................................................................32 4.3 Provision of Public Goods ..........................................................................................32

Acronyms And Abbreviations

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4.3.1 Rural Electrification.......................................................................................32 4.3.2 Public Utilities ...............................................................................................32 4.3.3 Farm-to-Market Roads...................................................................................33

4.4 Determinants and Drivers of Rural Poverty Reduction ..............................................33 4.5 Pakistan’s Rural Development Strategy .....................................................................34 4.6 Developing Less Developed Areas .............................................................................35 4.7 Conclusion ..................................................................................................................36

5 Industry .......................................................................................................................37 5.1 The Industry Sector in Punjab.....................................................................................37 5.2 Estimates of the Number of Manufacturing Units in Punjab......................................37 5.3 Employment and Manufacturing Output ....................................................................39 5.4 Key Issues in Industrial Development ........................................................................40

5.4.1 Role of Small and Medium Enterprises (SMEs)............................................40 5.4.2 Industrial Development and Environmental Degradation .............................41 5.4.3 Rising Cost of Energy....................................................................................42 5.4.4 General Issues ................................................................................................44

5.5 Programs and Initiatives for the Industrial Sector ......................................................45 5.6 Conclusion ..................................................................................................................45

6 Urban Development ...............................................................................................................47 6.1 Urban Livability and Location Characteristics ...........................................................48

6.1.1 Housing..........................................................................................................48 6.1.2 Water Supply and Sanitation and Solid Waste Management ........................51 6.1.3 Transport........................................................................................................53 6.1.4 Environment ..................................................................................................55

6.2 Punjab Government’s Urban Strategy ........................................................................60 6.3 Conclusion ..................................................................................................................61

7 The Services Sector ................................................................................................................63 7.1 Linkages of the Services Sector ..................................................................................63 7.2 Rural Investment Climate Survey (RICS) 2005 .........................................................64

7.2.1 Wholesale and Retail Trade...........................................................................64 7.2.2 Finance and Insurance ...................................................................................65 7.2.3 Ownership of Dwellings ................................................................................66 7.2.4 Community, Social, and Personal Services ...................................................67

7.3 Transport and Communications..................................................................................68 7.3.1 Transport Sector.............................................................................................68 7.3.2 Communications Sector .................................................................................70

7.4 Steps to Expand the Growing Services Sector............................................................71 7.5 Recommendations.......................................................................................................74 7.6 Conclusion ..................................................................................................................75

8 Education .......................................................................................................................77 8.1 Key Indicators.............................................................................................................77

8.1.1 School Attendance .........................................................................................77 8.1.2 Functionality ..................................................................................................77 8.1.3 Literacy ..........................................................................................................77 8.1.4 Enrolment Rates.............................................................................................78 8.1.5 Capacity Utilization .......................................................................................79 8.1.6 Dropout Rates ................................................................................................81 8.1.7 Expenditure on Education..............................................................................81

8.2 Major Initiatives in the Education Sector ...................................................................81 8.2.1 Punjab Education Sector Reform Program ....................................................82 8.2.2 Poverty Focused Investment Strategy (PFIS) ................................................84 8.2.3 Punjab Devolved Social Sector Program (PDSSP) .......................................84 8.2.4 Targets for Millennium Development Goals .................................................84

8.3 Conclusion ..................................................................................................................87


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9 Health and Population...........................................................................................................89 9.1 Key Indicators.............................................................................................................89

9.1.1 Population and Population Density................................................................89 9.1.2 Basic Demographics ......................................................................................89 9.1.3 Basic Health...................................................................................................89 9.1.4 Child Health...................................................................................................90 9.1.5 Reproductive Healthcare................................................................................91 9.1.6 Communicable Diseases ................................................................................92

9.2 Health Infrastructure ...................................................................................................93 9.3 Issues and Constraints.................................................................................................94

9.3.1 Management Issues........................................................................................94 9.3.2 Personnel Issues.............................................................................................95 9.3.3 Lack of Equipment and Medicines ................................................................95 9.3.4 Inadequate Funding........................................................................................95

9.4 Health Sector Reform Program (HSRP) .....................................................................95 9.5 Expenditure on Health ................................................................................................97 9.6 Conclusion ................................................................................................................100

10 Mainstreaming Gender in Development............................................................................101 10.1 Key Indicators...........................................................................................................101 10.2 Government Initiatives .............................................................................................103

10.2.1 Gender Reform Action Plan ........................................................................103 10.3 Conclusion ................................................................................................................103

11. Land .....................................................................................................................105 11.1 Land Use ...................................................................................................................105 11.2 Changes in the Pattern of Land Ownership ..............................................................105 11.3 Changing Trends in Operated Area by Tenure and Farm Size .................................107 11.4 Land Degradation in Punjab .....................................................................................108

11.4.1 Salinity and Sodicity....................................................................................109 11.4.2 Water Logging .............................................................................................109 11.4.3 Deforestation and Desertification ................................................................110 11.4.4 Soil Erosion .................................................................................................110 11.4.5 Depletion of Soil Nutrients ..........................................................................111 11.4.6 Proposed Strategies......................................................................................111

11.5 Land Management Issues..........................................................................................112 11.5.1 Status of Land Titling ..................................................................................112 11.5.2 A Revenue Record and not a Title...............................................................113 11.5.3 Registration of Land Documents .................................................................113 11.5.4 Land Acquisition..........................................................................................113 11.5.5 Registration of Land Sales ...........................................................................114 11.5.6 Land Use Regulation ...................................................................................114

11.6 Contract Enforcement ...............................................................................................114 11.7 Key Issues, Recent Progress and Some Policy Suggestions .....................................115 11.8 Conclusion ................................................................................................................117


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12 Water .....................................................................................................................119 12.1 Future Water Requirements: National Scenario .......................................................119 12.2 Geography and Climate of Punjab............................................................................121 12.3 Surface Water Resources ..........................................................................................122

12.3.1 River Flows..................................................................................................122 12.3.2 Sediment Transport and Surface Water Quality ..........................................123 12.3.3 Drainage.......................................................................................................124 12.3.4 Floods ..........................................................................................................125

12.4 Groundwater .............................................................................................................125 12.5 Irrigation Infrastructure.............................................................................................128

12.5.1 Canal Irrigation System Issues ....................................................................130 12.6 Water Sector MTDF .................................................................................................132 12.7 Punjab Irrigation Sector Reforms ............................................................................133 12.8 Agricultural Water Use .............................................................................................136 12.9 Water Requirements for Crops in Punjab .................................................................138 12.10 Issues at the Agriculture-Water Nexus .....................................................................140 12.11 The Way Forward .....................................................................................................140 12.12 WSS Services............................................................................................................142 12.13 Sanitation Services Coverage in Punjab ...................................................................145 12.13.1 Domestic Wastewater Loads .......................................................................145 12.14 Issues in WSS ...........................................................................................................147

12.14.1 Water Supply ............................................................................................147 12.14.2 Sanitation..................................................................................................148

12.15 Devolution of WSS Services ....................................................................................148 12.16 Recommendations.....................................................................................................149

12.16.1 WSS..........................................................................................................149 12.16.2 Devolution of WSS Service Delivery.......................................................150

12.17 Industrial Water Use .................................................................................................151 12.17.1 Recommendations ....................................................................................152

12.18 Conclusion ................................................................................................................153 13 Public Sector Resource Management.................................................................................155 13.1 Recent Developments ...............................................................................................155

13.1.1 National Finance Commission (NFC) Award 2006.....................................155 13.1.2 Implementation of Subprogram II of the Punjab Resource

Management Program (PRMP) ................................................................156 13.1.3 Institution of Medium Term Planning Frameworks ....................................157

13.2 Expenditure Trends...................................................................................................158 13.2.1 Current Expenditure.....................................................................................158 13.2.2 Development Expenditure ...........................................................................159 13.2.3 Debt Liabilities of the Provincial Government ............................................160

13.3 Trends in Revenue Mobilization...............................................................................161 13.4 Initiatives for Improved Resource Management.......................................................163

13.4.1 Focus on Social Sectors ...............................................................................163 13.4.2 Public-Private Partnerships..........................................................................163 13.4.3 Institutional Reform.....................................................................................163 13.4.4 The Medium Term Budgetary Framework (MTBF) 2007/10 .....................164 13.4.5 Meeting the MTBF 2007/10 Targets ...........................................................166

13.5 Conclusion ................................................................................................................168


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List of Appendix

Appendix 1: Social Safety Nets .....................................................................................................171 Appendix 2: The Agriculture Research Infrastructure in Punjab ..................................................174 Appendix 3: Livestock Development Initiatives ...........................................................................180 Appendix 4: Technical Education and Vocational Training Authority (TEVTA) ........................182 Appendix 5: Health Sector Reform Achievements........................................................................184 Appendix 6: Gender Mainstreaming Project (2004/07).................................................................186 Appendix 7: The Land Records System ........................................................................................190 Appendix 8: Punjab Irrigation Sector Reforms (Water) ................................................................192


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List of Tables Table 2.1: GDP Growth Rate in Punjab (% per annum)................................................................6 Table 2.2: Percentage Distribution of Rural and Urban Employed Persons by Major Sector in Punjab, FY 2000 and FY 2006 ......................................................8 Table 2.3: Percentage Distribution of Employed Persons Engaged in the Informal Sector by Employment Status and Gender in Rural Areas, 2005/06 .......................................9 Table 2.4: Non-income Poverty Indicators for Punjab, FY 1999 to FY 2005 .............................10 Table 3.1: Gross Provincial Agriculture Product by Sub-Sectors in Agriculture ...............................14 Table 3.2: Sectoral Share in Gross Agriculture Product in Punjab .....................................................14 Table 3.3: Sectoral Growth Rates of Punjab Agriculture ....................................................................14 Table 3.4: Average Yields for Selected Agriculture Commodities and the Associated Yield Gaps .17 Table 3.5: Distribution of public agricultural research expenditures and total researchers, 2003......19 Table 3.6: Public and Private Research Expenditures, 2003 ...............................................................19 Table 3.7: Distribution of Improved seeds by Crops...........................................................................24 Table 3.8: Agriculture Loan Disbursement per Cropped Hectare.......................................................25 Table 3.9: Tunnel Farming: Yields gap between tunnel farmers and traditional vegetable growers.28 Table 3.10: Tunnel Farming: Fantastic Returns (median net returns Rs/acre) .....................................28 Table 5.1: Share of Punjab in Production of Selected Manufactured Items in Pakistan ....................39 Table 5.2: District-Level Detail of Industrial and Municipal Discharge in Punjab ............................42 Table 6.1: Size and Growth of Population in Punjab (Million)...........................................................47 Table 6.2: Population Share of Large and Small Cities in Urban Punjab (percent) ...........................48 Table 6.3: Housing Units by Number of Rooms and Fuels Used in Urban Areas (percent) .............49 Table 6.4: Household Features by Area ( percent) ..............................................................................49 Table 6.5: Water Supply and Sewerage Connections in Punjab’s Major Cities 2005/06 ..................51 Table 6.6: Manpower Status of Waste Collection/Transport and Cleaning.................................52 Table 7.1: Linkages of Services and Commodity-Producing Sectors in Pakistan 2005.....................63 Table 7.2: Tenure Pattern and Construction Types in Punjab.............................................................66 Table 7.3: Performance of Transport and Communication Sector in Punjab .....................................69 Table 7.4: Business Services as a “Breakthrough” Sector...................................................................72 Table 7.5: Inter-linkages among Selected Services Sub sectors..........................................................73 Table 8.1: Population that has ever Attended School, Pakistan and Punjab.......................................77 Table 8.2: Literacy Rates in Pakistan and Punjab................................................................................78 Table 8.3: Gross Primary, Middle and Matric Level Enrolment Rate in Punjab and Pakistan..........79 Table 8.4: Capacity Utilization at Primary Level in Punjab................................................................80 Table 8.5: Key Education Indicators/Medium-Term Targets, Timeframe for Achieving MDGs .....84 Table 8.6: Capacity Utilization in Technical Institutions in Punjab....................................................85 Table 8.7: Capacity Utilization at Higher Education in Punjab ..........................................................86 Table 8.8: Capacity Utilization at Professional Education Level in Punjab .......................................86 Table 9.1: Percentage of Immunized Children (12 to 23 Months) in Punjab .....................................90 Table 9.2: MDGs Targets: Indicators of Health in Punjab..................................................................97 Table 9.3: Health Sector Resource Allocation (Rs. Million)...............................................................98 Table 10.1: Indicators of Gender Development Index.........................................................................101 Table 10.2: Labor Force Participation, Unemployment and Underemployment Rate in Punjab.......102 Table 11.1: Land Use in Punjab ...........................................................................................................106 Table 11.2: Gini Coefficient for Ownership Holding..........................................................................107 Table 11.3 Percentage Distribution of Land Ownership in Punjab....................................................107 Table 11.4: Gini Coefficient for Operated Area by Mode of Tenancy ..............................................108 Table 11.5: Percentage Distribution of Farm Operated Area for Punjab............................................108 Table 11.6: Soils affected by various types of salinity and sodicity....................................................109 Table 11.7: Extent of waterlogged area................................................................................................110


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Table 11.8: Area afforested and regenerated (million hectares) in Punjab during 1997/98 to 2001/02........................................................................110 Table 11.9: Area affected by water erosion .................................................................................111 Table 11.10: Area affected by wind erosion ..................................................................................111 Table 11.11: Nutrient balance Sheet in Pakistan (1985/86 and 1995/96) ......................................111 Table 12.1: Irrigation Water Requirements for High-Demand Scenario .....................................119 Table 12.2: Irrigation Water Requirements for Low-Demand Scenario......................................120 Table 12.3: Average Annual Rainfall (mm) at Selected Locations in Punjab, 1996 to 2005 ......122 Table 12.4: Total River Flows (MAF) of Western and Eastern Rivers .......................................122 Table 12.5: Western River Flows (MAF) at Rim Stations...........................................................122 Table 12.6: Apportionment of Indus Waters between Provinces (MAF) ....................................123 Table 12.7: Loss of Storage Capacity in Main Reservoirs due to Silting ....................................123 Table 12.8: Distribution of Groundwater Quality Zones .............................................................126 Table 12.9: Groundwater Quality Status in Different Groundwater Monitoring Units of Punjab, 2005 (Area in ha) ...........................................................................127 Table 12.10: Salient Features of Link Canals ................................................................................128 Table 12.11: Details of Punjab’s Canals ........................................................................................129 Table 12.12: Features of Punjab’s Irrigation System.....................................................................129 Table 12.13: Summary of revised (2006) Costs of Rehabilitation of Assets .................................130 Table 12.14: Irrigation and Drainage Projects ...............................................................................132 Table 12.15: Projects Funded by Federal PSDP ............................................................................132 Table 12.16: Allocations of Foreign-Funded Projects ...................................................................133 Table 12.17: Punjab’s Urban Population and Water Demands......................................................142 Table 12.18: Supply of Drinking Water in Punjab by Source .......................................................143 Table 12.19: Main Sources of Drinking Water in Punjab..............................................................143 Table 12.20: Sources of Punjab’s Water Supply ...........................................................................143 Table 12.21: Access to Water Supply ............................................................................................143 Table 12.22: MTDF allocations 2007/10 for Water Supply and Sanitation (including WASAs) .145 Table 12.23: Punjab Urban Wastewater Produced and Future Projections ...................................145 Table 12.24: Distribution of Households by Type of Toilet (percent)...........................................146 Table 12.25: Punjab Sanitation Coverage, Wastewater, and Solid Waste Disposal (percent).......147 Table 13.1: Shares of Different Current Expenditure Categories in Total Current Expenditure .159 Table 13.2: Development Expenditure Allocations (Rs. Million) ...............................................160 Table 13.3: Debt Servicing Costs (Rs. Million)...........................................................................160 Table 13.4: Growth of General Provident Fund Liability Fund...................................................161 Table 13.5: Provincial Revenue Receipts (Rs Million) ...............................................................162 Table 13.6: Financing of Expenditure of Punjab MTBF 2007/10 ...............................................166


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List of Figures Figure 2.1: Sector Wise Share of Punjab’s GPP in National GDP..................................................4 Figure 2.2: Share of Key Sub-Sectors of Punjab’s GPP in National GDP......................................4 Figure 2.3: Sectoral Shares in Punjab’s GPP, FY 2007 ..................................................................5 Figure 2.4: Composition of Punjab’s Services Sector, FY 2007.....................................................5 Figure 2.5: Growth Rates of Key Sectors and the GPP in Punjab...................................................7 Figure 2.6: Share in Employment and Value-Added for Key Sectors, FY 2006 ............................8 Figure 3.1: Composition of the Agriculture Sector in Punjab (FY 2000 to FY 2007).........................15 Figure 3.2: Share of Value Added of Four Crops in Total Value Added of Major Crops in Punjab ..15 Figure 3.3: Productivity Gaps in Agriculture ........................................................................................16 Figure 5.1: Composition of Industrial Sector of Punjab, FY 2007................................................37 Figure 5.2: Share of Value-Added of Major Industrial Groups in Punjab, FY 2001 ....................39 Figure 5.3: Energy Consumption by Industry in Pakistan ............................................................43 Figure 8.1: Pass Rates for Matric Examination in Punjab by Grade (Science Group)..................80 Figure 8.2: Pass Rates for Matric Examination in Punjab by Grade (General Group) .................80 Figure 8.3: Total Expenditures on Education in Punjab (Rs Million)...........................................81 Figure 8.4: Enrolment Rates in Punjab*........................................................................................83 Figure 9.1: Infant Mortality Rate in Punjab (Deaths per 1,000 Live Births).................................90 Figure 9.2: Type of Assistance in Child Delivery-Punjab (2003/04)............................................92 Figure 12.1: Storage Capacity of Various Semi-Arid Basins........................................................120 Figure 12.2: Evolution of Tube wells in Punjab............................................................................125 Figure 12.3: Punjab Canal Withdrawals, Apr to Mar (MAF) .......................................................136 Figure 12.4: Water Table Decline in SGW Zone of Chaj Doab, 1998 to 2001.............................137 Figure 12.5: Shares of Major Crops in Cropped Area in Punjab 2005- 06 ...................................139 Figure 12.6: Shares of Major Crops in Terms of Water Requirements.........................................139 Figure 12.7: Sanitation Facilities in Punjab ..................................................................................146 Figure 13.1: Expenditure Trends...................................................................................................158


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List of Boxes Box 3.1: Impact Evaluation of Agricultural Extension through the Mass Media (2001) ................23 Box 3.2: Idara-e-Kissan (Halla Dairy): A Success Story..................................................................27 Box 4.1: Helping People Help Themselves: SLBAP ................................................................35 Box 5.1: The Handloom Industry: an Export-Potential Industry Being Phased Out........................................................................................................40 Box 5.2: Punjab Small Industries Corporation (PSIC) ..............................................................41 Box 5.3: Investment Climate Survey of Manufacturing and Exporting Industries ...................44 Box 5.4: Sundar Industrial Estate ..............................................................................................45 Box 6.1: Anjuman-e-Samaji Behbood, Faisalabad....................................................................53 Box 6.2: The Level of Pollution in Punjab’s Provincial Capital ...............................................56 Box 6.3: Vehicular Pollution Management Measures ...............................................................57 Box 6.4: Performance Management System for TMAs....................................................................59 Box 6.5: Performance Management System for TMAs....................................................................59 Box 6.6: The Urban Unit – Analytical Studies to Support the Urban Development of

Punjab .........................................................................................................................60 Box 8.1: Assessing the PESRP..................................................................................................83 Box 8.2: The State Bank’s Evaluation of PESRP......................................................................84 Box 9.1: Innovative Healthcare Models in Punjab ...................................................................99 Box 9.2: Punjab Emergency and Ambulance Services—Rescue 1122: A Success Story.........99 Box 11.1: Establish Property Rights..........................................................................................113 Box 11.2 Improving Land Records Service Delivery ..............................................................117 Box 12.1: Development Policy Loan (DPL) Key Development Outcomes and

Monitorable Indicators..............................................................................................135 Box 13.1: NFC Award 2006—Distribution of Revenue and Grants-in-Aid ............................156 Box 13.2: Punjab Resource Management Program...................................................................157


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Study Team Ms. Safiya Aftab Innovative Development Strategies Dr. Shujat Ali, Chief Economist, P&D Department,

Government of Punjab Mr. Waqar Akram, University of Sargodha Mr. Khawar Ata Research Economist, Punjab Economic

Research Institute Mr. Masood Awan, Assistant Professor, University of Sargodha Mr. Mubashir Ijaz, Innovative Development Strategies Mr. M. Afsar Khan, Innovative Development Strategies Dr. Muhammad Jameel Khan, Former Director, Punjab Economic Research

Institute Professor Dr. Sohail Jehangir Malik, Team Leader,University of Sargodha and

Innovative Development Strategies Dr. Muhammad Abdul Quddus Malik, Acting Director, Punjab Economic Research

Institute Ms. Hina Nazli, Innovative Development Strategies Mr. Habib ur Rehman Senior Chief, P & DD Dr. Mohammad Khan Niazi, Innovative Development Strategies Dr. Sarfraz Khan Qureshi, Innovative Development Strategies Mr. Shakeel Ramay, Innovative Development Strategies Professor Zakir Hussain Rana University of Sargodha Mr. Mohsin Raza, Innovative Development Strategies Ms. Ayesha Razzaq, Innovative Development Strategies Professor Dr. Khalid Riaz, University of Sargodha Note: Names are in alphabetic order.


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Acronyms and Abbreviations

AARI Ayub Agricultural Research Institute ADB Asian Development Bank ADBP Agricultural Development Bank of Pakistan ADP Annual Development Program AKFED Agha Khan Fund for Economic Development AKRSP Agha Khan Rural Support Program AMRI Agricultural Machinery Research Institute APCA All Pakistan Contractors Association APCom Agricultural Prices Commission APTMA All Pakistan Textile Mills Association AWBs Area Water Boards BHU Basic Health Unit BOD Biochemical Oxygen Demand BOS Bureau of Statistics BRDP Bahawalpur Rural Development Project BVDP Barani Village Development Project CAS Country Assistance Strategies CBOs Community-Based Organizations CBR Central Board of Revenue CCA Culturable Command Area CDGs City District Governments CED Credit Enterprise Development CFTD Cotton Fiber Textile Development [a French Public-Private Sector Company] CMI Census of Manufacturing Industries CPI Community and Physical Infrastructure CV Coefficient of Variation CWR Crop Water Requirement DCO District Coordination Officer DDO Deputy District Officer DHA Defence Housing Authority DHQ District Headquarters DLR Directorate of Land Reclamation DO District Officer DO Dissolved Oxygen DoH Department of Health EDO Executive District Officer SEIA Statements and Environmental Impact Assessment EMIS Educational Management Information System EOBI Employees Old Age Benefit Institution EPA Environmental Protection Agency EPD Environment Protection Department EPI Expanded Program of Immunization ESSI Employees Social Security Institutions EU European Union FAO Food and Agriculture Organization FBC Federal Bank for Cooperatives FBS Federal Bureau of Statistics FFC Fauji Fertilizer Company FFS Farmers Field School FO Farmers’ Organization FP Family Planning FWB First Women’s Bank GDI Gender Development Index GDP Gross Domestic Product


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GER Gross Enrolment Ratio GIS Geographic Information System GMS Genetically Modified System GRAP Gender Reform Action Plan HDR Human Development Report HID Human and Institutional Development HIES Household Income and Expenditure Survey HIET High Irrigation Efficiency Technologies HIV/AIDS Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome IEE Initial Environmental Examination IK Idara-e-Kissan IMR Infant Mortality Rate IPM Integrated Pest Management IT Information Technology IWRM Integrated Water Resources Management JMP Joint Monitoring Program KB Khushali Bank KPF Khushal Pakistan Fund KPP Khushab Pakistan Program KPs Khal Panchayats L/Cs Letter of Credits LG&RDD Local Government and Rural Development Department LGO Local Government Ordinance LGs Local Governments LSMI Large Scale Manufacturing Industries m.ha Million hectares MAF Million Acre Feet MCOs Mobile Credit Officers MDGs Millennium Development Goals MF Micro Finance MFIs Micro Finance Institutions MICS Multiple Indicators Cluster Survey MIS Management Information System MLR Martial Law Regulation MMT Million Metric Tonnes MPDD Management Profession Development Department MTBF Medium Term Budgetary Framework NCBs The Nationalized Commercial Banks NEQS National Environmental Quality Standards NGOs Non-Government Organizations NIAB Nuclear Institute for Agriculture and Biology NIPA National Institute of Public Administration NPK Nitrogen, Phosphorus and Potassium NPs Nehri Panchayats NRSP National Rural Support Program NWFP North-West Frontier Province OFWM On-Farm Water Management PERI Punjab Economic Research Institute PBM Pakistan Bait-ul-Mal PCGA Pakistan Cotton Ginners Association PCP Pakistan Centre for Philanthropy PDSSP Punjab Devolved Social Services Program PESRP Punjab Education Sector Reform Program PFC Provincial Finance Commission PFIS Poverty Focused Investment Strategy PG Provincial Government PHED Public Health Engineering Department PIADSP Punjab Irrigated Agriculture Development Sector Project


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PIHS Pakistan Integrated Household Survey PISC Punjab Small Industries Corporation PMDFC Punjab Municipal Development Fund Company PMSIP Punjab Municipal Services Improvement Project PPM Parts per Million PRMP Punjab Resource Management Program PRSP Provincial Rural Support Program PRSP Poverty Reduction Strategy Paper PSC Punjab Seed Corporation PSLM Pakistan Social and Living Standard Measurement Survey PTV Pakistan Television Authority RHC Rural Health Centre RICS Rural Investment Climate Survey RSP Rural Support Program RTA Regional Transport Authority SAP Social Action Program SCARP Salinity Control and Reclamation Project SCs Schools Councils SDP Sector Development Program SHMI Small and Household Manufacturing Industries SME Small and Medium Enterprises SMEDA Small and Medium Enterprise Development Authority SMO SCARP Monitoring Organization SSP Single Super Phosphate T&V Training and Visit TB Tuberculosis TDN Total Digestible Nutrients TEVTA Technical Education and Vocational Training Authority THQ Tehsil Headquarter TMA Tehsil Municipal Administration UC Union Council UHT Ultra High Temperature UNDP United Nations Development Program UNICEF United Nations Children’s Fund UNIDO United Nations Industrial Development Organization WAPDA Water and Power Development Authority WASA Water and Sanitation Authority WHO World Health Organization WRM Water Resource Management WSS Water Supply and Sanitation WTO World Trade Organization WWF Workers Welfare Fund ZTBL Zarai Tarraqiati Bank Ltd.

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Statement

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Mr. Suleman Ghani, Chairman Planning and Development Board The province of Punjab has made significant progress in terms of income growth and improvement in the access of the people to key social services in recent years. The last Punjab Economic Report 2005 presented the analytical and policy underpinnings of Punjab’s development strategy. The current report documents the progress made in the recent past in the pursuit of the two basic objectives of our reform agenda; namely, improving the incomes of the people and strengthening the delivery of public services. We are well on the way to achieving the “Vision 2020” described by the Chief Minister in his pre-budget policy speech on June 15, 2004. Our vision is based on the relentless pursuit of modernization, innovation, confidence and tolerance. It sees Punjab in the year 2020 as a fully literate, fully employed, highly educated, skilled, talented, tolerant, culturally sophisticated, internationally connected, and reasonably well-off healthy society. The main elements of this vision include an excellent educational system, thriving and competitive markets, strong internationally competitive companies, world class infrastructure with modern urban centres, a high value-added agriculture sector and a smart, small and efficient government. To achieve this vision, we have set ourselves very high targets. In order to achieve the target of a GNP per capita of over $2000 by the year 2020 our GDP will have to double every eight years or so. This implies a sustained GDP growth of 7 to 8 percent a year. We are pursuing our strategy with a keen focus on results. Our ultimate objective is improvement in the welfare of the people of Punjab. As this report documents there is considerable evidence that the economic growth in the province is translating into improved welfare of the people. While data to compute the money-metric measures of poverty are not available for the current year all the non money-metric measures indicate significant progress in the right direction. Our comprehensive development framework based on a set of broad based long term strategies covering the urban and rural areas, agriculture and industry, human development, physical infrastructure and cluster development is being implemented through a medium term strategic focus aimed at providing a facilitating and enabling environment to the private sector for unleashing the potential of the four main growth pillars of our economy – agriculture, manufacturing, minerals and natural resources and the services sector.


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This strategy is bearing fruit. Our performance has been quite satisfactory – and we are on track to double our GDP every seven to eight years and achieve our target of a GNP per capita of over $2000 by the year 2020. We realize that growth alone is not enough for effective poverty reduction and have continued to accelerate our efforts to provide more and better education, health and social services to the people. There has been an unprecedented increase in school enrolments especially at the primary level and most importantly in the enrolment of girls. This is the result of an intensive campaign to get children to school. We have now entered into the second generation of reforms that focus on the quality of service delivery. Our policies, therefore, aim not only to increase school enrolments but also to improve the quality of schooling. Similarly access to health and population services has shown remarkable improvements and significant qualitative improvements are afoot. Our efforts at improving social welfare services are also beginning to show results. These improvements in the performance of the economy and the social sectors are part of a trend over the past few years that is fast gaining momentum. While we rejoice in our achievements we continue to keep a watchful eye on the implementation of the policy framework. This report is part of our efforts to do so. While the report documents the successes in our efforts it also identifies the areas that require attention. The process of producing this report has involved an extensive review and appraisal process with each of the line departments. It is my hope that the report will become an annual feature. I am extremely pleased that this report is completely home grown. It has involved extensive interaction with and input from the line departments. I compliment the Chief Economist and the team for putting together a useful document.

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Preface

by

Dr. Shujat Ali, Chief Economist, Government of Punjab The economy of the Punjab is in the process of structural transformation from its traditional reliance on the agriculture sector to an increasing emphasis on manufacturing and the services sectors. This transformation highlights the opportunities as well as the challenges for achieving the twin objectives of increased incomes and improved social services. The Government of Punjab is pursuing a results-based strategic thrust with an emphasis on creating at least a million new jobs each year and sustaining a GDP growth rate in excess of 7 percent. This holistic framework is based on seven separate but mutually re-enforcing strategies designed to achieve the “Vision 2020”. These strategies cover the main urban, rural and human development sectors and are supported by strategies for physical infrastructure, regulatory framework, public finance and cluster development which together determine the overall enabling environment. This report represents the efforts of the Planning and Development Department (P&DD) to sharpen the focus on results. It is an effort to document the progress made during the year by highlighting achievements and identifying areas for future consideration. The current report is different in many ways from the one produced in 2005. That report represented a stock of knowledge in terms of the analytical underpinnings of our strategic framework. The current report takes that as a starting point and documents the results achieved so far and highlights the initiatives undertaken and those planned for the future. As such it represents a flow of knowledge about the economy of Punjab over the recent past. Punjab Economic Report 2005 was produced by a consortium of our donor partners with the assistance of the Government of Punjab. This year’s report is totally home grown. It was produced within the Planning and Development Department at the Punjab Economic Research Institute with the assistance of the Bureau of Statistics and a team of Pakistani consultants. The process of producing this report is part of the efforts to build internal capacity for effective monitoring and evaluation of the development process in the province. In this process we have attempted to strengthen the feedback linkages with the line departments and provide a forum for internal debate and discussion. It has helped to identify data limitations and areas that require further attention. These will be strengthened over time. It is our hope that this report will become an annual feature and one of the flagship activities of the Planning and Development Department, around which we will focus our review activities. I want to put on record my thanks to the whole team for putting together this report. In particular I would like to mention the support I received from Dr. Muhammad Abdul Quddus and Dr. Muhammad Jameel Khan (current and former Directors) and their team at the Punjab

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Economic Research Institute, Mr. Muhammad Ramzan, Director General, Bureau of Statistics and his team and Mr. Habib Ur Rahman, Senior Chief, P&DD and the other staff members of the P&DD who participated wholeheartedly in this effort. I would like to thank the team of consultants from Innovative Development Strategies (Pvt.) Ltd, led by Professor Dr. Sohail Jehangir Malik of the Higher Education Commission of Pakistan at the University of Sargodha for assistance in putting this report together. I would like to put on record our debt to the Report Steering Committee and in particular to Mr. Inaamul Haque, Mian Tayyab Hassan and Mr. Tariq Sultan for letting us benefit from their wisdom and guiding us so ably through this process.

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Executive Summary Introduction This second Punjab Economic Report (PER) 2007 follows the pattern of the first PER published in March 2005. PER II aims to document the progress made in 12 key areas during the two years following the publication of PER I. The choice of sectors was based on the areas identified in the first report and the dominant policy framework in Punjab. Punjab’s policy framework is encapsulated in the Chief Minister’s Vision 2020, which highlights a comprehensive set of strategies to achieve socioeconomic development in the province. Presented in June 2004, Vision 2020 sees Punjab as “a fully literate, fully employed, highly educated, skilled, talented, tolerant, culturally sophisticated, internationally connected, and reasonably well off healthy society by 2020.” PER II aims to document the progress made so far and identify the challenges to the growth and development required to achieve this vision and the measures to overcome these. Structure of the Report PER II maps Punjab’s macro-growth trends and the resulting improvements in welfare, and presents an analysis of the employment situation with a review of safety net measures that ensure that those who cannot participate in the process of growth are accounted for. It then considers the province’s structural transformation away from agriculture and toward industry and services, presenting a discussion of the agriculture sector and rural development, followed by industry and urban development. The report then analyzes the progress made by key social sectors, including education, health and population, given that human development with a particular focus on gender continues to be a key pillar of Punjab’s vision 2020. Discussions on Punjab’s land and water resources follow, forming the main thematic thrust of the report given that they are crucial resources for unlocking the full potential of the provincial economy. Finally, the report focuses on the financing needs necessary for the growth and poverty reduction in Punjab. The Economy’s Performance: Growth, Poverty, and Employment In Fiscal Year 2007 Punjab’s gross provincial product (GPP) grew at 7.8% over the previous year. In absolute terms it amounted to Rs. 3,067,033 million 58% of the national gross domestic product (GDP). The services sector is by far the largest sector, contributing about 54% to gross provincial product. Agriculture accounts for 20.3% and industry 25.7%. Changes in the sectoral breakup of GPP over the years are indicative of structural changes away from a reliance on agriculture. The data indicate that the share of agriculture has declined considerably, from 31 to 20.3% between FY-1991 and FY-2007, while that of manufacturing and services has increased. The structural changes that are taking place in Punjab’s rural economy over time have important implications, particularly for employment. About 44 % of Punjab’s labor force is employed in the agricultural sector. It is also the only sector other than construction where the labor force absorption rate (as measured by the percentage of total labor employed in that sector) is higher than its share in the provincial economy. While the impressive growth of the services sector serves to boost GPP, growth in agriculture has a far more wide-ranging effect on incomes, employment, and incidence of poverty in the province. The Punjab Government has estimated the decline in poverty headcount to have been about 11.52% between FY 2002 and FY 2005. Non-income-based poverty measures, such as the enrolment rate,

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literacy level, access to safe water and health services, etc., have also improved over time as documented by several surveys. The Bureau of Statistics estimates that the Province is poised to meet nearly all the Millennium Development Goals well before the 2015 target. This progress results from the growth in incomes as well as the Governments efforts to provide social and welfare services to the masses. Agriculture Agriculture is the mainstay of Punjab’s economy, with a 20.3% share in the GPP. Major crops contributed about 46.5% of value-added to agriculture in Punjab in FY 2007, while livestock contributed a further 39.1 %. The Government of Punjab is taking several initiatives to optimize agricultural resource use (particularly of fertilizer), improve seed quality and promote farm mechanization, plant protection, and access to agricultural credit. Other potential areas to increase agriculture productivity and production include promotion of nontraditional agricultural products (e.g. off-season vegetables), and livestock, and the expansion of effective research and extension. Rural Development For agricultural growth linkages to be strengthened and have the greatest possible impact on rural poverty it is important to have a thriving and vibrant non-farm sector. Effective rural development not only facilitates this growth of incomes but the provision of publicly provided goods and services to the rural sector also add to rural welfare. The provision of public goods—electricity, public utilities, and farm-to-market roads—is an essential part of rural development. In Punjab, the number of electrified villages has grown by 11% per year from FY 1996 to FY 2006. About 91% of villages in Punjab already have electricity and the rural electrification program continues to be executed on a priority basis.

These developments are particularly conducive to the promotion of agro-based and cottage industries. The network of farm-to-market roads has grown at a fast 9.5% per year after FY 2002, strengthening the link between rural areas and urban centers. Land ownership along with education and employment opportunities in the formal sector have been found to be important correlates of household wellbeing; although their effects vary with region and kinship group. Kinship group identity is an important determinant of relative well being. The Government has also, indirectly, been an important driver of pro-poor change. The initiatives and announcements from the Government have served to rally the efforts of the rural people leading to significant changes. Fuller understanding of the dynamics of rural poverty reduction is increasingly forming the basis of the Government’s policies in this area. Several special programs to develop the province’s less developed areas have been started by the Government of Punjab with the objective of reducing regional disparities and alleviating poverty. Particular attention is being focused on barani (rain-fed) regions of Potohar , Cholistan, and Dera Ghazi Khan. Individual landholdings in these regions are small, agricultural techniques primitive, and there is an acute water shortage. New initiatives include drought management efforts, the Barani Village Development Project, Sustainable Livelihoods in Barani Areas Project, Bahawalpur Rural Development Project, and Dera Ghazi Khan Rural Development Project. These initiatives aim to achieve rural development through income-generating employment activities, improvements in regional infrastructure, and provision of financial support for skills development through participatory organizations.


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Industry Punjab has played a significant role in the industrial development of Pakistan, accounting for almost 60% the country’s industrial production in FY 2007. Punjab’s manufacturing sector makes a significant contribution to national exports. The industrial sector’s share in GPP was 25.7 percent in FY 2007, compared to roughly 17 percent in FY 2000. The large and small scale manufacturing sub-sectors accounted for 14.14 and 5.27 percent of provincial GPP respectively in FY 2007 (Value-added from the slaughtering industry which is now classified as an industrial activities make up the rest). Increase in industrial output is associated with significant potential increase in employment. Estimates made in 2005 indicate that 97% of the manufacturing units have less than 10 employees. As these units grow in size and number the additions to employment generation will lead to commensurate poverty alleviation. Rural industrialization offers a good opportunity for controlling rural-urban migration. The Government of Punjab’s Vision 2020 envisages promoting the development of industrial clusters through public-private partnerships and by improving the business climate for firms. The department of industries has taken a number of initiatives to promote industrial development, including liberalizing its location policy, and establishing industrial estates and export processing zones, and an expo center in Lahore. The share of the services sector now exceeds that of all the commodity-producing sectors combined. The wholesale and retail trade sub-sector is the most important in Punjab in terms of its large share, followed by transport, storage and communications, and social, community, and personal services. The services sector has great potential for employment generation and poverty reduction due to its strong forward and backward linkages. Urban Development Punjab is urbanizing faster than any other province in the country: its level of urbanization has increased from 17.4% in 1951 to 31.36% in 2006. In 2006, of its total population of 87.5 million, urban Punjab had a population of 28 million. The Government of Punjab has, therefore, put urban development at the forefront of its strategy. Its urban planning and implementation is backed by a series of research studies that cover nearly every conceivable aspect of urban development. These cover the areas of water supply, sanitation, sewerage, urban waster management, land management issues including land titling and records, urban immovable property taxation, traffic planning, transportation and environmental issues to name a few. Special programs are being developed for the five large cities of Punjab which together account for over fifty percent of its urban population and given their large size have specific issues. The Government of Punjab in close consultation with the city district governments (CDGs) and tehsil municipal administrations (TMAs) has evolved and is in the process of evolving holistic strategies to address the urban development issues. Education The Government of Punjab has taken the development of education to be its key challenge; and, the slogan of ‘”parha likha Punjab” exemplifies its vision. Gross enrolment rates at primary, middle, and matriculation levels have increased over time for both males and females, although a large rural-urban gap persists. Total expenditure on education as a percentage of Punjab’s GPP has increased steadily after FY 2004, especially following the initiation of the Punjab Education Sector Reform Program (PESRP). Allocation to education is expected to treble from Rs. 9,200 million in FY 2006 to Rs. 21,480 million in FY 2009. Under the Chief Minister’s accelerated program for education, several key initiatives have been taken, including the

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improvement of physical infrastructure in seven universities, provision of IT equipment to schools, a science education project, provision of libraries in schools, and the establishment of child-friendly schools, among others. Technical and vocational education had been a neglected sub-sector in Punjab in the past, with little effort to prepare curricula and devise a system of examination for such education in keeping with modern trends. Courses offered depended on the skills of available instructors. There were no uniform criteria to evaluate graduates, and thus no standardized examinations. Curricula did not match the demands of the market place; resulting in surplus skilled manpower in some trades and shortages in others. Teacher training had not been paid much attention either. To deal with issues in this important educational sub-sector, the Government of Punjab has established the Technical Education and Vocational Training Authority (TEVTA). With the increasing focus on higher education the number of private universities in Punjab has grown at an average annual rate of 12.8% since FY 1996. Health and Population Punjab is the most populated province of Pakistan, with 87.5 million people as of 2006. At its current growth rate of 2.64%, Punjab’s population will double by the year 2026. Dependency and vulnerability rates are quite high with 47% of the population classifiable as dependant. Actual dependency is much higher due to the low participation of women in economic activities. About 69% of the population—comprising women, children, and the aged—can be classified as vulnerable. Basic Health, Child Health, and Reproductive Healthcare Immunization coverage of children in Punjab increased from 39% in FY 1999 to 58% in FY 2005 when measured on the basis of records. This is reflected in the decline in the Infant Mortality Rate (IMR), particularly in the rural areas, from 123 to 82 deaths per 1,000 live births - although significant variations exist across districts depending on the level of development. A significant proportion of children in Punjab (aged under 5) are underweight, reflecting poor overall health and well being and child health and nutrition continues to be a major concern of the Governments health policy. Improvement in maternal health is one of the Millennium Development Goals. About 71% of births in Pakistan take place at home; most commonly with the assistance of trained dais, traditional birth attendants, or family members resulting in high maternal mortality rates (MMR). The Government has focused its attention on decreasing the MMR by increasing ante and post natal care. Health Infrastructure and Expenditure Punjab has the largest health infrastructure in Pakistan but medical facilities in small towns and union councils, i.e., rural health centers (RHCs) and basic health units (BHUs) continue to require attention. The major constraints relate to management issues due to geographic dispersion, the shortage of qualified personnel, non-availability of diagnostic equipment and medical supplies, and inadequate funding. A Health Sector Reform Program is now being implemented in the province to intervene with greater financial allocations and other policy measures to overcome these inadequacies. Gender in Development Despite some progress significant gender disparities exist in the province, with women comprising less than 5% of public sector employees. The representation of women at the decision-making level stands at a negligible 3%. Female labor force participation at around 38–39% is low, even after


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including those who produce goods or services at home. The female underemployment rate has persistently remained four times as high as that of male underemployment. The Government’s major initiatives in this area include the Gender Reform Action Plan (GRAP), which is designed to trigger actions that will result in gender mainstreaming in provincial departments. GRAP focuses primarily on institutional change to achieve gender equity, and its reform agenda includes policy review and reform, gender responsive budgeting with allocation of an order code for “women’s development” in the federal and provincial budgets, and collection of gender-disaggregated data Land Between FY 1991 and FY 2006, Punjab’s cultivated area increased from 11,819,000 ha to 12,510,000 ha due to improved water supply. However, per capita availability of cultivated land fell due to the rising population. Land ownership in Pakistan is highly skewed and inequality is increasing. For farms larger than 50 acres, the share in land owned increased from 16% in 1990 to 21% in 2000 according to the Agricultural Census of Pakistan. There is also an increasing preponderance of small holdings; and the average size of small holdings has fallen drastically. This has important implication for poverty alleviation for the majority of the small holders since the landholding is too small to provide adequate collateral to access finance for utilizing modern inputs for agricultural growth. The Government of Punjab is focused on instituting reform of the system of land records and titling. A comprehensive policy on regulating land use in rural areas would help to address the misuse of productive agricultural land. Conversion of private agricultural land for other uses, i.e., commercial, industrial, or residential takes place without any check. Enforcement of contracts can be improved by on-the-spot inspections, reducing the number of tiers in the system, and barring the jurisdiction of civil courts in revenue matters are all steps that would improve the bottlenecks associated with land markets. A special land survey to confer conclusive titles to land for different landowners will help to strengthen the land records and land titling efforts of the Government. The present records-of-rights need to be updated after the due process of extensive consultation with all stakeholders. It would also be helpful to integrate land sales and land mutation processes in one administrative wing so that the work of both is facilitated. Following this, land records need to be computerized. The overriding objective of accurate land records is to promote greater efficiency through faster information retrieval, transparency, and reduction of transaction costs for landowners. Water Punjab, like the rest of Pakistan, is a water-scarce area both with reference to irrigation needs and drinking water and sanitation needs in rural and urban areas. Water conservation and management is crucial to ensure continued, adequate water supplies. A water conservation strategy for the province will require the use of innovative technology as well as institutional reforms to achieve the desired results, but the Government of Punjab has already taken some important steps in this direction and plans to do far more. Judicious use of the country’s scarce water resources is crucial to ensure food security and maintain growth in the economy. Two demand scenarios are explored. Under the high-demand scenario, meeting production targets would require the cropped area to increase to 30.88 million hectares (Mha) by 2010 and to 31.83 Mha by 2025. Compared with a cropped area of 22.7 Mha in 2000, this represents a large increase that will require the addition of new areas and large investments in irrigation and drainage works. The low-demand scenario implies that cropped area needs to increase

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to 26.1 Mha by 2010 and to 26.26 Mha by 2025. The targets of the low-demand scenario are largely achievable through the intensification of existing cropped area without significantly expanding into new areas. The high-demand scenario envisages improvements in irrigation efficiency by 45 percent by 2010 and by 50 percent by 2025. Assuming that the aforementioned gains in irrigation efficiency can be realized, canal water diversion requirements would be 170.44 million acre feet (MAF) in FY 2011 and 155 MAF in FY 2025. The lower figure for FY 2025 is the consequence of expected water savings due to higher irrigation efficiency. In the absence of additional storage, the mean annual surface water availability would remain at 103.81 MAF, translating into a shortfall of 39 percent by FY 2011 and 33 percent by FY 2025. The requirements of the domestic and industrial sectors would be in addition to the agricultural water demands mentioned above. Urban domestic and industrial water use was 4.3 MAF in 2002 and is projected to increase to 7.1 MAF by 2011 and to 12.1 MAF by 2025.1 Rural domestic water use was 0.8 MAF in 2002 and is expected to increase to 1.86 MAF by 2011 and to 3.2 MAF by 2025. The Punjab water sector’s mission statement is to “provide adequate and reliable irrigation supplies to culturable lands of Punjab aiming at enhanced agricultural productivity, sustainable development with focus on holistic management, and broad-based institutional reforms.’’ The Framework of Action to implement this mission is supported by the medium-term investment framework for the period FY 2008 to FY 2010. The Government of Punjab is in the process of implementing a comprehensive package of reforms under the Punjab Irrigation Sector Reform Program (PISRP). The reforms, supported through a series of Development Policy Loans (DPL) from the World Bank, focus on participatory management, and aim at improving service delivery and sustainability of irrigation infrastructure through effective participation of farmers at all levels of irrigation management. Built on four reform pillars covering institutional policy, water management, irrigation service delivery and on farm water management the major initiatives under DPL are:2

Preparation of a 5-10 year Asset Management Plan Realistic O&M funding on the basis of updated yardsticks An effective O&M performance evaluation system for greater transparency and accountability Evolving a framework for O&M cost sharing Establishment of 2 AWBs and 100 FOs during each of the next two years. Developing a comprehensive system for monitoring and evaluation of canal allocations and canal

operations. Greater transparency and accountability through display of canal flow data on the website Public Sector Resource Management The Government of Punjab has significantly increased spending on the social sectors. To maintain social sector expenditure at its desired level, the Government has instituted significant financial management reforms for expanding the budgetary fiscal space to shoulder the expenditure requirements of these sectors. This chapter looks at fiscal issues covered in the previous PER, and assesses progress on fiscal and financial management in the two years since that report. Fiscal Issues Covered in PER 2005 The first PER contained a detailed analysis of the fiscal and financial issues facing the provincial Government. In an attempt to realign budgetary processes to reflect its development policy priorities over the medium term, the Government of Punjab moved toward preparing the budget according to a MTBF. It has also pursued several avenues to increase the effectiveness of its expenditures. The flagship program in this context was the devolution program under which more than 40% of provincial expenditures were

1 National Water Strategy. National Water sector Profile, Volume 5. Government of Pakistan. Ministry of

Water and Power. Chief Engineering Advisor/Chairman Federal Flood Commission. October 2002. p. 122. 2 Source: ‘Punjab Irrigation Sector Development Policy Loan’. Presentation made by the Secretary Irrigation

and Power Department, Government of Punjab, at Punjab Development Forum, May 5, 2006


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transferred as single-line items to the districts. To ensure proper accounting, a new chart of accounts is being implemented under the aegis of the Project to Improve Financial Reporting and Auditing (PIFRA). During the last nine years, the total expenditures of the Government of Punjab averaged 5.6% of its GPP, the bulk of which (4.3% of GPP) was for recurrent expenditure and the remaining (1.3% of GPP) for development expenditure. The Government of Punjab has increased efforts to mobilize its own revenues, focusing its efforts on introducing agricultural income tax (AIT), rationalizing provincial taxes and improving tax compliance by changing the rate structure of urban immovable property tax (UIPT) and stamp duties and tax administration. Foreign borrowing has become an increasingly important source of financing for Punjab’s development program in recent years. Recent initiatives undertaken by the Government of Punjab to improve resource management include focusing more on social sector expenditures, developing public-private partnerships, pursuing a debt management strategy, and implementing governance reforms. While the Government of Punjab has successfully implemented a number of reform initiatives, some issues need further consideration. These include improvement of the monitoring of its fiscal risks and greater public access to information and legislative oversight. To achieve its ambitious development goals in terms of poverty reduction and accelerated growth, the Government of Punjab needs to mobilize significantly higher resources for non-inflationary financing of its development program. Possible options that the Government could exercise to create the additional fiscal space it needs over the medium term to achieve its development objectives include: placing continued emphasis on debt management, improving its expenditure efficiency, aligning policies and outcomes, institutionalizing the MTBF process at lower levels of Government, reviewing public-private partnerships, harmonizing aid programs, making budgets more comprehensive, improving financial reporting systems, and promoting transparency. These form part of the Finance Department’s recently completed Medium Term Budgetary Framework 2007/2010. Epilogue Punjab has made significant progress in all aspects of the economy since the broad based strategic thrust identified in the Vision 2020 was announced by the Chief Minister in 2004. This report catalogues the progress and identifies the challenges. While the Government continues to focus its attention on the key areas of reform two inter-related and extremely important aspects need to be further strengthened. Effective policy reform requires a sound monitoring and evaluation system. It is important to know what works and what does not; and what can be replicated and up-scaled. And it is crucial to have this information in real time to feed into policy refocusing for greater efficiency. Such a system of monitoring and evaluation is built on sound data. A revitalized data collection system in the province will greatly strengthen this M&E system.

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1. Introduction The first Punjab Economic Report (PER) was published in March 2005 to “provide an analytical and policy underpinning Punjab’s development strategy.”5 The PER rested on five pillars: (i) improving governance, (ii) reforming the fiscal and financial management system, (iii) creating a conducive environment for private sector-led growth, (iv) improving public service delivery, and (v) addressing the provincial economy’s vulnerability to shocks. In the two years since its publication, there have been a number of developments in Punjab’s economy, development policy framework, and resource management systems. This report, referred to as PER II, documents progress in the key areas identified by the first PER, and extends the scope of analysis to cover all productive sectors of the Punjab economy. In effect, PER II identifies barriers to growth and development in 13 areas, including the commodity producing sectors, human development-related areas, and issues in natural resource management; it also presents recommendations to overcome these barriers in the short to medium term. In addition to the first PER, PER II bases its choice of sectors for analysis and recommended growth strategies on the dominant policy framework in Punjab, the main features of which are outlined as follows. 1.1. Vision 2020 Punjab’s premier development paradigm is encapsulated in the Chief Minister’s Vision 2020, which was presented in June 2004 and highlights a comprehensive set of strategies for Punjab’s socio-economic development. It projects Punjab as “a fully literate, fully employed, highly educated, skilled, talented, tolerant, culturally sophisticated, internationally connected, and reasonably well off healthy society by 2020 [sic].” It also sees Punjab as having “an excellent education system, thriving and competitive markets, strong internationally competitive companies, world class infrastructure with modern urban centers, a high value adding agriculture sector and a smart, small and efficient Government by the year 2020 [sic].” Essentially, the Vision 2020 conceives an economy with a significant presence of international investors and a per capita gross domestic product (GDP) in excess of $2,000. This implies that the province will have to maintain a growth rate in per capita GDP of over 8 percent a year.6 The Vision 2020 statement outlines the following strategies to achieve its objectives: • Three basic strategies covering urban, rural, and human development. This long-term vision is

expected to be achieved through a set of medium-term strategies for agriculture, manufacturing, services, and minerals and natural resources—“the four main pillars” of Punjab’s economy. The central emphasis on the social sectors in the strategic vision is designed to ensure human development, increased productivity, and growth.

• Three enabling strategies covering physical infrastructure, provincial regulations, and funding.

• A cluster development strategy that underpins the geographical aspects of the development approach.

1.2. Structure of the Report Following this introduction, a review of macro-growth trends in Punjab and the resulting improvements in welfare is presented in Chapter 2. Since employment generation is the key mechanism for achieving the twin goals of growth and equity, the second chapter also presents an 5 Government of the Punjab, World Bank, Asian Development Bank, and UK Department for International

Development. 2005. Punjab Economic Report—Towards a Medium Term Development Strategy. Report No. 29373-PAK. The World Bank.

6 Based on the Chief Minister’s “Punjab’s Vision 2020: Pre-Budget Policy Address,” June 2004, and the “Three Years Performance of the Government of Punjab.”

Introduction

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analysis of the province’s employment situation. Economic growth and increased employment have to be accompanied by a comprehensive system of safety nets to ensure that those who cannot participate in the process of growth are accounted for. A review of the safety net measures in place is, therefore, included in the appendices. As the analysis in the report indicates, Punjab’s economy is undergoing a structural transformation, with the share of agriculture declining and that of the manufacturing and services sectors increasing over time. The latter sectors tend to be located in the urban areas, but while the issues associated with growing urbanization are increasingly important, the majority of the population continues to live in the rural areas. While the Local Government Ordinance 2001 has obliterated the legal distinction between the rural and urban sectors, ground realities and the limited resources and infrastructure require that they be treated separately. Therefore, the agriculture sector and rural development are discussed in Chapters 3 and 4, respectively, while Chapters 5 and 6 are devoted to a discussion of industry and urban development, respectively. The services sector accounts for the major share of provincial GDP and is discussed in Chapter 7. Human development, with a particular focus on gender, continues to be a key concern of the Government of Punjab. Analysis of the progress made in the key social sectors of education, health, and population is the subject of Chapters 8 and 9. Chapter 10 is devoted to a discussion of the progress made in mainstreaming gender in the province. The main thematic thrust of this report is land and water. These are discussed in Chapters 11 and 12, respectively. Unleashing the full potential of the provincial economy to meet its strategic objectives depends essentially on addressing the issues connected to these crucial natural resources. In particular, the analysis of Punjab’s water sector presents a holistic picture of the situation and identifies critical constraints and issues, as well as the interventions necessary to address them. Finally, Chapter 13 of the report focuses on financing the needed growth and poverty reduction in Punjab. This report represents a synthesis of data and analysis supplied primarily by functionaries of the Government of Punjab.7 It is hoped that this report will become an established annual exercise, with each edition representing progress made during the year, highlighting the issues and steps taken to achieve that progress, and illuminating the road ahead.

7 While care has been exercised to cite sources where available, certain subsections of this report are

based directly on Government of Punjab documents supplied by various functionaries. Since this is a Government of Punjab report, these contributions have not been explicitly acknowledged.

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2. Assessing the Economy’s Performance: Growth, Poverty and Employment

International experience suggests that significant poverty reduction is only possible when broad-based growth is sustained over time, and is accompanied by efficient provision of good-quality social services. Punjab’s Vision 2020 envisions doubling the Gross Provincial Product (GPP) every eight years, and recognizes that such an outcome is inconceivable without substantial human resource development. This chapter (i) examines growth and employment trends in the provincial economy, (ii) reviews the functioning of social safety nets, and (iii) assesses the welfare and poverty status of the population. 2.1. Punjab’s GPP The first PER estimated Punjab’s GPP based on a national GDP apportioning methodology, which was then used by the Bureau of Statistics (BOS) to generate GPP estimates for two subsequent fiscal years, FY 2006 and FY 2007.8 Given the shortcomings of national and province-level data generation, the resulting estimates are largely indicative, but provide a good idea of the direction the economy is taking, the share of key sectors in the provincial economy, and the gradual structural transformations that are taking place. The BOS estimates that Punjab’s GPP amounted to Rs. 2,844,290 million in FY 2006 (in terms of constant factor cost of FY 2000)—almost 58 percent of the national GDP. The GPP grew at a rate of 7.4 percent over the previous year. For FY 2007, GDP at constant factor cost was estimated at Rs. 3,067,033 million, showing a growth rate of 7.8 percent. 2.1.1 Share in National Economy Punjab is a significant contributor to national GDP, accounting for 58.5 percent of Pakistan’s national income according to estimates of the Government of Punjab. In FY 2007, the province accounted for 62.6 percent of community and social services, 61.3 percent of wholesale and retail trade, 57 percent of agriculture, and 58.2 percent of industrial value-added in the national GDP.9 Overall, Punjab contributes more than 50 percent of the country’s GDP in almost every sector in the national accounts. Figure 2.1 illustrates the percentage share of Punjab’s GPP in the national GDP by major sector, while Figure 2.2 shows the share of key sub-sectors in the national economy in FY 2007.

8 The formulation FY2006 refers to the year beginning 1 July 2005 and ending 30 June 2006. Fiscal years

are referred to throughout this report using this formulation. 9 According to classifications used by the Government of Punjab, the industry sector includes

manufacturing (large and small scale as well as the slaughtering industry), mining and quarrying, construction, and electricity, gas and water supply.

Assessing the Economy’s Performance: Growth, Poverty, and Employment

4

Figure 2.1: Sector Wise Share of Punjab’s GPP in National GDP

55.5

56.0

56.5

57.0

57.5

58.0

58.5

59.0

59.5

Agriculture Industry Services OverallGDP

Sectors

Share in National GDP

Source: Bureau of Statistics, Punjab (2007).

Figure 2.2: Share of Key Sub-Sectors of Punjab’s GPP in National GDP

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20.0

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2.1.2 Structure of GPP In terms of relative contribution to GPP, the services sector is by far the largest sector of the provincial economy, accounting for almost 54 percent. The commodity producing sectors—agriculture and industry (mainly manufacturing)—together account for about 46 percent of GPP, with agriculture accounting for 20.3 percent and industry for 25.7 percent, as shown in Figure 2.3.


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Figure 2.3: Sectoral Shares in Punjab’s GPP, FY 2007

20.35%

25.70%

53.95%

Agriculture

Industry

Services

Source: Bureau of Statistics, Punjab, 2007.

Given the increasing importance of services in the provincial economy, a further breakdown of the services sector is useful for analyzing key sources of growth. Figure 2.4 illustrates the breakdown of the services sector in Punjab. Wholesale and retail trade constitutes by far the largest share, accounting for about 37 percent of services. This is followed by transport and communications, which accounts for 21.1 percent. Other services, including a wide range of community, social, and personal services, and others not classified separately, constitute 19 percent of total services.

Figure 2.4: Composition of Punjab’s Services Sector, FY 2007

21%

37%9%

5%

9%

19%

Transport,Storage &CommunicationsWholesale & RetailTradeFinance & Insurance

Ownership ofDwellingsPublic Admn. &DefenceOther Services


Similar breakdowns can also be estimated for the commodity producing sectors. Within the agriculture sector, major crops make up 46.5 percent, minor crops 13.4 percent, forestry 0.34 percent,


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and fisheries 0.6 percent of output; livestock makes up the remaining 39.1 percent. Within the industry sector, large-scale manufacturing accounts for about 55.03 percent and small-scale manufacturing about 20.5 percent of total value-added. The slaughtering industry, which is now officially designated part of the manufacturing sector, makes up 5.5 percent. The sectoral breakdown of GPP is indicative of the structural changes in Punjab’s economy over the years, with its reliance on agriculture being gradually replaced by the increasing importance of services and, to a lesser extent, by manufacturing. This shift is particularly noticeable when trends in sectoral value-added are analyzed over time. Government of Punjab data indicate that from FY 1991 to FY 2007, the share of agriculture has declined from 31 to 20.3 percent, while that of industry (including what was earlier classified as “other production”) and services has increased from 20 to 25.7 percent, and from 49 to 53.9 percent, respectively.10 This shift has important implications for the magnitude and direction of future growth and for employment generation, as explained in subsequent sections. 2.1.3 Sectoral Growth Trends Punjab’s economy has grown at a rate of 8.1 percent per annum since FY 2003 according to estimates compiled by the BOS, buoyed by the exceptionally strong performance of manufacturing in FY 2004 and FY 2005. The provincial economy’s growth rate slowed down to 7.4 percent in FY 2006 compared with a growth rate of 9.35 percent11 in FY 2005, largely due to the poor performance of the crop sector on which a significant proportion of the provincial economy depends. In FY 2007, growth rose to 7.83 percent, mainly due to revival of the agriculture sector, particularly major crops which posted growth rates of 8.5 percent, compared to a decline of almost 5 percent in FY 2006. The services sector did not perform as well in FY 2007 as it did in FY 2006, however. Wholesale and retail trade posted a growth rate of 9.3 percent, compared to 14 percent in FY 2006, and the growth rate in the finance and insurance sector was just over 18 percent, compared to almost 33 percent in FY 2006. [Table 2.1].

Table 2.1: GDP Growth Rate in Punjab (% per annum) SECTOR 2002/03 2003/04 2004/05 2005/06 2006/07 Commodity Producing Sector 1. Agriculture 7.06 0.88 10.37 0.43 6.27 2. Industrial sector 3.23 14.70 12.35 5.73 7.43 Mining and quarrying -23.69 2.45 5.04 6.38 11.66 Manufacturing 6.86 13.67 15.07 9.89 8.43 Construction 3.98 -10.75 18.56 5.66 17.23 3. Services sector 6.43 8.17 7.47 11.23 8.63 Transport, Storage &

communication 4.27 3.53 3.45 6.88 5.75

Wholesale/Retail Trade 9.97 15.49 9.43 14.00 9.32 Finance & Insurance -1.28 8.98 30.85 32.96 18.16 Ownership of Dwellings 3.50 3.50 3.50 3.50 3.50 Services 6.07 5.56 6.59 6.27 8,55 GDP 5.79 8.03 9.35 7.40 7.83

Source: Bureau of Statistics, Punjab.

Based on the Government of Punjab estimates per capita income at current factor cost in the Province, expressed in US Dollar terms has risen from $ 601 in 2002/03 to $ 990 in 2006/07 - a 67% increase in four years. This is a commendable achievement. Figure 2.5 plots growth rates of key sectors of the Punjab economy, as well as the average annual growth rate of GPP over the last four years. As the data shows, agricultural growth rates have been 10 These shares may also have changed because of the reclassification of some sub sectors. For example,

the slaughtering industry was recently designated as part of manufacturing rather than agriculture. 11 All growth rates are based on provincial and national GDP estimates constant factor cost of FY2000.


7

highly volatile over the period, while industrial growth rates have shown a downward trend, reviving slightly only over the last year of our analysis. The growth in services has been the relatively constant factor in the picture, and has served to keep overall GPP growth relatively stable.

Figure 2.5: Growth Rates of Key Sectors and the GPP in Punjab

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2.2. Employment12 The broad-based economic growth needed for poverty reduction requires that the poorer segments of society be included in the growth process. Employment offers the most direct mechanism to ensure this inclusion. According to the BOS estimates 3.5 million new jobs had been created in Punjab in the three years preceding 2006; 60 percent of which were in the agricultural sector and 20 percent in services. 2.2.1 Employment by Sector Data from the recently released Labor Force Survey of Pakistan 2005/06 show that employment in the province is largely concentrated in the agricultural sector, which employs 44 percent of the provincial labor force. As is obvious from Figure 2.6, agriculture, construction, and personal services are the three sectors of the provincial economy whose labor force absorption rate (measured by the percentage of total labor employed in that sector) is higher than their share in the provincial economy. Thus, while the impressive growth of the services sector serves to boost GPP, growth in agriculture and, to a lesser extent, in construction, can have a far wider effect on incomes, employment, and incidence of poverty in the province. Fluctuations in agricultural growth thus have serious implications for social welfare in Punjab. This is discussed in more detail in the next section.

12 Unless stated otherwise, data quoted in this section are from the Labor Force Survey 2005/06, which is

the latest version of this publication.


8

Figure 2.6: Share in Employment and Value-Added for Key Sectors, FY 2006

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30

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Share in EmploymentShare in Value Added

Source: Labor Force Survey (2005/06). The rural economy has undergone structural changes over time. The percentage of people employed in agriculture in the rural areas declined from 66.44 percent in FY 2000 to 58.98 percent in FY 2006, while the proportion employed in manufacturing in the rural areas increased from 7.68 to 11.26 percent. A similar pattern occurs in employment in certain services (wholesale and retail trade, and restaurants and hotels) in rural areas, as shown in Table 2.2. Table 2.2: Percentage Distribution of Rural and Urban Employed Persons by Major Sector in

Punjab, FY 2000 and FY 2006 1999/2000 2005/06 SECTOR

Overall Rural Overall Rural Total 100 100 100 100Agriculture, forestry, hunting, and fishing 50.19 66.44 44.35 58.98Mining and quarrying 0.03 0.01 0.08 0.10Manufacturing 12.33 7.68 15.4 11.26Electricity, gas, and water 0.40 0.25 0.51 0.38Construction 5.53 5.21 5.55 5.63Wholesale and retail trade, and restaurants and hotels 12.79 7.86 14.08 9.23Transport, storage, and communications 4.52 3.44 5.30 4.21Financing, insurance, real estate, and business services 0.64 0.18 0.98 0.39Community, social, and personal services 13.58 8.92 13.72 9.77Source: Labor Force Survey (1999/2000 and 2005/06).

The high proportion of labor absorption in agriculture tends to lend certain distinguishing characteristics to rural labor markets in Punjab. Overall, there is a high proportion of self-employed labor in the province (37 percent), and a large majority of female workers who work as unpaid family workers. The rate of self-employment is, however, much lower in urban areas. The bulk of employment in the province is in the informal sector, which employs nearly two thirds (74 percent) of the non-agricultural employed labor force.13 Female workers are particularly vulnerable in this regard: of the total number of employed females in Punjab’s non-agricultural sector, 73 percent work in the informal sector. Table 2.3 highlights how the informal sector is composed of either self-employed or wage employees. The proportion of unpaid family helpers is only 11.26 percent.

13 The informal sector is defined by the structure of the organization and size of the establishment. It

includes family enterprises, industrial establishments with less than 10 workers, and non-industrial establishments with not more than 20 workers.


9

Table 2.3: Percentage Distribution of Employed Persons Engaged in the Informal Sector by Employment Status and Gender in Rural Areas, 2005/06

Employment Status Both Sexes Male Female Total 100.0 100.0 100.0Employer 0.68 0.72 0.17Self-employed 41.64 43.14 30.02Unpaid family helper 11.26 9.48 25.13Employee 46.43 46.66 44.68Source: Labor Force Survey (2005/06).

2.3. Poverty Available diagnostic work on poverty in Punjab, which includes the Participatory Poverty Assessment (PPA),14 and the Punjab Poverty Reduction Strategy Paper (P-PRSP),15 has yielded some interesting results. The PPA was more a qualitative exercise based primarily on focus group discussions and participatory activities in 54 urban and rural sites, covering all three agro-ecological zones of Punjab.16 Key informant groups consisted of Government functionaries, elected representatives of the local Governments, and members of civil society, but special emphasis was placed on including representatives of marginalized groups—the very poor, minorities, women, and the aged—in the discussions. The PPA focused on identifying the characteristics of the poor in each community, as well as the characteristics of poor communities. In addition, it investigated the principle changes affecting the poor over time, and the factors that influenced these processes. The PPA also included an institutional analysis and attempted to identify the resources and socio-economic relationships important for a region. With respect to the characteristics of a poor locality, the PPA found that villages with poor access to main roads, lack of facilities and basic services, and environmental and natural resource issues such as waterlogged and saline land, poor drainage/the prevalence of drought conditions are considered likely to be poor. Similarly, landlessness was a key indicator of household poverty in almost all localities, and the lack of security of land titles is perceived as being a major issue to the extent that land disputes can plunge even well-off families into poverty. Poor families are also characterized by large families and the fact that they typically do not eat three meals a day and are often under heavy debt. Chronic illness and physical disability are also determinants of poverty. The poor have limited access to finance, and thus social capital or the existence of a strong family or clan network is crucial in times of economic stress. The PPA recommends increasing the access of the poor to key livelihood assets, particularly land; and reducing vulnerability through better environmental management and disaster preparedness. It also stresses the need to make public services pro poor, and the need to tackle social exclusion and gender inequality by making equal access to services an integral part of policy design. The Punjab Poverty Reduction Strategy Paper (P-PRSP) is a more specific policy document that seeks to identify and implement a medium-term agenda for poverty alleviation. It states that the main causes of poverty in Punjab include low productivity in agriculture, poor access to services, lack of financial discipline—which leads to wastage of public sector resources—and the lack of employment opportunities outside agriculture. The P-PRSP outlines an agenda to tackle these problems by (i) implementing governance reforms (particularly strengthening the rule of law and accountability

14 Government of Punjab, Planning and Development Board. 2003. Pakistan Participatory Poverty

Assessment: Punjab Report. August. 15 Government of Punjab, Planning and Development Board. 2003. Punjab Poverty Reduction Strategy

Paper. October. 16 The PPA specifies the three zones as (i) northern Punjab (characterized by higher rates of urbanization

and the predominance of rain-fed agriculture), (ii) central Punjab (characterized by irrigated agriculture and fertile lands), and (iii) southern Punjab (characterized by an arid climate that allows only limited agriculture).


10

systems); (ii) strengthening planning capabilities, and fiscal and financial reform within the framework of a Medium-Term Budgetary Framework (MTBF); (iii) creating an enabling environment for private sector operations; and (iv) an increased focus on gender issues and the need for better management of the environment. With regard to more recent findings, estimates made by the Federal Government based on data from the Pakistan Social and Living Standards Measurement Survey (PSLM) for FY 2005 show a significant decline in the national poverty headcount from 34.46 percent in FY 2002 to 23.9 percent in FY 2005—a decline of over 10 percent.17 Reportedly this decline has occurred in both urban as well as rural areas. Unfortunately, province-level details have not yet been released by the Federal Government. The high growth rates witnessed in Punjab in recent years, and the Federal Government’s estimates of decline in national poverty incidence discussed above indicate a significant decrease in the poverty headcount in Punjab also. A considerable body of development literature led by the seminal work of Nobel Laureate Amartya Sen has highlighted the importance of non-money-metric measures of welfare in determining overall poverty status. These non-income determinants of welfare are related more directly to public sector provision of basic facilities such as education, health, clean water, and sanitation, and are discussed below. 2.3.1 Non-income Determinants of Poverty – Progress Towards the MDGs In Punjab’s case, improvements in welfare due to non-income determinants of poverty are much easier to document because of the greater availability of these basic data. Non-income-based poverty measures such as enrolment rate, literacy level, and access to safe water and health services are all important indicators of well-being. Provincially representative data from diverse sources such as the Pakistan Integrated Household Survey (PIHS) for 1999 and FY 2002, the Multiple Indicators Cluster Survey (MICS) for FY 2004, and the PSLM for FY 2005 provide information on a range of social indicators, all of which show an improvement in welfare over time (Table 2.4).

Table 2.4: Non-income Poverty Indicators for Punjab, FY 1999 to FY 2005

(Percent) PIHS MICS PSLM Indicator

1998/99 2001/02 2003/04 2004/05 GER at primary level 75 76 88 95Adult literacy (15 years and older) 43 44 52 52GER at middle level 43 45 48 49Population with tap water (in house and outside house) 20 20 24 32Population with hand-pump 56 54 42 34Households with flush in house 44 48 66Households living in one room 32 25Households using gas/oil as cooking fuel 21 31Households using electricity for lighting 72 89

Source: PIHS (2001/02), MICS (2003/04), and PSLM (2004/05).

The Government of Punjab is focused keenly on the attainment of the Millennium Development Goals (MDGs). The Chief Minister’s pre-budget Policy Address of June 13, 2007 highlighted the fact that the Province is well poised to achieve the targets by 2015. The pre-budget policy document presented data pertaining to progress towards the MDGs in the education, Health and Water and Sanitation sectors. These data indicate that except for two indicators, namely the maternal mortality

17 Government of Pakistan, Federal Bureau of Statistics. 2006. Pakistan Social and Living Standards

Measurement Survey. Islamabad.


11

rate and rural sewerage/drainage coverage, the progress on all other indicators has been substantial. The MDGs (in all other cases) will be met well before 201518. The detailed focus on the MDGs in the Chief Minister’s pre-budget Policy Address highlights the Governments overriding concern with the income and non income elements of poverty reduction. Housing status is also an important non-income measure of poverty status. A comparison of data from the Population Census (1998) and PSLM (FY 2005) indicates that, in Punjab, the proportion of households living in one-room housing units has declined from 32 percent in 1998 to 25 percent in FY 2005—the proportion living in larger dwellings has increased. Similarly, the proportion of households using gas/oil as cooking fuel and electricity for lighting has also risen noticeably. These are all important indicators of improved welfare in the province. 2.3.2 Relationship between Money-Metric Poverty Status and Access to Public Services Applying a logistic regression model to data from the PIHS for FY 2002, Malik and Nazli (2005) confirmed the existence of a significant relationship between a household’s poverty status determined by the money-metric headcount measure and a set of social indicators for Punjab.19 The study found, for example, that the household head’s education level and presence of a tap, electricity and toilet facilities within the house were inversely related to poverty, while there was a positive and significant relationship between poverty and household size. The study also found that the presence of a motorable approach road to a village had a negative and significant effect on household poverty. When viewed in terms of the results from the improved access to public services (discussed above) that have occurred in the province in the last five years, these results confirm that overall poverty has declined in Punjab over this period. While growth in employment can have a significant impact on poverty, the Government has an obligation to institute social safety nets to prevent households from falling below the poverty line, and to assist households below the poverty line to maintain minimum standards of nutrition and welfare so that they retain some ability to cross the poverty threshold. The Government of Punjab administers a number of such schemes, including the institution of zakat and Pakistan Bait-ul-Maal schemes, as well as others to facilitate access to physical assets (Appendix 1). 2.4. Conclusion Punjab makes a significant contribution to the national economy in both the commodity producing and service sectors. Provincial growth rates have been above 7 percent in the last four years. This growth is also reflected in the significant progress being made towards the attainment of the MDGs. Provincial non-money-metric estimates of poverty are generally better than the national average but without access to disaggregated data it is hard to make a definitive statement about the incidence of money-metric poverty in the province as of now. There is a need for the Province to generate its own statistics on these key aspects and to strengthen the statistical processes for the generation of the GPP estimates. The volatility in agricultural production, and the downward trend in the growth rates of the manufacturing sector indicated by the available GPP estimates need to be monitored and corrected swiftly if Punjab’s growth momentum is to be maintained over the medium term.

18 The sources of data through which these targets have been tracked were not specified in the pre-budget

policy document. 19 Malik, Sohail J., and Hina Nazli. 2005. Household Poverty Status and Access to Services. IDS working

paper. Unpublished.

13

3. Agriculture Agriculture is the mainstay of Punjab’s economy. As shown in the previous chapter, its share in the GPP is 20.3 percent. It employs almost half of the labor force in the province. It contributes over half to total national agricultural value added.20 A detailed study21 was conducted in 2004 as part of the background work for the Punjab Economic Report 2005 to “review the performance of the agricultural sector and identify public policy priorities to accelerate agricultural growth, enhance sustainable use of natural resources, and reduce rural poverty”. The growth performance of Punjab’s agricultural sector was examined in the light of its input intensification, total factor productivity, agricultural trade, and natural resource management. The study found output growth of the agricultural sector in Punjab to have been satisfactory over the last twenty years. However, in terms of productivity, the growth was evaluated to be quite dismal during the 1990s after the impressive growth of the 1980s. Growth in the sector is crucial for Punjab’s economy and its development prospects, and has a significant impact on poverty levels. The sector has historically had large variations in output as a result of droughts, crop viruses and similar natural disasters. Since most of the major issues in Agriculture in Punjab were part of the previous Punjab Economic Report and its background work this chapter will briefly describe the main trends in the growth of agriculture and look at the factors behind this growth22. A few key potential areas which offer the greatest potential for enhancing value-added in this sector, which were not adequately covered in the previous report are also discussed here. The chapter is, therefore, divided into five sections. Trends in agriculture and its structural transformation and performance are the subject of discussion in section 3.1. The theoretical framework on the sources of growth and the extent of yield gaps existing in Punjab are presented in section 3.2. A detailed analysis of the main sources of growth, the constraints being faced as well as the proposed strategies for the relaxation of the binding constraints is presented in section 3.3. The diversification of agriculture is generally demand-driven. Since the demand for high-value products such as dairy and vegetables is income-elastic, as incomes rise there is a greater need to pay special attention to boost the production of this sub-sector to avoid price increases for these products and nurture the emergence of new marketing arrangements for high-value products. Section 3.4 is devoted to a discussion of high-value agriculture. It identifies strategic directions for establishing institutions to support rapid growth in this sub-sector. The final section, 3.5, presents general conclusions and a policy road map for accelerating agricultural growth. 3.1. Trends, Structure and Performance of Agriculture An analysis of agricultural performance helps in identifying sources that may be tapped for growth in the sector. Table 3.1 shows the GDP amount originating in agriculture and its different sub-sectors in Punjab. At constant prices of 1999/2000, agricultural GDP has increased from Rupees 504,006 million in 1999/2000 to Rupees 624,119 million in 2006/07. There has been growth in all sub-sectors. However, measured in terms of their contribution to total value-added in agriculture, the contribution of fishing, forestry and minor crops has not been major.

20 Depending on how sectors are defined, agriculture can be considered the single largest sector of the

provincial economy, given that “services” is actually a grouping of a number of diverse activities. 21 World Bank (2004) Accelerating Agricultural Growth in the Punjab: Priorities for Public Policy by D.

Byerlee and M. Ali Unpublished Background Note for the Punjab Economic Report 2005 22 The interested reader is referred to the earlier study op cit for details

Agriculture

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Table 3.1: Gross Provincial Agriculture Product by Sub-Sectors in Agriculture (At Constant Factor Cost of 1999/00)

(Million Rupees) SECTOR 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07

Crops 323269 303147 297678 309152 309603 357359 346915 373664 Major crops 244483 227155 221463 234093 235704 281085 267677 290315 Minor crops 78786 75992 76214 75059 73899 76274 79238 83349

Livestock 175564 180950 187121 209284 213426 219925 233042 244233 Fishing 3836 3608 3110 3690 3631 3736 3882 4077 Forestry 1338 3598 2632 3066 3157 3737 3431 2145 Agriculture 504006 491303 490541 525191 529817 584757 587270 624119

2006/07 weight major crops = 0.7769422 weight minor crops = 0.2230578

Table 3.2 shows the percentage share of different sub-sectors in total agriculture while Table 3.3 presents information on growth rates. While the relative shares of fishing and forestry are low and static, the share of livestock increases from 35% in 1999/2000 to 39 percent in 2006/2007 and that of crops falls from 64 percent in 1999/2000 to 60 percent in 2006/2007. There are large fluctuations in the rates of growth of agriculture and almost all of its sub-sectors. Table 3.2: Sectoral Share in Gross Agriculture Product in Punjab

(At Constant Factor Cost of 1999/00) (%age)

SECTOR 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 Crops 64.1 61.7 60.7 58.9 58.4 61.1 59.1 59.9

Major crops 48.5 46.2 45.1 44.6 44.5 48.1 45.6 46.5 Minor crops 15.6 15.5 15.5 14.3 13.9 13.0 13.5 13.4

Livestock 34.8 36.8 38.1 39.8 40.3 37.6 39.7 39.1 Fishing 0.8 0.7 0.6 0.7 0.7 0.6 0.7 0.7 Forestry 0.3 0.7 0.5 0.6 0.6 0.6 0.6 0.3 Agriculture 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Table 3.3: Sectoral Growth Rates of Punjab Agriculture (At Constant Factor Cost of 1999-00)

(%) SECTOR 2003/04 2004/05 2005/06 2006/07

Crops 15.42 -2.92 7.71 7.73 Major crops 0.69 19.25 -4.77 8.46 Minor crops -1.54 3.21 3.89 5.19

Livestock 1.98 3.04 5.96 4.80 Fishing -1.58 2.89 3.91 5.02 Forestry 2.98 18.39 -8.20 -37.48 Agriculture 0.88 10.37 0.43 6.27

3.1.1 Composition of the Agriculture Sector in Punjab Four major crops (wheat, rice, cotton and sugarcane) contributed about 47 percent of value added in agriculture in Punjab in FY 2006, while livestock contributed a further 39.1 percent, as shown in Figure 3.1. Within major crops, wheat has consistently contributed the largest share of value added, contributing about 40 percent in FY 2005 (see Figure 3.2). The relative shares of cotton and rice in total value added for major crops have fluctuated in recent years – the cotton crop in particular has been subject to the leaf curl virus (LCV).


15

Figure 3.1: Composition of the Agriculture Sector in Punjab (FY 2000 to FY 2007)

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60

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2000-01

2001-02

2002-03

2003-04

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2006-07

Major cropsMinor cropsLivestockFishingForestry

Figure 3.2: Share of Value Added of Four Crops in Total Value Added of Major Crops in Punjab

Source: World Bank (2005). Note: More recent data on value-added by crops are not available.

As a result of differential growth rates of different sub-sectors over time there has been a change in the composition of agriculture in Punjab towards livestock. 3.2. A Theoretical Framework for Analyzing the Sources of Growth in Agriculture Theoretically, growth in agricultural production is attributable to increased area under cultivation, changing cropping and/or activity mix from low to high value activity (i.e. diversification), increasing yields and an interaction term between these three sources of growth. In this section, based on available literature, we present a framework of analysis for the identification of different concepts of yield gaps. Closing these gaps leads to increasing yields and higher agricultural growth. The section concludes with presentation of some evidence on yield gaps in Punjab. 3.2.1 Sources of Growth – A Framework The average yields of various crops in Punjab are far below their potential yields, progressive farms’ yields and yields obtained at research stations. Moreover, the yields obtained in research stations in Punjab are

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Agriculture

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lower than the yields demonstrated on the research stations in many of the developed and developing countries. Evenson (2002)23 discusses four yield levels and three yield gaps associated with them. The first level is the realized yield on an average farmer’s fields (T0). The second yield level is the “best practice” yield (T1). This can be actualized using the best available technology (Figure 3.3). It is possible that some farmers obtain best practice yields. However, the average farmer as well as the majority of farmers does not come close to achieving the best practice yields. The third yield level is the “research potential” yield (T2). It is the hypothetical yield levels that would be expected to be attained as a result of a successful applied research program. The fourth yield level is “science potential” yield (T3). This is also a hypothetical yield as it is never achieved. It is the research potential yield attainable if new scientific discoveries are fully utilized in applied research programs. Associated with these four yields levels three yield “gaps” can be defined. First is the extension gap, i.e., difference between best practice and average yields. The extension programs are designed to close this gap. Second, research yield gap, the difference between research potential yields and the best practice yields. Applied research programs, when successful, are expected to narrow and hopefully eliminate this gap. Third, the science yield gap is defined, as the difference between science potential and the research potential yields. The agricultural productivity growth thus requires shifting of T3 and T2 yields, which widen “research gap” and continually bridge the gap by enhancing the best practice yield (T1) through applied research. Figure 3.3: Productivity Gaps in Agriculture

Source: Evenson. Robert, E. (2002) It is interesting to note that Figure 3.3 also provides a key to the issues and policy areas that are to be addressed to close and/or reduce the science gap, research gap and extension gap. Global research system generates new scientific discoveries which have spillover benefits for all countries. However, each country needs to access these discoveries by putting in place a system to utilize the basic science

23 Evenson, Robert E. (2002) Economic Impacts of Agricultural Research and Extension. Center Reprint

No. 578. Economic Growth Center, Yale University as quoted in Muhammad Iqbal and Munir Ahmad (2006) “Science and Technology Based Agriculture Vision of Pakistan and Prospects of Growth”, Pakistan Institute of Development Economics, Islamabad.


17

and technology relevant to its specific case. The closing of the research gap requires instituting a research system that is well funded and is staffed with qualified scientists. Also scientists should be given proper incentives and be provided with a conducive working environment. The extension gap can be narrowed through a well-functioning system of providing agricultural advisory services to farmers. Provision of marketing and physical infrastructure, availability of modern inputs including access to finance and dissemination of proper agronomic practices are some of the essential ingredients to increase the average yields. It should be noted that improvements in the research and extension system and input delivery systems interact with each other and impact on various yields gaps jointly. 3.2.2. Yield Gaps in Punjab In Punjab, yield gaps are quite high. Table 3.4 presents the relevant information that highlights this. Due to general inefficiency of the agricultural production system, the average yields of most of the agricultural crops are lower than the demonstrated potentials at the progressive farms and the research stations. The “extension” and “research” gaps range from 31 percent to 75 percent and 25percent to 57 percent respectively. The yields in Punjab of selected crops are 50 to 83 percent lower than the highest averages attained in other countries of the world. Closing the yield gaps thus offers significant prospects for future agricultural growth in Punjab.24 Table 3.4: Average Yields for Selected Agriculture Commodities and the Associated Yield Gaps

(Yield in Tonnes /hectare) Gap (%) Commodity Highest Avg Potential

Yield Progressive

Farm’s Yield

National Average

Yield

Punjab Average

Yield Extension Research From

World Wheat 7.5 (France) 6.8 4.6 2.3 2.5 50.0 32.4 69.3 Cotton 4.0 (China) 4.3 2.6 0.62 0.60 30.8 39.5 55.0 Sugar 120 (Egypt) 300 130 40 43.4 69.0 56.7 66.7 Maize 9.9 (France) 9.2 6.9 1.7 1.9 75.4 25.0 82.8 Rice 7.4 (USA) 5.2 3.8 2.0 1.6 47.4 26.9 73.0 Rapeseed/ Mustard

3.4 1.5 0.8 0.9 46.7 55.9

Cow milk (tonne/ Year)

5.5 (USA) 6.5 3.1 1.2 NA 61.3 52.3 78.2

Source: Adapted from Iqbal and Ahmad (1999) and unpublished data obtained from Pakistan Agricultural Research Council, Islamabad. There are a number of reasons for the presence of large yield gaps in Punjab. Investment in agriculture was particularly low from the mid 1980s to the early 1990s. Increasing water scarcity is exacerbated by low irrigation efficiency. There is a need for diversifying cropping patterns away from crops with high water requirements and towards crops that generate higher value-added. Indiscriminate use of farm chemicals has resulted in reduced effectiveness, as pests have developed resistance. The use of unsustainable agricultural practices has led to land degradation. Excessive use of pesticides has also introduced environmental and health hazards as Integrated Pest Management (IPM) are hardly practiced. The Government of Punjab has initiated a number of activities to address the yield gap issues in agriculture including a Rs. 850 million laser land leveling project, an initiative to procure 150 new bulldozers at a cost of Rs. 1.4 billion through the Annual Development Plan (ADP), and a program to improve 28,000 watercourses at the cost of over Rs. 2 billion. Other plans include a comprehensive strategy for production and marketing of fruits and vegetables, introduction of on-farm warehouse technology, rehabilitation of waterlogged land and promotion of water conservation techniques in irrigation, among others. We turn now to a detailed analysis of the situation with respect to extension and research gaps and the improvement of delivery systems for major inputs.

24 For analysis at the Pakistan level, please see “Science and Technology Based Agriculture Vision of

Pakistan and Prospects of Growth” by Muhammad Iqbal and Munir Ahmad, Paper presented in the 20th Annual General Meeting of Pakistan Society of Development Economists, Islamabad.

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3.3. Bridging the Agricultural Research Gap – Status and Prospects A wide-ranging institutional infrastructure is already in place in Punjab for agricultural research with a broad mandate of addressing all activities in the agricultural sector including crops, livestock and other high value products (see Appendix 2 for a listing of agricultural research institutions in the province).25 Despite this infrastructure, the system has neither generated a stream of research innovations to help achieve a high growth rate in agriculture, nor has it been instrumental in adaptive research on a large scale. In view of large spillover of benefits from the national research system to its provinces, it is important also to analyse the capacity of the province to effectively benefit from the national research. What is important for agricultural growth is not only the research done by the provincial research system but also the research done by the Federal Research System. In view of spillover benefits, there is a need to assess the relevance of research results emanating from both the provincial and federal research systems. The existence of a variety of research institutions and their performance needs to be analyzed from the perspective of the overall system’s performance and the performance of most of the research institutes. First, the Punjab research system is a highly fragmented system. Research on crops, on-farm water management, livestock, fisheries, forestry, farm mechanization, resource management, biotechnology and social services are housed in different departments and/or directorates in the Agriculture Department. There is little effective coordination between different agencies. The consequence is that research agendas are fragmented. Emerging issues and research needs are not handled in an integrated manner. Second, funds allocated and the levels of human capital available in the research system have both been low. Last but not the least, there is a weak system of priority setting in research and its evaluation. Only a brief discussion of the major problem areas is provided. 3.3.1. Lack of Co-ordination between Federal and Provincial Research Systems As already noted, agricultural research in Punjab has a mandate to evolve and spread new technologies in all sub-sectors in agriculture i.e. crops, livestock and other high value products. Research is a provincial subject according to the Constitution of Pakistan. Nevertheless, there is a significant presence of federal research institutions in Punjab and other provinces that conduct research on agricultural science and other related subjects. As Punjab is the major province in terms of contribution to national agricultural GDP, these spillovers contribute significantly to agricultural growth prospects in Punjab. In view of the relevance of spillovers, a discussion of the federal research system and its efficacy is needed in addition to that of the provincial research system. At the federal level, the research system is centered in the Federal Ministry of Food, Agriculture and Livestock under whose control the Pakistan Agricultural Research Council (PARC) operates as its research arm. In Punjab, research and extension are an integral part of the Department of Agriculture. Decision-making for financing research and setting the research priorities and execution of the chosen strategy is top-down. Financing was provided mainly through public budgets. Donor funds were also channeled through the department of agriculture. This has resulted in evolution of inappropriate technologies from the research system. 3.3.2. Low Funding Levels Due to large spillovers of effects described above, it is prudent to present data for the federal as well as provincial research systems. The dominant contribution to research funding is being made by the federal government. Table 3.5 shows the expenditure level in 1999/2000 prices by the federal government as well as by each of the province. The expenditure on higher education incurred by the agricultural universities is also shown. The expenditure on extension activities is not included. Expenditure levels and the staff deployed are, therefore, for knowledge creation only.

25 The description of different institutions is based on a study conducted by M. M. Yousaf Chaudhri as a part

of research sponsored under ASPL-II and discussions with stakeholders involved in research and extension work.


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Table 3.5: Distribution of public agricultural research expenditures and total researchers, 200326. Spending

2000 Rupees 2000 International Dollars

Researchers Type of Expenditures by Level of Government

(Millions) Full-Time Equivalents (FTE) Federal Government

PARC 203 17 239 NARC 416 35 500 Others 229 19 286

Sub-Total Federal 848 71 1025 Provincial Governments

Balochistan 95 8 169 North-West Frontier Province 138 12 354

Punjab 678 57 1163 Sindh 229 19 486

Sub-Total Provincial 1140 96 2172 Higher Education 254 21 291 Public Sector Total 2242 188 3,488

Source: i) Beintema, N.M.W Malik Sharif and U.Mustafa 2006. Agricultural R&D development in Pakistan. International Food Policy Research Institute and Pakistan Agriculture Research Council.

ii) Expenditures for the higher sector are estimates based on average expenditures per researcher at the University of Agriculture Faisalabad and University of Arid Agriculture, Rawalpindi.

It is clear that federal research institutions are the dominant players in research as far as allocation of research funds are concerned. In 2003, investment in agricultural research was 188 million US dollars in 1999/2000 prices. Of this amount, US$ 71 million was spent by the federal institutions and US dollars 96 million was spent by the four provinces. US $ 21 million was spent on agricultural education. The share of Punjab in research expenditures was US $ 57 million as against US $ 39 million for the remaining three provinces. In 2003, research staff in the entire system stood at 3487 on a full-time equivalent basis. The majority of the research personnel were, however, based in the provincial research systems. Punjab again dominates as 1163 staff members were working in its system compared with 1009 staff in the other three provinces. The average spending per scientist was larger in the federal research system relative to the situation in each of the four provinces. Total research spending in the Federal and Punjab system had declined by about one-third between 1991 and 1994 (Beintena et. al). Spending levels re-bounded after 1999 mainly due to the Agricultural Linkage Program (ALP). In Punjab, both the research expenditure and the Research staff employed have, however, remained stagnant in real prices. Agricultural research at the Federal and Provincial level including Punjab is undertaken mainly in the public sector. Of the total spending on agricultural research only 6 per cent was spent by the private sector (Table 3.6). In view of the potential lack of effective demand responsiveness by the public sector in research priority fixation, the dominance of public sector in research is a major issue. Table 3.6: Public and Private Research Expenditures, 2003

2000 rupees 2000 International dollars Share Agencies (millions) (Percentage)

Public 2,241 188 94.3 Private 136 11 5.7 Total 2,378 199 100

Source: Beintema et al. (2006) based on data from the ASTI database. The preponderance of the public sector in research in Punjab has had a negative impact on the research productivity. This problem was further compounded as the research is spread over many agencies within the Department of Agriculture.

26 Data for later years are not available in this format.

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3.3.3. Reasons for Ineffectiveness of Research Institutions Some of the main factors explaining the decline in the effectiveness of the research systems are given below: Lack of Effective Autonomy to Research Institutes: The institutes are governed by departments and procedures that stifle research. Controlling departments argue that since funding is provided by departments, government accounting rules and procedures must apply to research institutes to ensure accountability. Weak Coordination Among Research Agencies: The fragmentation in the research system requires a Provincial Board that coordinates research activities within the province. The need to coordinate federal and provincial research is also equally urgent. Weak Incentive Framework and Human Resource Development for Quality Research: The absence of well-defined promotion criterion that is based on qualifications, scientific work and peer review has led to weak linkages between merit and promotions. The salary structure is unfavorable relative to that of civil servants. Insufficient Funds for Agricultural Research: The provincial government spends no more than 0.15 percent of Punjab’s agricultural value added on research. This funding level is low relative to the successful cases from other developing countries. Not only are these resources low but they are being badly utilized. The operational funds are declining as a percentage of total funds being used in agricultural research. With such funding levels, only maintenance research is possible. There is little prospect for any significant increase in yields of crops and livestock through the current research budgets. Weak Role of Private Sector in Research: The private sector has a very limited role in Punjab’s agricultural research. There are some private sector research efforts in the development of varieties of maize, and hybrid seeds for sunflowers, but no other noticeable efforts. The limited role played by the private sector is due to limited protection provided under biosafety regulations and Plant Varietal Protection. The absence of the corporate sector in research is a major problem. Lack of Effective Accountability Mechanism: Last but not the least, there is no effective accountability mechanism for review of research programs. There are no established forums for regular exchange of research results. The factors outlined above explain the unsatisfactory state of affairs in the knowledge creation system in Punjab. No sustainable increase in productivity is possible unless this system is revamped. 3.3.4. Proposed Strategy The agricultural research system needs to respond to a number of challenges, primarily, ensuring that production remains at levels necessary to meet the food and fiber needs of a growing population, despite a depleting natural resource base. In the longer run, the research needs to concentrate on enhancing competitiveness in domestic and international markets, which is imperative if Pakistan is to maintain export growth in the medium term. Research efforts also need to focus on building capacity to exploit opportunities offered by the recent biotechnological innovations. The Government of Punjab has recently taken some measures to reactivate agricultural research in the province. The Punjab Agriculture Research Board has been activated and restructured to supervise and coordinate research efforts across the province. Ayub Agricultural Research


21

Institute (AARI) is being reorganized and strengthened to make it more productive, dynamic and forward looking. The career and pay structure of research scientists will be improved to provide them incentives for their good work. The funding of research institutes will be enhanced from the present level of 80:20 between salaries and operational cost to an internationally recognized ratio of 60:40. An amount of Rs. 500 million has been allocated to fund the competitive grant system. Recent government initiatives are steps in the right direction. The following proposals should also be considered to strengthen the research infrastructure and ensure that research outputs are of an international standard, and are utilized effectively. Restructuring of Ayub Agriculture Research Institute (AARI): AARI should be granted sufficient autonomy of operation through delegation of authority for financial and personnel management from the Secretariat to the AARI management. Furthermore, the Institute should be regrouped to form a series of units with decentralized management, and well staffed planning, monitoring and evaluation units. Staff strength in AARI needs to be rationalized, and regional research facilities strengthened. The incentive structure for the scientists has to be also restructured to incorporate merit based time scale promotions de-linked from the availability of posts in the higher cadre. More opportunities for in-service skill enhancement should be made available, and the incentive structure should include adequate compensation for staff posted to unattractive stations. Technical Support: A well-equipped and competently staffed repair and maintenance facility should be established for sophisticated electric and electronic laboratory equipment, which should extend services to all research institutions in the province. Investment in Biotechnology: In addition to the above measures, it is imperative that the Government of Punjab increase investments in bio-technology. This is needed to counter the inherent biases of multinational corporations in these areas. More importantly, the public sector needs to have a trained cadre in biotechnology for proper regulation and risk assessment. This is required whether the research is done in the public or in the private sector. Encourage Private Sector Participation in Research: Private sector participation in research needs to be encouraged. Only when the Pakistan Patent Act is in place would private sector participation in research rise over time. 3.4. Bridging the Extension Gap – Status and Prospects Agricultural extension is a provincial subject. The Agricultural Department is responsible for extension work. Recently, a number of models/approaches have been initiated to make the process of transfer of technology more relevant and efficient. Non-governmental Organizations (NGOs), particularly National Rural Support Program (NRSP) and Punjab Rural Support Program (PRSP) are working in selected areas in almost all districts of Punjab, using the community-based approach to extension work. Extension activities by industrial and business interests also exist, but these operate on a limited scale. Their main interest is the supply of modern inputs. Extension activities are only incidental. Fauji Fertilizer Company (FFC) is providing relatively more extensive services through its Farm Advisory Centers and Regional Technical Services Officers. Engro Limited is also an important player in extension in use of pesticides and fertilizer. Despite the involvement of the private and NGO sector, extension activity is mainly the responsibility of extension wing of Department of Agriculture. 3.4.1. Institutional Issues The extension system in Punjab is dominated by the public sector. It is based on a top-down approach. It presumes that farmers are backward and ignorant and need advice from above on a continuing basis. This view has persisted despite path-breaking work that has shown that farmers

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are rational decision makers and respond to incentives. Moreover, it is assumed that technologies are available on the shelf that needed to be disseminated by extension agents. This assumption implies that linkages with the research system are not needed. The other strategic flaw is a limited role being assigned to private and/or NGO sector on extension. Contract farming that involves the corporate sector in providing inputs, including extension as well as guaranteed access to output is still in the infancy in Punjab. International evidence suggests that the benefits ensuing for the private sector role in extension using this model are large. In Punjab, despite some recent changes towards the better, the relationship between NGOs and government and between the private sector and the government has not been very cooperative. The private sector is active in the provision of seeds, pesticides and fertilizer. It has been blamed for bad quality of inputs as well as for emphasizing higher usage of some of the inputs than was optimal from the perspective of sustainable agriculture. The experience of the Idara-e-Kissan, a cooperative body, involved in milk processing and milk collection shows that extension activity on their part was beneficial for farmers to increase milk production. 3.4.2. Critical Weakness Deficiencies in Extension Education: There are numerous deficiencies in the educational programs at the Agricultural Universities. Students with poor levels of educational achievement are generally recruited in the public extension service. In-service training programs for extension workers are entirely inadequate. The technical competence is therefore low. The absence of a system of performance evaluation only worsens the situation. Weak Research - Extension Linkages: Weak linkages between research and extension result in poor dissemination of technologies and no appropriate feedback. These linkages may have further weakened after the devolution reforms in 2001 as research is a provincial subject and extension has been devolved to district governments. Similarly, there is no working relationship between extension staff and staff working in NGOs and other private sector agencies who are carrying out extension services using a community based participatory approach. Currently, there is a top-down approach to technology packaging and its dissemination, and extension services do not take into account the real needs of the farmers. Fragmentation of the Extension System: The extension system is highly fragmented within the Agriculture Department. Extension services for crops, on-farm water management, engineering services, pest management, agricultural information and livestock are all housed in different organizations with little or no coordination. After devolution of extension to the district level, there is no coordinating mechanism across different districts or agro-climatic zones.


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Box 3.1: Impact Evaluation of Agricultural Extension through Mass Media (2001)

.4.3. Proposed Strategy The Government of Punjab proposes to strengthen extension services at the union council level with the provision of a qualified Agricultural Officer, who will oversee the collection of data on local crop production and disseminate information on latest production techniques. The Government is also considering proposals to reform the incentive structure for extension staff, arrange for in-service training, and encourage a more participatory approach towards extension service provision, including up-scaling the use of Farmers Field Schools. In addition, the following are proposed as means to reform and revitalize extension services. Encourage Location Specific Research: Extension systems have been devolved to local governments, but they do not have the means to finance operational extension services. There is a need to have a system of technology transfer grants funded by the provincial government and/or donors to the district governments. A transparent and clear set of criteria need to guide the disbursement of funds to different districts. Second, the province should develop human resources by imparting education and training to extension agents from all districts. The training programs should cater to the emerging needs in extension especially in the case of high value crops and/or projects. Matching grants can be used to introduce an element of demand-driven training in extension courses. Research/Extension Linkages: A provincial policy regarding research-extension linkage and division of roles between provinces and districts needs to be evolved. Agricultural extension must evolve into a more localized and bidirectional system that addresses technological questions posed by real life farming practices and is progressively made responsive to farmers’ needs. The recruitment of agricultural officers at the Union Council Level in selected districts is a move in the right direction that must be encouraged. 3.5. The Role of Input Use and Delivery System in Agricultural Growth Issues of resource use in agriculture and those connected with fertilizer use, seed quality, farm mechanization, plant protection, and agricultural credit are widely known and have extensively been discussed in the literature, including the first PER. The need of evolving a holistic set of public policies regarding use of modern inputs and promoting suitable agronomic practices are essential for accelerating agricultural growth. A brief overview of trends in inputs use and the effectiveness of their

PERI has conducted impact evaluation of agricultural extension through mass media. This study finds that the dissemination of messages through mass media was well received by the farming community. It is a cost-effective method of timely and quick dissemination of latest technology. However, it is not a substitute for traditional method of extension (one to one contact). Regular TV and radio programs on agriculture need to be strengthened through making additional financial allocations. Separate funds must be allocated for TV and radio flash, as it has been found to be extremely useful, particularly in communicating emergency messages regarding how to deal with irrigation water scarcity and pest flare up. This study recommends that both traditional extension set up and mass media should focus on conveying those messages which are consistent with national needs and help in exploiting the agricultural development potential. The messages must also have appropriate economic content in them. For example, increasing edible oilseeds production; increasing production of high value crops, i.e. fruits, and vegetables; efficient use of irrigation water; and soil testing for optimal use of fertilizer. For traditional extension services, this study recommends their reorganization following lines: • Quality manpower, rather than large number of extension workers is required. • Linkage between agricultural research and extension needs considerable improvement. In our

neighboring country highly qualified agricultural universities staff is actively involved in extension work with good results.

• Specialized extension service is needed for horticulture, vegetable growing, floriculture etc.

Source: Khan (2001)

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delivery systems for achieving growth in agriculture are provided in this sub-section.27 Increased use of inputs is needed for intensive agriculture to raise average yields. It is a pre-requisite through which extension and research gaps are narrowed. Despite rising fertilizer use in the past, the average consumption of fertilizer in the province remains lower than many developing regions in the developing world such as Egypt. The average consumption in Punjab has risen from 89 kilograms per cropped hectare in 1990/91 to 157 kg in 2004/05. The unbalanced use of fertilizer is also a serious problem. As against the recommended ratio of 2:1, the use of fertilizer nutrient has fallen only slightly from 3.7:1 in 1990/91 to 3.0:1 in 2004/05. Significant increase in crop output can be achieved if the fertilizer application is adjusted to the recommended dosage of 2:1. The high cost of phosphatic fertilizer relative to the nitrogenous fertilizer is a factor inhibiting the larger use of phosphatic fertilizers. There is also a need to test the soils for determining the deficiency in micro-nutrients on a larger scale before a decision by farmers is made in adjusting the fertilizer dose. The use of pesticides on a larger scale than it is being practiced in the province is also emerging as an issue. The area treated with pesticides in Punjab has increased from 8073 thousand spray hectares in 1994/95 to 13985 thousand spray hectares in 2003/04. The use of pesticides is still much lower than in other countries. However, in view of the fact that effect of applied pesticides can appear in the food chain, a caution is needed to monitor the levels of residual amount left in the food so that it does not exceed the residual limits safe for human consumption. Otherwise, the prospects of exports would be dented. The increased use of integrated Pest Management and the increased reliance on the bio-technology is needed. Table 3.7 shows the distribution of improved seed by crops. The use level of improved seed increased from 102.76 thousand tonnes in 1995/96 to 137.61 thousand tonnes in 2003/04. Wheat and cotton account for the bulk of the improved seeds. Seed production and distribution in the past was mostly in the public sector. Since 1994, the private seed companies have been allowed. There are still some restrictions on the private sector to enter the field of production for pre-basic and basic seed. There is a need to review these restrictions. There is also an urgent need to increase the capacity of public research institutes to produce larger quantity of improved seed. Table 3.7: Distribution of Improved seeds by Crops

(Matric Tonnes) Years Total Wheat Paddy Cotton Maize Gram Potato 1996/97 58,848 51,737 1,077 5,409 160 90 375 1997/98 61,434 54.940 1,243 4,382 7 62 800 1998/99 70,189 64,747 1,050 3,611 220 264 297 1999/00 62,271 56,911 1,336 3,557 269 122 76 2000/01 71,955 64,427 767 5,500 300 126 835 2001/02 71,062 64,157 1,559 4,256 103 87 900 2002/03 70,285 63,548 1,241 4,205 86 117 1,088 2003/04 67,451 60,740 1,780 3,600 132 204 995 2004/05 57,308 51,170 2,338 2,570 188 115 927 2005/06 43,674 37,715 1,978 3,277 192 47 465

Source: Director (Marketing), Punjab Seed Corporation, Lahore. As has already been shown, the access of farmers in Punjab to modern inputs has improved over time. The rapid increase in farm to market roads and many other types of physical infrastructure has reduced the transaction cost for most farmers. The institutional credit- both development and production loan has increased sharply (Table 3.8). Between 1990/91 and 2005/06, the total credit has increased from Rs. 674 per hectare in 1990/91 to Rs. 1783.2 per hectare in 1990/91 prices. Despite the large increase in the availability of institutional credit for the agricultural sector as a whole, the skewed distribution of the credit between the large, medium and small farmers is still an important policy issue to be resolved. Meeting the needs of farmers operating farms of less than 12.5 acres should be the top priority. It is also important to ensure that farmers engaged in high value agriculture should not be credit-constrained.

27 Issues with respect to conservation of land resources are discussed in Chapter 11.


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Table 3.8: Agriculture Loan Disbursement per Cropped Hectare (Rs. Per cropped hectare)

Year Year 1990/91 674.23 1998/99 926.49 1991/92 602.42 1999/00 786.39 1992/93 624.75 2000/01 814.34 1993/94 549.3 2001/02 918.24 1994/95 638.75 2002/03 972.57 1995/96 565.03 2003/04 1091.02 1996/97 468.62 2004/05 1386.15 1997/98 765.75 2005/06 1783.189

Note: The credit disbursed is in real prices. The computation is based on the constant prices of 1990/91. 3.6. Agricultural Diversification – The Way Forward The intensification of agriculture by using increased levels of modern inputs and narrowing of research and extension gaps in agriculture are important elements in accelerating the agricultural growth rate in Punjab. It needs to be noted that the traditional approach of increasing agricultural growth by bringing more area under cultivation and increasing cropping intensities sooner or later runs its course. It needs also to be highlighted that enhancing productivity of a few major crops such as wheat, rice, cotton and sugarcane also loses its effectiveness with the passage of time. A more attractive and viable course of action is to transform agriculture from being mainly a producer of a few traditional crops to a more diversified sector in which high value outputs figure prominently. Such crops contribute to achieving important social goals like poverty alleviation, employment generation and natural resource conservation. It has already been noted that agricultural diversification in Punjab has already been under way. Livestock, fisheries and poultry sub-sectors have been vibrant in the recent past. In this section, an attempt is made to assess the past pattern of agricultural diversification and to highlight a few success stories that need to be up-scaled for reaping benefits from high value agriculture. 3.6.1 Developments in Livestock and Dairy Farming According to the Household Income and Expenditure Survey data (HIES), the consumption of livestock products in Punjab increased sharply from the late 1980s to the mid-1990s. This contributed to the very rapid growth of the livestock sector during that period. While the livestock sector has continued to grow from FY 1991 to FY 2007, its recent growth has been slower than in earlier years. 3.6.2 Characteristics of the Livestock Sector On average, farmers derive 30 to 40 percent of their income from the livestock sector, and about 30 to 35 million rural persons are engaged in raising livestock.28 Despite its substantial contribution to the national economy, the livestock sector still remains a relatively neglected sub sector of agriculture. Sectoral priorities single-mindedly focus on enhancing crop yields. For instance, out of Rs108.7 billion total expenditure on the agriculture sector during FY 2006, the livestock sector received a paltry Rs 6.8 billion or 6.2 percent of total disbursements.29 Although the department of livestock and dairy development has tried to preserve the genetic pool of indigenous breeds such as Sahiwal cattle, Nili, Ravi, and Nili-Ravi buffalo, this asset has been depleted in Punjab due to export to Sindh, the North West Frontier Province (NWFP), and Central Asian Republics. Fodder and feed resources are inadequate and productivity of fodders is low because of poor research and extension support. Compound feeding is not widely accepted by farmers. Animal health cover and artificial insemination are still far from satisfactory. Essential infrastructure for the

28 Government of Pakistan. 2006. Pakistan Economic Survey 2005–06. Islamabad: Ministry of Finance. 29 State Bank of Pakistan. 2006. Annual Report 2006. Karachi: State Bank of Pakistan.

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storage, inspection, and marketing of milk; abattoirs; and cold chains for milk and meat transportation have not been adequately developed to international standards. The standardization of livestock products is also weak. According to some estimates, the dairy industry processes only 3 percent of the total milk produced. There is weak coordination between allied departments and staff is not properly trained or remunerated. Of the 38 milk processing plants in Punjab, 18 operate below their optimal capacity. 3.6.3 Constraints to Livestock Development Key constraints to the livestock sector include the following: • limited marketing facilities handicapped by consumer-oriented price control mechanisms

(there are diverse controls over the marketing of livestock and livestock products instituted under the Punjab Local Government Ordinance 2001);

• limited health and prophylactic coverage provided only by the public sector; • widespread breeding of genetically inferior livestock despite the availability of high-quality

indigenous breeds; • inadequate and poor-quality feed and fodder; and • lack of an effective system of incentives and facilities and especially the non-availability of

credit for small livestock keepers.

3.6.4 Proposed Strategy The Government of Punjab has taken some steps to address constraints to the livestock sector: it has set up a specialized institute for integrated research on buffalo, introduced outreach progeny testing to improve the breed of Sahiwal cattle, established a research and breeding center for camels in southern Punjab, and taken initiatives to strengthen livestock extension and veterinary services (see Appendix 3 for a discussion on the Strengthening of Livestock Services Project and other key achievements of the livestock department). However, the livestock sector needs a comprehensive development strategy to exploit its potential. The strategy needs to focus on increasing productivity in the sector by improving health coverage, animal breeding, nutrition, and management practices, rather than increasing the number of livestock and introducing better marketing practices. Some specific steps that could be taken in this regard are as follows. Productivity-enhancing measures. The production and preparation of balanced livestock rations needs to be encouraged through use of high-yield fodder varieties, treatment of roughage, and use of molasses in ruminants’ feed. Breeding needs to be undertaken on a more scientific basis by finding high-achiever animals and ascertaining their genetic potential. Breeding should be spread over years to stabilize permanent significant change in the population of cows and buffaloes. The Government could also work with farmers to develop the river belts, Thal, Cholistan, and barani (rain-fed) zones for livestock production and optimal usage of vestigial resources. Quality issues and marketing. There is need to improve the quality of livestock products with value addition at every step of processing, starting from chilling. The Government has a role to play in providing technical expertise in this regard, and in encouraging the organization of farmers’ associations for livestock products. Technical expertise is also needed to initiate activities such as the establishment of milk powder plants to convert surplus milk during the flush season. Research and extension. The Government of Punjab has an extensive research and extension program, but this more or less bypasses small and medium farmers, who are prime livestock holders. There are a number of innovative ways to reach such communities at relatively low cost, such as through the use of electronic media and FM radio. The need to create an enabling environment for the private sector to participate in livestock extension services should also be explored. Recent examples such as that of Idara-e-Kissan (IK) and the work of rural development organizations such as the National Rural Support Program (NRSP) demonstrate how this can be done.


27

Fiscal incentives. Fiscal policies need to be reviewed at both provincial and federal levels to ascertain the possible impacts of such policies on the livestock sector. Options such as a reduction of import duties on certain kinds of machinery and raw material, and freight subsidies on value-added exports from the livestock sector could be considered. There is also need to work with public sector and non-Government organization (NGO)-based financial institutions to explore options of credit provision for livestock development. Regulatory issues. The sector’s regulatory regime also needs to be reviewed to assess (i) the efficacy of regulations on pure food, (ii) the operation of abattoirs, and (iii) milk and meat inspection. The potential for increasing livestock productivity with improved management techniques is illustrated in the following case study of the Idara-e-Kissan. (Box 3.2) Box 3.2: Idara-e-Kissan (Halla Dairy): A Success Story

A recent cooperative initiative launched by IK—a corporate entity registered under the Societies Act 1860 with the brand name “Halla milk”—is a success story of improving economic condition of small livestock holders. An economic analysis reveals that IK dairy farmers (members) get 13.5 percent higher prices and have over 25 percent better milk yields. IK members report 9 percent more wet buffaloes and 6 percent less dry buffaloes compared with non-members. In brief, IK dairy members get 37 percent higher returns. These productivity differentials are attributed to the better livestock management and veterinary coverage that IK provides to its members’ animals. IK is a vertically integrated dairy cooperative that had 20,164 members in 519 villages in Punjab in 2004. The cooperative is open to any livestock keeper in a target village who owns one buffalo or one cow and is able to supply 300 liters of milk during a six-month period. Unlike traditional cooperatives that own dairy farms, IK collects milk from thousands of geographically dispersed member farmers. Milk is processed in one of the cooperative’s milk processing plants and marketed to urban consumers through retail outlets. The cooperative uses profits from its commercial operations to subsidize a package of veterinary and livestock extension services delivered to members through private contractors. In 2004, IK farms produced 47 million liters, equivalent to about 0.2 percent of total milk production in Punjab and about 2 percent of total pasteurized and UHT milk. According to a 2005 survey of 36 small dairy farmers (three to five animals per farm) in the districts of Kasur (IK farmers) and Okara (non--IK farmers), milk production per milk buffalo was 25 percent higher than for milk buffaloes on non--IK member farms. Two major factors account for this higher productivity: (i) higher-quality feed, and (ii) better veterinary services. IK members utilized three times as much cottonseed cake per milk buffalo than did non--IK members. Members also benefited from improved veterinary services provided through private contractors: IK farmers utilized these veterinary services at about twice the rate of non--IK farmers. Moreover, members were more satisfied with these services than non-members were with services provided by Government agencies and the private sector. However, member farmers have still not widely adopted other improved technologies promoted by the cooperative (such as balanced feed rations, improved fodder seed, non-traditional fodders, artificial insemination services, and hygienic practices to control disease). Improved market access is key to the success of member farmers. IK farmers received 13 percent higher prices for milk (which was priced according to fat content) than did non--IK members (who sold to local milk dhodis). Total revenues per milk buffalo for IK members were 38 percent higher than for non-members. Thus, in spite of 44 percent higher costs, IK cooperative members enjoyed 34 percent higher net returns per milk buffalo than non-members (Rs18,158 versus Rs13,582), implying a 112 percent marginal return on cash costs invested. A sensitivity analysis of these results suggests that increased market access for non-members would raise both their milk prices and fodder costs by 20 percent, reduce the difference in net returns between the two groups to only 21 percent, and reduce the marginal return on cash costs invested to about 93 percent. Source: Riaz (2005)

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3.6.5. New Institutions and Agricultural Diversification The case study of Idara-e-Kissan presented above illustrates the central importance of creating new institutional mechanism like cooperatives and vertically integrated enterprises that add value to farmer’s production and help generate profits at all stages in the processing and marketing chains. It further illustrates the need for attaching greater importance to agribusiness development and agricultural processing industries catering mainly the urban and export markets. It needs also to be pointed out that there are other institutional arrangements linking dairy farming and the establishment of processing industries in the private sector. Nestle, is a more important player than the Idara-e-Kissan in milk procurement, processing and distribution. The Punjab government needs to assess the strength and weaknesses of all the arrangements in the chain on a continuing basis. 3.6.6. Off-Season Vegetables (Tunnel) Farming - a Move toward Non-Traditional Products. Punjab has a varied set of agro-ecological conditions suited to growing a wide range of vegetables. Processing industries are currently in a rudimentary stage. There are often seasonal gluts when supply of fresh vegetables depresses the prices. If it is technically possible to schedule the production in off-season, the growers of vegetables can make larger profits. Tunnel farming allows the growing of vegetables at a time of choice by the vegetable growers. Off-season vegetables are grown during September through March in plastic tunnels to provide an enabling environment for growth through controlled temperature, moisture, and other climatic factors. The plastic tunnels help alter the maturing period of these vegetables so that they can be marketed when prices are high. Vegetables grown in these conditions include melons, tomatoes, peppers, cucumbers, bitter gourds, squash, eggplants, and watermelons. These are all high-value crops that show significant increases in yield and mature early. Ultra-violet light-inhibiting polythene film can be used as a covering material to further improve yield and maturing period. Table 3.9: Tunnel Farming: Yields Gap Between Tunnel Farmers and Traditional Vegetable Growers

Yield (tonnes /acre) Cucumber Tomato Sweet Pepper Median tunnel farmer 40 38 25 Median control group 7 22 6 Ratio tunnel : control 5.9 1.7 3.9

Table 3.10: Tunnel Farming: Fantastic Returns (median net returns Rs/acre)

Cucumber Tomato Sweet Pepper Median tunnel farmer 253,083 226,630 179,231 Median control group 42,339 41,843 10,562 Ratio tunnel :control 6.0 5.4 17.0

However, it needs to be noted that tunnel farming is highly capital and knowledge intensive. Imported hybrid seed, intensive use of fertilizer and skilled labour make the cost of growing vegetable high which limits this activity to a select group of large farmers who can afford the high capital cost. However, there are successful cases of government and private sector joint’s interventions that enable the growth of tunnel farming in a few selected clusters. Government would need to revamp the agricultural extension services to provide a targeted extension programme to these clusters. The provision of credit would also need to be ensured. There is a need to produce hybrid seeds and / or ensure its import. Even without the pro-active role of government, in Punjab, some progressive farmers are growing vegetables in tunnels and are making good profits. The Punjab government should learn from these success stories and assist in the further growth of vegetable farming in off-season under controlled conditions.


29

3.7. Conclusion Major crops account for almost half of output in the agriculture sector in Punjab, but livestock is fast catching up, with a contribution of about 40 percent to value added in the sector. Agricultural production is vulnerable to shocks, both weather related as well as due to pest infestations. In general, average yields remain below potential – a problem that has been exacerbated by relatively low investment in the sector in recent years. Several factors are responsible for the low productivity and efficiency of the agriculture sector in Punjab. These factors were covered in detail in the background study on Agriculture prepared by the World Bank for the previous Punjab Economic Report. That study30 presented a five points agenda to reverse the source of growth from input intensity to productivity and efficiency. This agenda is long term and continues to be as relevant today as it was three years ago when that study was conducted. These points are summarized below: First, the agricultural sector needs to respond to rapidly changing domestic markets with urbanization and more affluent consumers to expand exports into high value and value added products. The Government of Punjab is taking steps in this regard. With current self-sufficiency in wheat and sugar, the Govt. of Punjab is shifting its growth strategy to fruits and vegetables, value-added products, and livestock products, and promoting an export orientation for these products. To regulate output quality, steps are being taken to establish pesticide residue testing laboratories through out the province. Second, with ever more limited prospects for expanding land area and water supplies, growth strategies must increasingly rely on improved management and knowledge to improve resource productivity of existing inputs. To achieve this goal, technological progress and institutional reform is central to better system-wide and location-specific management of resources. Enhanced efficiency is also essential for improving Pakistan’s competitive position in world markets as it adjusts to WTO rules. Third, declining labor productivity in the agriculture sector needs to be halted immediately before skilled labor, investors, and interested stakeholders loose their interest in the sector. For this purpose, enhancing and sustaining the labor-intensive non-farm sector growth, encouraging labor intensive rather than labor saving technologies in agriculture, and investing on skill training and family planning are the keys. These need commitments at the highest government level, and collaboration between various ministries, NGOs, and the private sector. Fourth, sustainable agricultural growth depends on improved management of land and water resources to reduce natural resource degradation. This will require political commitment at the highest level, to mount a concerted effort across a wide range of government departments, as well as close coordination with federal agencies, and local governments, on a priority basis. Fifth, for specific commodities, these challenges suggest that Punjab should: 1. Continue to ensure a moderate growth in wheat production, but recognizing that under current

yields and world prices, it does not have a comparative advantage in wheat exports; 2. Improve competitiveness of rice and cotton, given aggressive efforts by other countries in

these markets, especially India in Basmati rice, and most major producers in cotton that have sharply reduced their production costs by adopting Bt cotton;

3. Judiciously seek opportunities in import substitution, especially oilseeds for more sustainable cropping systems, but only where they have a clear competitive advantage. Current high prices for oilseeds in world markets fueled by rapid growth in demand for livestock feed in Asia, provide a more favorable opportunity for import substitution;

30 World Bank (2004) Accelerating Agricultural Growth in the Punjab: Priorities for Public Policy by D.

Byerlee and M. Ali Unpublished Background Note for the Punjab Economic Report 2005

Agriculture

30

4. Diversify production toward higher value horticultural and livestock products to meet rapidly expanding domestic demand and generate employment,

5. Aggressively exploit Punjab’s excellent resource base and geographic advantage to tap into the rapidly expanding markets for high value products in Asia and the Middle East, as well as in high-income countries, and

6. Encourage the agricultural processing industries, especially in fruits and vegetables, in rural areas and improve the links between agricultural processing zones and production areas.

For Agriculture and its Allied sectors the improvement of research and extension services as a means of promoting long term growth in the sector remains critical. The livestock sector, in particular, has recently witnessed some innovative interventions on the part of the private sector, which have had a significant impact. The need for private sector involvement in research, and the restructuring of extension services at the local level are also crucial.

31

4. Rural Development By definition, rural development is a comprehensive and multidimensional concept that encompasses the development of agriculture and allied activities, village and cottage industries and crafts, socio-economic infrastructure, community services and facilities, and above all, rural human resources. The term also connotes the overall development of rural areas with a view to bettering the quality of life for rural people. As a phenomenon, rural development is the result of relations between various physical, technological, economic, socio-cultural, and institutional factors. As a strategy, it is intended to improve the economic and social well being of the rural population and, in particular, the specific group of the rural poor. It is multidisciplinary in character, and represents a connection of agricultural, social, behavioral, engineering, and management sciences. For a rapidly developing province such as Punjab, rural development encompasses strategies to (i) improve the rural infrastructure, (ii) provide social amenities to rural people, and (iii) enlarge opportunities for productive work in rural areas to meaningfully integrate rural development in the province with the national socio-economic development effort. This chapter looks at sources of livelihood in rural Punjab, and assesses the state of public services in rural areas, and ends by discussing the rural development strategy practiced in the province. 4.1. Sources of Livelihood in Rural Punjab31 The agricultural sector is the major source of employment in the rural areas. However, land fragmentation has increased over time and unfavorable person-land ratios have limited income-earning opportunities in agriculture. According to the Agriculture Census (2000), only one third of households in Punjab own and operate some land; 4 percent are tenant households; 18 percent are livestock holders; and 46 percent are non-agricultural households. The incidence of poverty is overwhelmingly high in rural areas: 39 percent of Pakistan’s rural people and 44 percent of Punjab’s rural population live below the poverty line. Therefore, in addition to agriculture, the growth of the non-farm sector is crucial for the uplift of rural areas. Non-agricultural labor is an important source of income not only for non-agricultural households but also for livestock holders. Nearly 24 percent of agricultural households derive income from non-agricultural labor and 18 percent from services. For non-agricultural households, income from services and business are important sources in addition to non-agricultural labor. The recent literature on poverty and type of activity finds that non farm incomes now account for nearly 50 percent of total rural household incomes. The majority of farm households also rely on non-farm sources of income. These studies also find that for households that are totally reliant on non-farm income there is a higher incidence of poverty compared to farm households.32 Malik (2005) indicates that 20.13 percent of the total numbers of rural poor of Pakistan are located in the cotton/wheat zone of Punjab. This region has the highest proportion of poor relative to its share of population in Punjab. Relatively low poverty in the barani areas of northern Punjab is attributed first to the socio-economic characteristics of barani areas, including the lowest dependency ratio, highest levels of literacy (particularly female literacy), and lowest number of unpaid family workers. Second, the rural areas in this region are well integrated with the prosperous urban centers that have strong linkages to the services sector—only 28 percent of the employed are involved in agricultural activities. Third, the region’s labor force works on a large scale in both the armed forces and Government sector. Due to the high incidence of domestic and overseas migration, remittances form a significantly higher proportion of total household income in barani Punjab. However, looking across

31 The Local Government Ordinance 2001 which forms the basis of the devolution process does away with

the distinction between urban and rural 32 See, for example, Qureshi and Arif (1999), Arif and Ahmed (2001), and Malik (2005).

Rural Development

32

farm and non-farm households, this study found a higher and increasing incidence of poverty among non-farm households in all agro-climatic zones including barani Punjab. The importance of the non farm sector in mitigating poverty highlights the importance of focusing on the entire rural sector and its development not only for the provision of private incomes but also from a public incomes point of view – since both types of incomes are crucial for poverty alleviation. 4.2. Key Policy Options In order to maximize the gains from rural development, the Government of Punjab is in the process of launching region-specific policies. Some of these policy options are discussed below. Strengthening marketing institutions. There is need to strengthen local and provincial marketing institutions to be able to collect, analyze, forecast, and disseminate reliable data on prices and potential demand for agricultural commodities. Beneficiary targeting. Rural development initiatives will target specific groups of beneficiaries, and integrate group and area-specific projects with sectoral programs wherever possible. Community organization. The Government will seek the help and cooperation of reputable local NGOs to help the rural poor organize themselves around some viable economic activity, and within an institutional framework that gives access to modern technology, institutional credit, resources, markets, professional management, and political systems. Infrastructure and services. The Government will prioritize the provision of necessary infrastructure and services, including financial and insurance services, to rural areas. The extent of group insurance schemes will be broadened to protect rural households against unavoidable risks and uncertainties. 4.3. Provision of Public Goods The provision of basic needs in rural areas is very much the mandate of provincial and local governments. The following sections look at the state of essential public infrastructure in rural Punjab. 4.3.1. Rural Electrification Rural electrification is one of the hallmarks of rural development. In Punjab, 67,020 villages and abadies or settlements have been electrified so far, and the number of electrified villages has grown by 11 percent per year from FY 1996 to FY 2006. The pace of rural electrification has been particularly rapid in the last three years. Data obtained from the Water and Power Development Authority (WAPDA) for this report indicates that there are a total of 71,814 villages and abadies in Punjab, which would indicate that about 91 percent of villages and abadies in the province have electricity.33 The rural electrification program is proceeding at an aggressive pace. The program envisaged electrification of almost 5,000 villages and abadies between January and June 2007 alone. This will facilitate the establishment of agro-based and cottage industries and upgrade the living standards of the rural population.. 4.3.2. Public Utilities There are inadequate data on the availability of various public utilities in rural areas. The HIES, therefore, remains a major source of such information. Data from the HIES for 2001/02 indicate that most villages in Punjab are connected with motorable roads. However, only about 51 percent of rural dwellings are pucca (solid or permanent construction), and 53 percent of villages have open drains

33 Data received from the Office of the Chief Engineer, Power, WAPDA.


33

(41 percent of the villages have no system of drainage). Solid waste disposal systems do not exist in Punjab’s rural areas. The HIES data further indicate that 17 percent of villages have banks, 41 percent have post offices, 27 percent have fertilizer depots, 51 percent have a telephone facility, and 6 percent have a main market or mandi within the village. Government primary schools for boys and girls exist in 81 and 75 percent of Punjab’s villages, respectively; while high schools for boys are found in 21 percent of villages, and for girls in only 8 percent. Private schooling, particularly for boys, is widespread, and private high schools for boys co-exist with Government high schools in most villages. Access to health facilities poses a larger problem, however. Only 3 percent of villages have easy access to Government hospitals and 11 percent have Government dispensaries within the village.34 4.3.3. Farm-to-Market Roads Pakistan has a total road network of 258,000 km, of which about 60 percent is paved. This network has grown at about 4.2 percent annually over the past decade. The National Highway Authority under the federal ministry of communications is responsible for the approximately 9,250 km-long national highway and motorway system (3.6 percent of the total road network), which carries 75 to 80 percent of Pakistan’s total commercial traffic. Provincial highway departments are responsible for around 101,000 km of provincial road. The remaining network comprises district roads (94,000 km) and municipal and cantonment roads (54,000 km). The network of farm-to-market roads plays an important role in linking rural areas to urban centers. The network of farm-to-market roads has increased from 19,954 km in FY 1996 to 36,138 km in FY 2005. A more rapid pace of development was recorded after FY 2002 (9.5 percent per year). The length of the sugar access road has also increased from 2,242 km in FY 1996 to 3,188 km in FY 2005. 4.4. Determinants and Drivers of Rural Poverty Reduction The Asian Development Bank (ADB) financed a major study in 2005 to identify the principle determinants and drivers of poverty reduction in Pakistan.35 The analysis of household well-being reported in this study has suggested fresh perspectives on poverty and change in rural Pakistan. These findings and lessons are relevant to rural development and poverty reduction efforts in Punjab and are, therefore, summarized below. Gazdar (2007) finds that land ownership remains a strong predictor of well-being and poverty, but that its effect varies greatly between villages. This variation is due partly to agro-economic conditions, but also “possibly, due to differences in institutional arrangements for access to land.” Education is found to be another important correlate of household well being, as are employment opportunities in the formal sector. The potential economic benefits of education and formal sector employment appear to be conditioned, however, by region and kinship group. Kinship group identity is also an important determinant of relative well-being. There is much diversity across communities in the way in which inter-group dynamics operate, and there are ways of identifying relatively mobile and stagnant groups. Interestingly, Gazdar also finds that the observed casualization of labor and apparent rise in non-agricultural employment might simply represent the transfer of underemployment or low-wage employment into a different heading. The study also finds that markets act as channels of economic opportunity in rural areas in general and for the poor in particular. The two markets that the study focuses on—labor markets and markets for land sales and tenancy—were found to be important components of the livelihood strategies of the poor.

34 The Government’s policy is to provide a basic health unit (BHU) in each union council, where a union

council normally consists of about 10 villages. 35 Cited with the permission of the Asian Development Bank. This section is based on the executive

summary in Gazdar, H. 2007. Rural Economy and Livelihoods in Pakistan. Paper for ADB TA4319-PAK: Determinants and Drivers of Poverty Reduction and ADB’s Contribution in Rural Pakistan, Collective for Social Science Research, Karachi.

Rural Development

34

The study also finds that the Government has been an important driver of pro-poor change. Government policies and programs on land redistribution, tenancy rights, and homestead land have often been criticized for not having reached the poor. While this criticism might be true (although the study was not aimed at verifying it), it misses a crucial feature of these past policy campaigns. Many of the local struggles of the poor documented in the fieldwork villages had rallied around these Government initiatives and announcements. These local struggles had been active, and in some cases remained active, in virtually all parts of the country. The point of reference for the poor was often some clause in a law or policy that allowed them to argue and mobilize for greater local leverage. 4.5 Pakistan’s Rural Development Strategy The Government of Pakistan approved its rural development strategy in May 2006; the strategy also applies to Punjab. The generally accepted objectives of rural development according to the strategy are: • improving the quality of life of rural people, • effective and appropriate land use, • provision of adequate physical and social infrastructure, • environmental sustainability, • provision of social services such as health, education, sanitation, and security, • improved governance and efficient delivery system for services. • rapidly developing indigenous resources of energy with proper emphasis on conservation and

efficiency in energy use, • creating an enabling atmosphere that encourages development and economic growth, • augmenting the wage incomes of the poor through specifically designed programs, • reducing the widening rural-urban disparity in income levels, • involving weaker sections and backward areas in the process of growth, • creating effective social, economic, and Governmental institutions, • creating an institutional framework to ensure community participation in the implementation

of rural development programs, and • upgrading human skills and providing satisfactory employment opportunities. The strategy builds on Pakistan’s long history of public works programs, which introduced a number of major programs for rural development. The Tameer-e-Pakistan Program, the Construction of Farm to Market Roads/Rural Access Roads program, and the Rural Support Programs (RSPs) are some notable Rural Development Programs that are currently underway. The main features of the Tameer-e-Pakistan Program are the provision of rural roads, rural electrification, provision of gas and Public Call Offices (PCOs), sanitation and education facilities, and access to land development facilities. The Construction of Farm to Market Roads/Rural Access Roads program aims to open up Punjab’s rural areas to farmers all over the country through all-weather roads, allowing them to bring their agricultural produce to the markets in time. The socio-economic impact of this program has been to increase the mobility and awareness of rural people. Rural industrialization is underway in areas where these roads have been constructed. The construction of petrol pumps, grain markets, rice mills, flour mills, shopping centers, commercial buildings, and hotels is already underway. Land value has increased, in some cases; by up to tenfold in some areas. The Rural Support Programs (RSPs) represent the emergence of the participatory concept of development in Pakistan. NGOs and Community Based Organizations (CBOs) have traditionally been at the forefront of participatory processes and, over the years, have been supported by a myriad of national and international organizations. The Punjab Rural Support Program, for instance, has made significant progress in terms of poverty alleviation and social and economic empowerment in rural Punjab through community participation.


35

4.6 Developing Less Developed Areas The less developed areas of Punjab lie in the barani regions of Potohar in the north, and Cholistan and Dera Ghazi Khan in the south. Inadequate rainfall means that there is an acute shortage of water in some areas. The barani tracts comprise 18.6 million hectares of land in Punjab, but individual landholdings are small and agricultural techniques primitive. Accordingly, the Government of Punjab has started special programs for these less developed areas. The objective is to reduce regional disparities and alleviate poverty in these areas by creating income-generating employment, improving regional infrastructure, and providing financial support for skills development through participatory organizations. These new initiatives include the following. Drought management efforts. To cope with drought conditions in Cholistan, eight turbines have been installed to improve the water supply, 243 km of road completed, and electricity provided to 37 villages in the area. Barani Village Development Project. This Rs. 1,836 million project focuses on (i) boosting agriculture and livestock production, and the incomes of the poor; (ii) establishing and strengthening community organizations for provision of technical and social services to target groups; and (iii) increasing opportunities for on-farm as well as off-farm employment. The project has established several community organizations, community development funds (worth Rs. 165 million), and a revolving credit fund (worth Rs. 124.2 million), It has also constructed 240 mini-dams and conveyance systems, 300 ponds and conveyance systems, 100 lift irrigation schemes, 1,800 dug wells and conveyance systems, and 50 tube wells and conveyance systems. In addition to imparting agricultural training to 14,449 males and 5,497 females, the project has provided livestock training to 2,306 persons. It has also provided 130,000 doses of spray in addition to 60,000 urea molasses blocks. Sustainable Livelihoods in Barani Areas Project (SLBAP). This Rs3,516 million project to be implemented from FY 2006 to FY 2011, aims to (i) reduce poverty and improve the socio-economic condition of the poor through interventions identified by UC and civil society members, (ii) provide vocational training, especially to unemployed women, (iii) strengthen the UCs and civil society organizations, and (iv) provide support to beneficiaries for prioritizing demand-driven interventions. Project targets include the construction of 1,120 km of road, electrification of 60 villages, water conveyances systems on 550 acres, 55 water supply schemes, and erosion control over 1,100 acres. The targeted poverty alleviation component involves small group-based interventions that include the planned construction of 55 mini-dams, 110 ponds, 55 turbines, 250 lift pumps, and 220 dug wells, in addition to conducting 55 directed agriculture research experiments and training 550 persons in off-farm income generation activities. Box 4.1: Helping People Help Themselves: SLBAP

In mid-2005, an innovative six-year intervention was launched in ten districts of barani Punjab, including some of the province’s poorest areas. The project was launched by the Agency for Barani Areas Development to address widespread chronic poverty in areas not already covered by other barani projects. SLBAP utilizes a Rs. 2460 million loan (70 percent of the project value) from ADB with the remaining (30 percent of the project value) being shared equally by the Government and beneficiaries. Special features of the SLBAP include: • a sustainable livelihoods framework whereby beneficiaries are helped to help themselves; • a process approach whereby partnerships of community organizations, Government, NGOs, and the

private sector work together to stimulate and respond to beneficiary-defined needs; • improving governance by demonstrating and supporting a more transparent and democratic

development process within the devolved local Government administration; • environmental and social assessment of all interventions; • encouraging gender sensitivity among beneficiaries and all partner agencies; • beneficiary contributions to all investments, directly benefiting their livelihoods (around 20

percent); and • competitive planning based on the quality of proposals and spread of benefits.

Rural Development

36

The sustainable livelihoods framework is a conceptual model that no longer approaches poverty as a “problem to be fixed,” but instead looks through the eyes of the poor to assess what they can achieve with the assets, capabilities, and opportunities they have. The capital assets they have access to (natural, physical, human, financial, and social) form their livelihood platform, which is affected by negative shocks and trends. These factors can be modified by external structures and processes in both positive and negative ways. The framework considers the diverse livelihood strategies devised by the poor, their outcomes, and how these might alter their capital assets. The inherent model is positive. It starts from where the poor are and works with their priorities. Complexity is not ignored but used analytically. The framework also incorporates the ways in which micro-initiatives connect with meso-structures, processes, and macro-policies. The components of the SLBAP reflect these innovative concepts of the “process approach” to development and include: • social mobilization and community group development around micro credit facilitated by the RSPs, • small-scale poverty alleviation investments by community groups, • functional literacy for women around their priorities for skills training, • medium-scale infrastructure projects identified by beneficiaries as essential to their progress, • support to UCs to facilitate project cycle management for medium-scale investments, • material and planning support to district line agencies involved in medium-scale projects, • demand-initiated agricultural research and seed multiplication, and • off-farm income generation linked to the private sector. SLBAP has made a sound start, spending Rs. 100 million in setting up institutional arrangements, recruitment, and procurement. Its partners have been briefed on the relevant concepts and opportunities. Social mobilization, village profiling, poverty assessments, and group formation are underway, and nine medium-scale investment proposals in five pilot areas have already been put forward by the community groups. These include: • the establishment of a surgical instruments training centre in village Gillanwala, UC Chaubara,

tehsil Pasrur, district Sialkot; • a social forestry project in village Nathwala, UC Sanghoi, district Jhelum; • community Government farming at village Saloi, UC Lehr Sultanpur, tehsil Choa Saidan Shah,

district Chakwal; and • protection of agricultural lands from nala bhimber (channel erosion) at UC Langrial, tehsil Kharian,

district Gujrat. Source: Agency for Barani Areas Development.

Bahawalpur Rural Development Project. This project aims to reduce poverty by (i) improving household incomes, (ii) improving rural infrastructure services, (iii) promoting value-added production activities, (iv) improving marketing services, and (v) strengthening institutions. Project outputs include the improvement of 680 watercourses, 561 small-scale infrastructure schemes, 399 rural electrification schemes, and 505 km of rural roads. Dera Ghazi Khan Rural Development Project. The objectives of the project are to (i) raise rural incomes and employment levels, thus enhancing people’s quality of life, (ii) improve infrastructure services, and (iii) expand production and improve marketing through provision of financial services. Project outputs include the implementation of community development subprojects; provision of 50,000 loans; a channel improvement work; provision of 76 tube wells; further provision of turbines, tube wells, and perennial channels at 50 locations; and construction of 149.5 km of road. 4.7 Conclusion While agriculture remains the main source of livelihood in rural areas, but almost a quarter of rural households rely increasingly on non-agricultural labor as well as employment services and business as a key source of income. The state of rural infrastructure in Punjab compares well with the average in Pakistan, but rural areas remain deprived of a range of services and often have to contend with poor quality when the service (for example, electricity) is provided. Given the complexity of rural development issues the Government has, therefore, initiated a number of integrated projects for rural development.

37

5. Industry Punjab has made a significant contribution to industrial development in Pakistan, accounting for almost 60 percent of industrial value added in the country. This chapter looks at the structure of the sector, and discusses some of the major challenges to its growth. 5.1. The Industry Sector in Punjab The industrial sector comprises mining and quarrying, manufacturing, construction, electricity and gas distribution, and water supply. The manufacturing sector in turn comprises the large- and small-scale manufacturing sub sectors, and the slaughtering industry. Overall industrial growth is driven mainly by the large-scale manufacturing sector, which constitutes 55.03 percent of value added in the industrial sector, with small scale manufacturing adding on a further 20.52, percent as shown in Figure 5.1. The industrial sector’s share in GPP was 25.7 percent in FY 2007, compared to roughly 17 percent in FY 2000. The large and small scale manufacturing sub sectors accounted for 14.14 and 5.27 percent of provincial GPP respectively in FY 2007. In terms of contribution to the national economy, Punjab’s manufacturing sector contributes 15.04 percent of national GDP: large-scale manufacturing accounts for 8.28 percent, small-scale for 3.09 percent, and the slaughtering industry 0.83 percent of national GDP. Figure 5.1: Composition of Industrial Sector of Punjab, FY 2007

2.73%

55.03%20.52%

5.53%9.80% 6.39%

Mining & Quarrying

Large-ScaleManufacturing

Small-ScaleManufacturing

Slaughtering

Construction

Electricity,GasDistribution andWater Supply


According to estimates prepared by the BOS, Punjab’s industrial sector grew at an average rate of 10.05 percent per annum between FY 2004 and FY 2007, led mainly by average annual growth rates of over 14 percent in large-scale manufacturing, and over 7 percent in construction. 5.2 Estimates of the Number of Manufacturing Units in Punjab Industrial sector surveys have not been conducted regularly in Pakistan in the last decade or so, and paucity of data on industrial establishments is a major issue. This is particularly true for small and household level establishments, which operate as informal sector units and do not maintain

Industry

38

documentation for the most part.36 According to the most recent Survey of Small and Household Manufacturing Industries (SHMI) conducted by the Federal Bureau of Statistics (FBS) in 1997, there were approximately 427,784 manufacturing units in the country, of which 70 percent were located in Punjab. Thus in 1997, there were approximately 299,448 or almost 300,000 small-scale manufacturing units in the province. National and Punjab Government data gives the average growth rate of the small-scale industry sector as 7.98 percent over the last four years. If this growth rate is applied to the 1997 data, we can get a rough estimate of the number of small-scale manufacturing establishments in Punjab, which works out to about 645,000. We must caution that this estimate is not entirely robust given the lack of survey data on small-scale manufacturing, and the consequent inability to calculate reliable inter-censal growth rates for the sector. Data on registered (primarily large-scale) establishments is a little easier to come by, but still does not provide a comprehensive picture. The Census of Manufacturing Industries (CMI) also conducted by the FBS, which collects data on registered firms, covered 2,357 units in Punjab in its last survey conducted in FY 2001.37 Most large-scale industries in Punjab (an estimated 42 percent) are related to the textile sector, followed by food (18 percent), and machinery and equipment (12 percent). The food and textile industries together contribute 63 percent of the industrial value-added in Punjab. The chemical industry is also a significant component, while the share of leather, paper, sports goods, and machinery is growing but remains low (Figure 5.2). More recent data from the BOS Punjab indicates that there were 6,521 registered factories in Punjab in 2004, of which, 86 percent employed less than 100 people. Most of these factories are related to textile, food, ginning, and non-metallic mineral products and are located in Kasur, Faisalabad, and Gujranwala. A survey conducted in FY 2005 by the Directorate of Industries, Punjab, covered 8,006 industrial units and revealed that these units provide employment to 841,446 people. Total investment in these industries is estimated at Rs. 735,641 million. This indicates that the average size of employment is 47 people per unit and average investment is Rs. 41 million. Nearly 79 percent of these units are related to engineering products, 36 percent to food and drink, 20 percent to tobacco, and 23 percent to textiles. The textiles sector appears to be the largest sector with the highest rate of labor absorption, employing 56 percent of the total industrial labor force. This survey finds that most of the province’s manufacturing units are located in Sialkot (17 percent), Gujranwala (17 percent), Lahore (15 percent), Faisalabad (9 percent), Kasur (4 percent), and Sheikhupura (4 percent).

36 The definition of small enterprises varies across data collection agencies in Pakistan. The Small and

Medium Enterprise Development Authority (SMEDA) defines SMEs as establishments having productive assets of less than Rs. 20 (for small) to 100 million (for medium), and/or having less than 35 (for small) or less than 100 employees (for medium). The Federal Bureau of Statistics defines small enterprises as those having less than 10 employees. The State Bank of Pakistan and the SME Bank have their own definitions based on productive capital.

37 According to the Factories Act 1934, all establishments employing 10 or more people are required to register.


39

Figure 5.2: Share of Value-Added of Major Industrial Groups in Punjab, FY 2001

Leather & Leather Products

1%

Sports & Athletic Goods1%

Paper & Paper Products 3%

Drugs & Pharmaceutical Products

2%

Machinary 5%

Others12%

Industrial and other chemicals

13% Food Beverages,

Tobacco24%

Textile and apparel 39%

Source: Census of Manufacturing Industries (2000/01).

Another census published in 2005, the Economic Census of the Federal Bureau of Statistics which covered manufacturing enterprises in addition to service establishments also estimates the number of economic establishments in Punjab. According to the Census, there were a total of 399,219 manufacturing enterprises in Punjab in 2005. The Census, however, does not give information on production and value added. 5.3 Employment and Manufacturing Output On the basis of published data on production and number of employed persons, the BOS (2005) has calculated output elasticity with respect to employment for the manufacture of cotton yarn, sugar, fertilizer, cement, and paper and paperboard. These elasticities indicate that, in all these industries (except cement and paper and paperboard), a 1 percent increase in employment leads to a more than 1 percent increase in output. In the case of cement, the value of this elasticity is less than 1, while it is negative in the case of paper and paperboard. In both cases, a 1 percent increase in employment leads to a less than 1 percent increase in output; in fact, in the case of paper and paper board, output falls. The employment elasticities in these industries have remained low over the 15-year period from FY 1992 to FY 2005 and are lowest in the case of fertilizers and cement. One reason for this is the high capital intensities of production associated with these industries. However, the elasticities have shown some recent improvement: employment elasticities calculated for the period 2001–05 show some encouraging trends in the direction of greater labor productivity. These apply to all industries except paper and paperboard, which shows negative employment elasticity (Table 5.1). Table 5.1: Share of Punjab in Production of Selected Manufactured Items in Pakistan

Industry Share of Punjab’s Production in

Pakistan (FY 2005)

Output Elasticity (1992–2005 )

Output Elasticity (2001–2005)

Employment Elasticity

(1992–2005)

Employment Elasticity

(2001–2005) Cotton yarn 69.2 1.05 1.23 0.79 0.76 Sugar 76.8 1.63 2.77 0.12 0.17 Fertilizer 70.0 1.21 2.17 0.08 0.45 Cement 44.3 0.64 0.94 0.09 0.53 Paper and paperboard

96.3 1.39 -5.73 0.53 -0.10

Source: Calculated from Bureau of Statistics, Punjab (2005).

Industry

40

5.4 Key Issues in Industrial Development The above sections set out the structure of Punjab’s industrial sector and highlight how the sector has come to assume an increasingly important role in the provincial economy, with significant increases in the shares of large-scale and small-scale manufacturing in the provincial GPP. This section discusses the key issues in the industrial sector. 5.4.1 Role of Small and Medium Enterprises (SMEs) The SME sector has great potential for generating both male and female employment as well as export earnings, which in turn has implications for poverty reduction. National level data from successive Economic Surveys suggests that the SME sector generates 25 percent of manufacturing sector export earnings and provides 99 percent of non-agricultural jobs. As such, it has a crucial role in the economy. Box 5.1 presents the case of the Handloom Industry, which has significant export potential but has been shrinking in size over time. Box 5.1: The Handloom Industry: an Export-Potential Industry Being Phased Out

Pakistan’s traditional handloom industry produces cloth, bed and table linen, khes, cushion covers, towels, and rugs and carpets. This variety indicates that the industry has great potential as an important export base for Pakistan. Handloom activity requires very little space, is often located in or around a house, and requires little capital investment. The average required investment per unit was only Rs. 2,009 in FY 1997 and the running cost per unit, Rs. 3,238. This gave a return of Rs. 18,537 to household units. Non-industrial costs include only travel and storage expenses; there are no expenses incurred on insurance, copyrights, or printing and stationary. According to the SHMI (FY 1997), nearly 99 percent of the country’s handloom units are located in Punjab. The results of an initial primary study conducted recently by the Punjab Small Industries Corporation (PSIC), the Small and Medium Enterprise Development Authority (SMEDA), and United Nations Industrial Development Organization (UNIDO) indicate that the handloom industry has great potential for absorbing labor with little investment. However, its neglect has meant that this technology is being phased out in Pakistan. People involved in the activity are unfamiliar with market opportunities. The absence of quality control means that these products are not competitive in the export market. The exports of cotton and handloom products from Pakistan are worth only $14 million, while Indian handloom products—which are growing rapidly—have an export value of $439 million. The US and European Union are major importers of these products. PSIC, SMEDA, and UNIDO (2005) indicate that the number of handloom units in Pakistan are declining at an alarming rate. In 1947, there were 250,000 units. These had declined to 50,000 in 1998 and further down to 30,000 in 2005. A large number of landless and non-farm households are involved in this industry. With the proper advice, technical and financial support, quality control, and proper marketing, it has great potential for increasing employment and livelihoods for many poor households. Despite this, the sector has continued to shrink. Power looms are the main threat to the growth of handlooms. Low levels of education, lack of awareness of market demand, and lack of know-how in the production of high-quality products are also significant factors that explain the decline of Pakistan’s handloom industry.

Key impediments to SME development include their inability to meet legal compliance standards and collateral requirements that would give them greater access to formal financial institutions; law and order and security issues that significantly affect SME operations; and human resource and technology constraints. In general, for small enterprises the cost of doing business is disproportionately high. The Government of Punjab recognizes that it needs to move swiftly to address these constraints, both through public sector institutions, and by forging deeper links between government institutions servicing SMEs and non-governmental actors in this field. Box 5.2 gives an overview of the activities of the Punjab Small Industries Corporation, a key provincial government entity promoting SME development.


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Box 5.2: Punjab Small Industries Corporation (PSIC) PSIC was established in 1961, and is a major contributor to the development of small industries in the province. The Corporation works to promote small and cottage industries through market-driven industrial and credit support, contributing to employment generation and socio-economic uplift in the province. Major initiatives taken by PSIC include (i) investment promotion through credit provision; (ii) the development of small industrial estates; (iii) support to traditional craftsmen through design and marketing; and (iv) the establishment of service centers to promote improved production, technology transfer, training, and guidance. PSIC’s efforts in making expensive machinery available to SMEs for common use, training, and supply of credit have contributed to the development of clusters all over Punjab, including the surgical instruments and sports goods industry in Sialkot, light engineering in Gujranwala and Gujrat and cutlery in Wazirabad. The Corporation has employed a time tested approach based on multifaceted interaction with the client, and in fact does not operate very differently from newer and more informally structured organizations such as the Rural Support Programs (RSPs). PSIC is currently running two credit programs. The first, the Credit Scheme for Small Industries targets units with a fixed investment of up to Rs. 0.2 million. The second scheme, called the Credit Assistance to Craftsmen and Women targets enterprises with a fixed investment of up to Rs. 5 million, and includes many export-oriented enterprises. In addition, since 1989, PSIC has been establishing industrial estates for SMEs under a Self Finance Scheme which asks investors to deposit 50 percent of the estimated cost of a developed plot at the time that the application for the plot is submitted. According to the PFIS (2005) PSIC is operating 19 small industrial estates, and has developed over 6000 plots. While PSIC has distinct advantages in terms of the spread of its operations (the Corporation is active in almost all districts of the province) and in terms of the range of sectors it is involved in, it is time for it to take stock of its operations with a view to learning from past successes and failures. The possibility of PSIC entering into the provision of microfinance is also being considered. The Government of Punjab envisions an important role for a restructured PSIC in its goal to develop the SME sector. 5.4.2 Industrial Development and Environmental Degradation Industrial waste, if not treated properly, can cause serious environment and health hazards. In Pakistan, the major industries creating environmental hazards include chemicals (including pesticides), textiles, pharmaceuticals, cement, electrical and electronic equipment, glass and ceramics, pulp and paperboard, leather tanning, food processing, and petroleum refining. Despite it being one of the Millennium Development Goals (MDGs), Pakistan still lacks data on the source, volume, and characteristics of industrial pollution. A preliminary study of hazardous chemical industries conducted in 1985 for the Environment and Urban Affairs Division surveyed 100 plants scattered across the country. The study found that only three branches of multinational companies treated their waste up to commonly accepted standards. The remaining industries were found to dispose of their waste untreated. According to the Report on National Profile on Chemical Management in Pakistan for 1998/99, most of the waste produced by chemical industries is disposed of either in nearby drains or other outlets. The Government of Pakistan recently released the Compendium on Environment Statistics of Pakistan, 2004. For all practical purposes, industries do not manage their waste effluents through process controls, waste recycling, or end-of-pipe treatment. For example, various industries such as chemicals, tanneries, textiles, and steel re-rolling mills are located in the industrial area of Kala Shah Kaku near Lahore. The effluents produced by these industries contain hydrochloric acid and high levels of organic matter. In the absence of any treatment measures, all this waste goes directly into streams and canals where biological oxygen demand levels range between 193 and 833 mg per liter and mercury levels of 5.6 mg per liter have been measured. According to the Compendium, the proposed interim (and relaxed) Government standards for these indicators are 200 and 0.1, respectively. These discharges have rendered nullahs (drain or water course) unfit for irrigation use and livestock consumption, and caused an annual reduction in the fish catch of 400 tonnes, valued at Rs. 10 million. Table 5.2 shows that, out of 579 industries, only 8 treated their effluents. The amount of total effluent discharged was 4,318.5 cusecs in selected cities of Punjab: 9 percent from industries and the remainder from the municipalities.

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Table 5.2: District-Level Detail of Industrial and Municipal Discharge in Punjab District No. of

Industries Effluent from

Industries (Cusecs)

Effluent from Municipalities

(Cusecs)

Total Effluent (Cusecs)

Treated Untreated

Faisalabad 123 70.0 145 215 1 122 Lahore 151 120.0 3,126 3,246 2 149 Hafizabad 2 0.5 15 15.5 - 2 Gujranwala 55 37.0 63 100 - 55 Sialkot 39 24.7 3 27.7 - 39 Kasur 23 21.4 43 64.4 - 23 Sheikhupura 100 70.0 80 150 1 99 Mandi Bahauddin 11 7.1 30 37.1 - 11 Gujrat 4 1.0 39 40 - 4 Sargodha 26 8.5 71 78.5 - 26 Jhang 9 5.6 6.5 12.1 - 9 Khanewal 4 7.0 2.4 9.4 1 3 Multan 9 5.0 2,04.8 209.8 - 9 Lodhran 1 - - - - 1 Bahawalpur 4 nd 7 7.0 - 4 Bahawalnagar 2 nd nd nt - 2 Rahim Yar Khan 4 9.0 - 9.0 - 4 Dera Ghazi Khan 2 - 60 60 - 2 Muzaffargarh 7 25.0 8 33.0 3 4 Sahiwal 2 nd nd nd nd nd Toba Tek Singh 1 3.0 - 3.0 - 1 Total - 414.7 3,903.7 4,318.4 - -

Source: Government of Pakistan (2006). nd – Non disclosure nt – Not tested As Table 5.2 shows, industries in Punjab discharge high levels of solids, heavy metals, aromatic dyes, inorganic salts, and organic materials directly into municipal sewers without any pretreatment, thus polluting nearby agricultural land. The untreated industrial waste that is discharged directly into or onto the ground contaminates the shallow groundwater, especially in areas located near industrial plants. Groundwater pollution is often permanent: it can take hundreds or even thousands of years for pollutants such as toxic metals from tanneries to be flushed out of a contaminated aquifer. 5.4.3 Rising Cost of Energy38 Electricity, gas, petroleum, and coal are the industrial sector’s major sources of energy. According to the Energy Year Book, industry consumed 14,654,360 TOE in 2006, of which oil accounted for 11.6 percent, gas for 52.7 percent, electricity for 11 percent, and coal for 24.6 percent. The data show that coal consumption by the industrial sector has been declining progressively since 2003/04, while the consumption of gas and oil has been increasing. The year to year growth rates shown in Figure 5.3 below also indicate that electricity consumption has grown at a more or less constant rate of around 7 percent every year.

38 Data are not available for Punjab separately. However, since Punjab accounts of the major share of

Pakistan’s industrial output the national trends are a good proxy for trends within the Province.


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Figure 5.3: Energy Consumption by Industry in Pakistan

Source: Energy Year Book (2006). Among petroleum products, the industrial sector depends largely on furnace oil and high-speed diesel oil. Of the total consumption of petroleum products, furnace oil accounted for 74 percent and high-speed diesel oil for 24 percent, while the remainder was divided among kerosene, light diesel oil, motor spirit, and high-octane blending component. Pakistan’s total production of gas and its consumption is distributed among the following sectors: power generation (44 percent), general industries (18 percent), cement (1 percent), fertilizer (18 percent), commercial use (2 percent), and domestic use (15 percent). The price of gas has increased considerably—for example, gas for commercial purposes cost Rs. 186.98 per million British thermal units (MBTU) in March 2002, the price increasing to Rs. 298.03 per MBTU in July 2006. The price of gas for industrial use (excluding the cement industry) has increased from Rs. 166.18 per MBTU to Rs. 264.87 per MBTU during this period. The increase in gas price for the cement industry was even higher than for other sectors during this period, and has had an adverse effect on fertilizer and cement manufacturers. In addition, gas is the major input in thermal power generation—an increase in the price of gas could raise the price of electricity. Coal is used as a source of energy primarily by the brick-kiln industry, cement industry, steel industry, and in power generation. More than 80 percent of the coal used is consumed by the cement and brick-kiln industries (41 and 43 percent, respectively). Since FY 1999, the price of coal has increased by more than 10 percent. Industry consumes 13 percent of the electricity produced. Coal, oil, and gas are the major inputs to thermal power generation. The unit cost of power generation by using coal and oil is higher than when gas or furnace oil is used. Gas is the cheapest mode of electricity generation. An increase in the prices of any of these would increase the cost of production of electricity and result in higher electricity tariffs. The price of electricity for industry ranges between Rs4.29 per kilowatt-hour (kWh) to Rs. 6.01 per kWh during peak hours. In addition to the high cost of electricity, power losses can affect the industrial sector very badly. Pasha, Ghaus, and Malik (1990) found that load-shedding had caused the value-added of large-scale manufacturing units to fall by 2 percent compared with 14 percent for

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2001-02 2002-03 2003-04 2004-05 2005-06

Year

Gro

wth

Rat

e (%

)

Oil Gas Electricity Coal

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44

small units and 17 percent in the case of medium-sized units. Consequently, this had reduced their profitability by 9, 23, and 29 percent, respectively. The Government of Pakistan has taken various technical and administrative measures to improve operational and managerial efficiency to reduce power losses. During July–March 2005/06, power losses reduced from 24.2 to 22.8 percent. In FY 2005, about 43 percent of Pakistan’s installed capacity for power generation was in Punjab. Of this, 64 percent was thermal, 30 percent hydel, and 6 percent nuclear. Per capita electricity consumption in Punjab was 453 kWh against 418 kWh in Pakistan (Census of Electricity Establishments for 2004/05). Industry is the country’s second-largest consumer of energy, followed by domestic consumption in all the provinces. An increase in the price of one source of energy can affect the price of other sources, in turn adversely affecting the efficiency of industrial production. In addition to rising energy prices, the current structure of taxation raises the cost of investment and business. The results of the Investment Climate Survey that was conducted jointly by SMEDA and the World Bank in 2002 indicate that tax administration, tax rates, cost of financing, corruption, and electricity are the major constraints to operating a business in Pakistan. Of 965 surveyed firms, half disagreed that the interpretation of regulations was consistent and predictable. 5.4.4 General Issues The data show that the share of the manufacturing sector in Punjab’s GPP is increasing, albeit slowly. According to the official data, the share of small scale industries has remained stagnant. Productivity-enhancing linkages between large- and small scale manufacturing units are very weak. Manufacturing exports are concentrated mostly in textiles with minor diversification. There is no Pakistani industrial flagship in the world market. Joint ventures with foreign investors in manufactured exports are negligible. Private investment has fallen drastically since the 1980s. A large savings-investment gap and unfavorable business climate are key reasons for low investment. The business climate is constrained by various technocratic and regulatory hurdles, low human capital, and the poor provision and high cost of key public services. Box 5.3 gives an overview of the findings of the Investment Climate Survey of the manufacturing and exporting industries in Pakistan. Box 5.3: Investment Climate Survey of Manufacturing and Exporting Industries In Pakistan, the Investment Climate Survey of the formal sector was conducted jointly by SMEDA and the World Bank in 2002. The survey covered 965 formal sector firms in key manufacturing and exporting industries in 12 different locations drawn from all four provinces across Pakistan. Of these, 80 percent were non-exporters and 97 percent were owned domestically. The sales of these firms were mostly domestic (85 percent). This proportion is comparatively higher than that of neighboring countries like Bangladesh and India where domestic sales are 61 and 43 percent, respectively. Poor tax administration, tax rates, cost of financing, corruption, and electricity were found to be the major constraints to operating a business in Pakistan. Retained earnings are the main source of finance not only for working capital but also for starting new investment. Nearly half the surveyed firms felt that the interpretation of regulations was inconsistent and unpredictable. Almost 2 percent of sales revenue was paid in bribes to officials. The main constraints to investment for informal enterprises were access to finance and electricity, and the lack of skilled/educated workers. Corruption was a significantly less severe constraint for informal sector firms because their informal nature helped them avoid taxes and other regulations that tend to be associated with higher levels of corruption. The World Development Report (2005) pointed out that corruption and unreliable electricity supply are the two major constraints faced by firms in South Asian countries. These results are based on a survey of 3,900 registered and 1,000 micro- and informal firms. According to this report, bribes average almost 3 percent of total sales in Bangladesh. Losses from electricity outages average over 10 percent of sales in India and over 6.5 percent in Pakistan. In addition, insecure property rights are also identified as major concern. This report finds 40 percent lower productivity in firms that are located in poor investment climate states compared with those located in countries with sound investment climates. If the investment climate for firms in Dhaka matched that of Shanghai, Dhaka could reduce its productivity gap by 40 percent and wages could rise by 18 percent. For Calcutta, this effect is estimated to be even larger: 80 percent of the productivity gap could be reduced and wages could rise by 38 percent. Source: World Bank (2004) and (2005).


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With time, other “residual” factors such as law and order and political instability are intensified. Over-regulation is another factor, with nearly 60 separate Government regulations and laws being applied to the small and medium business sector in Pakistan. 5.5 Programs and Initiatives for the Industrial Sector As shown earlier, the manufacturing sector is becoming increasingly important for Punjab. The provincial Government’s Vision 2020 envisages promoting the development of clusters through public-private partnerships and by improving the business climate for firms. It aims to support the following clusters: • light engineering (in Lahore, Gujranwala, Gujrat, Wazirabad, Daska, and Sialkot); • leather (in Kasur and Sialkot); • textiles (in Faisalabad and Lahore); • cotton and ginning (in Multan and Rahim Yar Khan); • furniture (in Gujrat, Jhelum, and Rawalpindi); and • other city clusters. The department of industry has taken a number of initiatives to promote industrial development, including the liberalization of its location policy, establishment of export processing zones, and the establishment of an expo center in Lahore. The department has also organized a survey of industries and halted the excessive inspection of industrial units to facilitate business. The Government also established the Punjab Industrial Estates Development and Management Company (PIEDMC) as a public-private partnership to develop a chain of new industrial estates and to upgrade existing ones; working closely with the business community to ensure that their needs are identified and accounted for. Recent achievements include the inauguration of the Sundar Industrial Estate (SIE) in December 2006 (see Box 5.4) and the commencement of work on the Quaid-e-Azam and Multan Industrial Estates in early 2007. Box 5.4: Sundar Industrial Estate (SIE) The SIE, located about 40 km outside Lahore, was inaugurated by the president of Pakistan on 16 February 2007. The estate is the latest in a series of industrial estates being developed by the Punjab Industrial Estates Development and Management Company, a privately managed public sector enterprise that was established by the Government of Punjab to promote the planned and rapid industrialization of the province using innovative public-private partnership approaches. The SIE is spread over an area of about 1,600 acres and comprises 667 plots, all of which had been sold by August 2005. The SIE has been provided state-of-the-art infrastructure, including concrete roads, 22 water tanks, sewerage and storm water drainage facilities, underground electricity and gas infrastructure, and a wide range of telecommunication facilities. In addition, the SIE will have a vocational and training center, a hospital, sports complex, hotel, banks and shops, and commercial centers. A common effluent treatment plant will also be set up, which is expected to work according to the specification of the National Environmental Quality Standards (NEQS)—in fact, treated water from the facility will be used for tree plantation and agriculture. The SIE will also have a 225 MW combined cycle power plant to ensure uninterrupted electricity supplies. The initial reaction of businessmen who have started operations in the SIE is very positive, and the infrastructure facilities provided have been widely commended. As of August 2007, 657 plots had been sold and possession of 165 plots had been handed over to the owners; 77 factories were under construction while 24 had already gone into production. 5.6 Conclusion As in the case of agriculture, Punjab’s industrial sector makes a significant contribution to national GDP. Data on the number of industrial establishments in the province is sketchy, but the available data suggests a preponderance of SMEs in manufacturing, which are poorly documented and whose growth dynamics are not very well understood. Other key issues in industrial development include (i) the increasing environmental degradation associated with

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46

the manufacturing sector, (ii) the rising cost of energy, which has a significant impact on profitability, and (iii) the need to improve the overall business climate in the province.

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6. Urban Development Punjab is urbanizing faster than any other province in the country. This pace of urbanization has implications for overall poverty and economic development. Not only does this mean that more and more people now live and work in its cities, but also that the volume of travel and trade within urban Punjab has increased. More than one third of the Punjab’s population now lives in the urban areas39. How cities in the province meet this exploding demand for urban travel, housing and other social services has implications for the livability of these areas and for the overall growth and development of the Province. This chapter deals with issues relating to (i) the nature and pace of urbanization and the issues this raises, particularly the (ii) patterns of growth of urban transport and housing, and (iii) emerging issues such as the increasing number of slums, worsening air pollution, and inadequate provision of social services like water, sanitation, and solid waste collection and disposal40. A review of policy initiatives already taken by the Government of Punjab and key policy suggestions to address urban problems in service delivery being implemented or under discussion are also presented here. The level of urbanization in Punjab has increased from 17.4 percent in 1951 to an estimated 31.3 percent in 2006. Table 6.1: Size and Growth of Population in Punjab (Million)

Indicator 1951 1961 1972 1981 1998 2006* Total 20.540 25.464 37.607 47.292 73.621 87.462 Growth Rate 3.4 2.74 2.63 2.6 Urban 3.568 5.476 9.183 13.052 23.019 27.376 Growth Rate 5.34 6.76 4.21 3.32 Rural 16.973 19.988 28.425 34.241 50.602 60.086 Growth Rate 1.66 3.06 2.23 2.32

Sources: Population Organization, Provincial Census Report of Punjab; and Bureau of Statistics, Punjab. * Projected as on 31 December 2006. Note: Projections for urban and rural populations are based on the assumption that the urban population constituted 31.3 percent of the total population in 2006, as it did in 1998. Given the increasing rate of urbanization, this estimate is, therefore, likely to be under-estimated. Table 6.1 shows the pattern of population growth in Punjab over the last 50 years by rural and urban locality. In 2006, of a total population of about 87.5 million, urban Punjab had a population of 27.4 million. Table 6.2 presents data on the population distribution of Punjab’s five largest cities and remaining smaller cities. It is interesting to note that small cities account for more than 50 percent of the urban population.41 Trends in urbanization and the distribution of the urban population among large and small cities can be explained in terms of the economic forces that underpin the process of urbanization. The cost of living is higher in urban than in rural areas. Urban land prices are also far higher. A valid question is why people and businesses are attracted to the cities where costs are higher. The answer could simply be that these higher costs are more than offset by the economic benefits that cities offer enterprises and people.

39 The city of Lahore, is home to about 8 million people and the other four cities namely Faisalabad,

Rawalpindi, Multan and Gujranwala have populations in excess of one million. Around 47% of the urban population of Punjab lives in these 5 large cities

40 Issues connected with water, sanitation and sewerage are also discussed in Chapter 12 on Water in this report.

41 International experience indicates that large cities grow faster than small and medium cities in the early stage of development. However, the growth of large cities relative to the small cities slows down over time. Punjab seems to be following a similar path. Each of the big cities in Punjab is matched by many small cities which are also growing rapidly. This growth of small cities helps reduce the pressure on the larger cities.

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Table 6.2: Population Share of Large and Small Cities in Urban Punjab (percent) City 1981 1998 2004* 2005* Five large cities with populations larger than I million

Lahore 23.0 22.6 22.8 22.8 Faisalabad 9.5 8.7 8.7 8.7 Rawalpindi 6.1 6.1 6.2 6.2 Multan 5.6 5.2 5.2 5.3 Gujranwala 4.6 5.3 5.4 5.4 Total 48.8 47.9 48.3 48.4

Remaining small cities with populations smaller than I million Other small cities 51.2 52.1 51.7 51.6

Source: Population Census Organization, Government of Pakistan. * Estimated population. Small cities that do not offer sufficiently attractive economic prospects compared with big cities may nevertheless be growing due to migration from adjoining rural areas, where opportunities are even fewer. Better social services in terms of health and education in the cities also encourage people from rural areas to migrate. 6.1 Urban Livability and Location Characteristics Due to their rapid population growth, cities are often unable to provide a sufficient volume and quality of basic services to their residents. This section reviews the current situation of basic services provision in urban Punjab and outlines the policy response for better provision of services in the cities. 6.1.1 Housing Punjab currently has 10.6 million housing units with a backlog of 2.4 million. If the backlog is to be wiped out by 2020, Punjab needs to build 330,000 units annually on average.42 This is indeed a tall order. If the back log is not met then with current rates of population growth and migration, the demand-supply gap will widen, creating further social and economic problems in the entire province. The huge housing shortage is already apparent in the province. More and more kachhi abadis have surfaced to cater to the housing needs of the poorest. According to an estimate, about 50 percent of the urban population lives in kachhi abadis, slums, and other informal settlements.43 As a result of this overall housing shortage, Punjab’s major cities also face an acute housing shortfall and the situation deteriorates day by day. The poor in Punjab should not be relegated permanently to settlements near putrid nullahs, riverbeds, under railway and road bridges, and urban fringes without even rudimentary living facilities. The poor also need a living environment that is appropriately located and reasonably serviced by public and infrastructural facilities in accordance with their affordability. Household characteristics collected as part of the Population Census (1998) indicated that 28 percent of urban households in Punjab lived in one-room housing units. This proportion declined to 23 percent in FY 2005 according to the PSLM.44 The number of housing units with two to four rooms has increased during this period. The use of wood as a cooking fuel also shows a declining trend between FY 1998 and FY 2005. The decline in the use of gas/oil and other fuel for lighting has been compensated through the increased use of electricity (Table 6.3).

42 http://www.oneworld.net/external/?url=http://southasia.oneworld.net 43 National Housing Policy Pakistan 2001. p.1&25 44 Indicators analyzed in the two surveys are identical although sample design may differ. Both surveys are

representative at the province level. According to the statistical theory, comparison between the two surveys is a valid procedure. Some caution may, nevertheless, be exercised while comparing the results from two surveys.


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Table 6.3: Housing Units by Number of Rooms and Fuels Used in Urban Areas (percent) Characteristics 1998 2004/05 Housing unit consists of:

1 room 28 23 2 to 4 rooms 63 70 5 or more rooms 9 8

Cooking fuel used: Wood 37 34 Gas/oil 60 59 Other 3 7

Lighting fuel used: Electricity 93 97 Gas/oil 6 3 Other 1 0

Source: Housing Census (1998) and PSLM (2004/05). The MICS for 2003/04 used a number of household assets to identify living standards in terms of house structure and facilities. The results are given in Table 6.4. Table 6.4: Household Features by Area (percent)

Household Feature Punjab Major Cities Other Urban Pucca (permanent) construction 46 87 66 Electricity 83 99 97 Gas connection 19 84 36 Telephone connection 13 38 21 Cable television 5 22 8 At least one utility 83 99 98 Radio 13 13 15 Television 38 71 55 Computer 2 10 3 Mobile phone 4 14 4 Three possessions 56 88 75

Source: MICS for Punjab (2003/04). The MICS (2003/04) data for Punjab indicate that 46 percent of the homes had permanent construction and 83 percent had electricity. These percentages are much higher for the major cities where 87 percent of the homes have permanent construction and 99 percent were electrified. While the situation for electrification was almost similar between the major cities and other urban areas, the percentage of pucca (permanent construction) was significantly lower (66%) but still significantly higher than the provincial average which is pulled down significantly by the lack of pucca homes in the rural areas. Although 81 percent of households in Punjab own a house, a considerable proportion (almost 50 percent) does not have adequate toilet, sanitation, and kitchen facilities. However, a comparison of data from the 1998 Population Census and PSLM survey for 2004/05 reveals that provision of water and electricity has improved considerably. In addition, while tap water remains the main source of drinking water for most urban households, poorer households now depend on hand pumps. Improper drainage and poor systems of garbage collection indicate unhygienic living conditions in some urban localities. Rapid urbanization poses a massive housing challenge for the Government of Punjab. About 35 percent of the urban population lives in slums and another 11.5 percent in kachhi abadis. Due to the rapid rise in land prices, slum dwellers have no means of moving out to areas provided with better municipal services. Speculation in real estate has encouraged land grabbing and accelerated the increase in number of kachhi abadis. Key Issues in Housing Key housing issues in the province are summarized as follows.

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Congestion. The number of people per house in urban Punjab is gradually increasing due to natural growth and migration from rural areas and the low rate of increase in houses constructed. Lack of low-cost housing. The housing areas developed since independence, both by the private as well as public sector are highly skewed in favor of upper- and middle-income groups. The low-income housing schemes developed by various housing agencies are well beyond the affordability of low-income groups. The absence of planned efforts to meet the housing standards of the urban poor has resulted in the spontaneous formation of slums and kachhi abadis in different areas of the metropolises, including on prime urban land, vulnerable catchment areas of rivers and nullahs, and other unsafe areas. Non-availability of affordable land. Land suitable for housing is becoming scarce, particularly in and around urban centers. Land values continue to increase with unchecked speculation resulting in the virtual non-availability of affordable land, especially for low-income groups. Land is the principle input to housing, but is under constant pressure from competing uses by the public and private sectors. The situation is further worsened by the unchecked growth of settlements, spiraling land values, complicated land acquisition laws, and allotment of plots. Poor housing quality. Estimates suggest that more than 50 percent of Punjab’s houses are over 50 years old and are rapidly deteriorating due to general neglect and civic apathy on the part of their owners or residents. The quality of building materials also needs to be improved. The study on Urban Land and Housing Markets in Punjab45 in its assessment of key performance measures of the Punjab’s urban land housing markets – urban land supply, land prices, quality of the housing stock, access to urban services, construction costs, private sector participation in real estate development and levels of informality in the housing production sector – confirms that the province’s urban housing markets are not operating efficiently. This background study by the World Bank indicates a range of impediments to efficient urban land and housing market performance, namely, excessive public land ownership, inadequate infrastructure services, weak property rights, counterproductive urban planning policies and regulations, costly subdivision and construction regulations, limited financing for property development and acquisition, rent controls and distortive taxation mechanisms. This report offers a series of recommendations for improving urban land market performance. These are: 1. Building an urban information base and deepening understanding of urban land and property

market dynamics. 2. Strengthening property rights and improving efficiency of land titling and registration. 3. Reforming and restructuring systems of local property taxation to reduce distortions and to

strengthen resource mobilization. 4. Reforming urban planning, zoning, subdivision and construction regulations to encourage sound

economic development of cities and more affordable housing production. 5. Reforming rent control 6. Reducing levels of public land ownership through auctions and using proceeds to finance critical

infrastructure and engaging in a reform of public land development agencies. 7. Increasing investment in infrastructure systems and building institutional base for economically

and financially sustainable system of infrastructure delivery, operations and maintenance. 8. Encouraging more private sector participation in real estate development and the financing of real

estate. 9. Designing new institutional frameworks for managing urban development at the local, city and

metropolitan levels.

45 World Bank and Urban unit (2006) “Report on Urban Land and Housing Markets in the Punjab”, The

World Bank South Asia Region and The Urban Unit, P&D Department, Government of the Punjab, Lahore.


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The study calls for close coordination between the central, provincial and local levels of governments to address the looming challenges posed by rapid urban development. Governments at all levels, the study reiterates, “should focus on the establishment of an enabling environment through strengthening the legal framework, particularly, for property rights, modernizing its planning, zoning and construction regulations and approaches, withdrawal from direct interventions in the market and facilitating greater involvement of the private sector”. 6.1.2 Water Supply and Sanitation and Solid Waste Management According to the available data, 50.06 percent of the total population is served by piped water supply systems and 53.9 percent is covered by a sewerage system (Punjab Development Statistics 2005). There are five operating water and sanitation authorities (WASAs) in Punjab, namely the Lahore WASA, Gujranwala WASA, Faisalabad WASA, Multan WASA, and Rawalpindi WASA. Table 6.5 illustrates Punjab’s piped water supply and sewerage and drainage system for each of the WASAs in FY 2006. Although there are differences among cities, the general conclusion is that the provision of water supply and sanitation (WSS) services leaves much to be desired. Sewerage coverage in Rawalpindi, which is situated next to the federal capital and is one of the largest cities in Punjab, stands at an appalling 35 percent, while Gujranwala, another major urban centre, has a water supply and sewerage coverage of 28 and 60 percent, respectively.

Table 6.5: Water Supply and Sewerage Connections in Punjab’s Major Cities 2005/06

Indicators Faisalabad Gujranwala Lahore Multan Rawalpindi No. of Water Supply Connections 104,467 30,125 511,628 33,192 70,020 Water Supply Coverage (percent) 60 28 65 60 75 No. of Sewerage Connections 185,385 89,006 511,628 152,928 80,000 Sewerage Coverage (percent) 52 60 65 55 35

Source: City WASAs. The government of Punjab with support from the World Bank has recently completed its Urban Water Supply and Sewerage Reform Strategy46. The strategy aims to address the several weaknesses in the Water supply and sewerage (WSS) service provisions in Punjab. The strategy document notes that there are no formal standards for quality of service provision and significant variations from city to city in the existing quality which is generally of a poor standard as compared to international levels. In terms of water supply the strategy notes, in particular, that the reliability of service provision is poor, supply is on and intermittent basis and at variable pressure, making it inefficient and non-sustainable. The quality of the water is not known and no regular sampling and analysis is undertaken. Based on the intermittent supply and poor condition of the distribution network, the strategy assumes that the water currently supplied to customers is generally contaminated. In terms of sewerage service delivery, the strategy document notes the following weaknesses: • Poor planning and failure to keep up with the development of the cities or because of piecemeal

extensions. The result is that capacity is inadequate in many places and leading to overflowing on to the surface and thence drainage to low lying (ponded) areas with resultant contamination of near surface groundwater

• Poor maintenance of pumping stations again leading to overflows and ponding (only Rawalpindi’s sewerage system can function without pumping)

• Combined systems of sewerage and storm water, which can’t cope with heavy rainfall, which leads to surface flooding and ponding.

• Absence of any sewage treatment. Consequently, the wastewater systems are major health hazards.

46 Government of Punjab (2007) “Urban Water Supply and Sewerage Reforms Strategy Final Report”,

Fitchner, Germany.

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Solid Waste Management presents another important problem facing the urban areas of Punjab. The recently completed solid waste management study47 states that the problems related to solid waste and its management in Punjab are not merely an outcome of urban resource constraints. They arise from the lack of a comprehensive waste management system and strategy that should encompass functions of governance, institutions, finance and technology. These problems include: • Insufficient legal and regulatory establishment, • Lack of awareness among municipal residents regarding solid waste handling and treatment

due to short of experience of environmental policy and management, • Lack of comprehensive SWM administration and institutional arrangements, • Financial and technological difficulties to build and operate waste treatment facility and

equipment, • Manpower shortage (SWM experts and municipal collectors/scavengers), • Absence of private sector and community participations, • Lack of research in the solid waste sector, etc.

There are serious manpower shortages in the provision of solid waste collection/transport and cleaning services. This can be gleaned from the data in Table 6.6 below

Table 6.6: Manpower Status of Waste Collection/Transport and Cleaning

City Area (km) Population (million) No of Sanitary Workers

Population per Sanitary worker

Lahore 1,7772 8.00 10,745 744 Multan 495 2.20 1,6660 1,325 Gujranwala 368 1.50 1,274 1,177 Sialkot 276 1.25 1,124 1,112 Rawalpindi 175 1.00 990 1,010 Faisalabad 589 2.14 NA NA Sargodha 268 0.55 804 684 D.G. Khan 170 0.26 395 658 Bahawalpur 184 0.50 NA NA

Source: Improving Solid Waste Management in Punjab, Pakistan, Ernst Basler and Partner, 2006 as quoted in Urban Unit “Training o Integrated Solid Waste Management

A large proportion of the waste collected in large cities does not reach dumping sites. There is extensive dumping in open lands and water channels, and most dumping sites do not meet environmental standards, thus exacerbating land and water pollution. Improving solid waste services requires investing in machinery, vehicles, weighbridges, and transfer stations. It also requires better handling of hazardous and special waste. As a first step towards addressing this problem JICA and the Fukuoka University has recently provided the Urban Unit of the Government of Punjab with the design and operation of a sanitary landfill. In January 2007 the Urban Unit in collaboration with the World Bank, the Korean International Cooperation Agency (KOICA), solid waste management experts from the Korean Environment Institute (KEI) and the Sudokwon Landfill Site Management Corp (SLC) organized a training program on Integrated Solid Waste Management in Punjab. The training was organized to facilitate transfer of knowledge from Korean experts and presentation/participation of solid waste management officers in Punjab. Forty two participants from all over Punjab participated. Key Issues in Water Supply and Sanitation and Solid Waste Management Extend WSS and SWM services. A complete and comprehensive approach toward improved public health should promote the importance of the water supply-sanitation-hygiene link. Even where piped water from a treatment plant produces an acceptable quality of effluent, the water can still be contaminated if there is no proper water distribution system. Similarly, sewerage and solid waste 47 Korean International Cooperation Agency (KOICA)/World Bank (2007) “Joint Study on Solid Waste

Management in Punjab, Pakistan”


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management services have serious implications for public health and need to be extended and improved. Check contamination from industrial waste. Industries situated in urban areas often discharge toxic effluent into surface water. This water mixes with sewage in urban areas, and becomes unfit for agricultural or domestic use. In view of the serious nature of this problem, it is important to evolve an appropriate policy framework for toxic effluent discharge. It is also necessary to institute a system of bulk usage by industries, and it should be mandatory for industries to install treatment plants for water purification. Build Capacity of WASAs and TMAs. WASAs and TMAs should be strengthened in terms of properly trained staff knowledgeable about the technical aspects of water purification, as well as instituting policies on water cost recovery. There is also need to properly demarcate the mandate of governing bodies in the water and sanitation sectors at the federal, provincial, WASA, and TMA level to ensure that there is no overlapping of jurisdiction and that there are coordinated efforts to supply good-quality water. Involve the media. The media needs to be involved in highlighting issues of water pollution and the need for hygiene and sanitation. International agencies such as the World Health Organization (WHO) and United Nations Children’s Fund (UNICEF) have run effective national and international media campaigns in this regard. Local Governments as well as the Government of Punjab should consider involving the media in developing similar local-level campaigns. NGOs are also playing a role in urban development by promoting water supply, sanitation and hygiene education and sustainable technologies and by assisting with infrastructure provision and maintenance. Box 6.1 presents the case of Anjuman-e-Samaji Behbood in Faisalabad. Box 6.1: Anjuman-e-Samaji Behbood, Faisalabad

NGOs have recently been at the forefront of implementing urban development initiatives, particularly in water and sanitation. Anjuman-e-Samaji Behbood (ASB), a Faisalabad-based organization, seeks to replicate Karachi’s successful Orangi Pilot Project in Punjab’s second-largest city to improve residents’ quality of life by developing water, sanitation, and hygiene education using local skills and practical, sustainable technologies. ASB’s basic philosophy is that low-income communities are not consulted on their water and sanitation needs and, as a result, the systems made available to them are often technologically and managerially inappropriate, and tend to fall into disrepair. Informally, residents of low-income communities routinely make payments to mafias to meet their water and sanitation needs, and these funds can be channeled into payments for public service delivery, provided the quality of service is good and communities have a sense of ownership in the project. ASB is assisted by a number of international NGOs and donors, including UNICEF, Water Aid, Freshwater Action, and the World Water Council, and organizes communities to construct, finance, and maintain their own water and sanitation infrastructure. As of March 2006, ASB had constructed sewers in 565 lanes in Faisalabad at a cost of over Rs. 28 million and had installed water supply schemes in 85 streets at a total cost of just over Rs. 3 million.

6.1.3 Transport International experience indicates that the use of motorized vehicles increases rapidly as incomes rise. Other factors such as easy availability of credit for the purchase of motor vehicles also play a role in the increase in number of vehicles on road48. Manufacturing units are often located in the outlying areas of large cities, which accentuate the problems arising from a boom in use of transport vehicles. This is fast becoming the case in Punjab, where rapid urbanization and improving incomes have

48 The Punjab government figures indicate the number of registered vehicles in Punjab in 2006 were 4.5

million with a growth of more than 10 percent a year. Out of this total, the number of registered vehicles in the five major cities of Punjab was about 2.8 million in 2006, with an increase of more than 13 percent a year. The number of non-motorised vehicles (NMV) in Punjab in 2006 was more than 5,839,803. This includes 228,873 registered and 5, 610,930 un-registered NMT [Source: Dainichi (2007) Urban Transport Study for Five Cities of Punjab Province, Draft Final Report, July]

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increased the volume of traffic and transport in cities. The most prominent problems in Punjab’s large cities include traffic congestion, inadequate public transport, deteriorating environment quality, weak institutional capacity, and lack of road safety. The growing volume of traffic also puts immense strain on the weak road infrastructure. The imbalance has caused the condition of roads to deteriorate, increased congestion, and eroded the efficiency of cities as attractive centers of economic production. Although hard quantitative data are often unavailable, a few stylized facts are generally believed to hold true for urban Punjab. These are as follows. • The rapid growth in volume of vehicles in urban areas has been accompanied by the uneven

growth of private and public transport. Private transport has become more popular than public transport.

• The increased traffic is a major source of road congestion, reduction in speed, increase in number of accidents, increased energy consumption, and emission of local and global pollutants.

• The road infrastructure and mass transport system, especially in large cities, have not shown much improvement despite the Government’s efforts in this regard. Incentives provided to private buses and wagons have yielded little result, although the number of taxis and rickshaws has shown a large increase.

Key Issues in Transport Inefficient movement of traffic due to faulty planning. Land use planning and its integration with transport planning is critical. Lahore, for instance, is growing at 3.22 percent per year (urban areas only). Massive changes in land use and the densification of over-congested corridors due to rapid commercialization have already caused the transport infrastructure in most cities to deteriorate. Large cities are especially prone to this problem. Roads are built for efficient movement of people and goods rather than solely for cars. According to a Japan International Cooperation Agency study carried out in 1992, the population of Lahore generates about 12.4 million trips. There is a significantly high share of public transport trips in daily vehicular trips: 49 percent of vehicular trips are public transport trips (Lahore Mass Rapid Transit System Study 2006) while about 1,000 public transport buses are available in the city. A similar situation exists in Rawalpindi. In the absence of formal bus/taxi terminals, depots, and workshops, road space is used for these functions, which results in congestion on the main road arteries. Deterioration in air quality and noise levels. The rapid increase in population, absence of a decent public transport system, and high growth in the number of private vehicles has had a deadly impact on air quality and noise levels. The deteriorating environment has affected the health of commuters. NOx concentrations are ten times higher than WHO standards in central Lahore, while noise levels on its major roads are about 89–90 dbs compared withy the maximum recommended standard of 85 dbs (NESPAK 1997). Various studies by the Pakistan Medical and Dental Association confirm the presence of high levels of lead in the blood of school children, traffic police, and the adult population.

Problems in transport infrastructure. Infrastructure geometry is very important to mitigate congestion and ensure a smooth traffic flow. The evaluation, capacity, and efficiency of transport infrastructure is given priority in well run cities, as is capacity analysis, pavement management, queuing length analysis, length and number of lanes required for right or left turns, ways to mitigate traffic conflict, highway safety and pedestrian facilities, and road visibility. In Punjab’s major cities, however, most intersections lack specific right-turn lanes. In the absence of any proper parking plan and management, roadside parking has deteriorated vehicular and pedestrian traffic and reduced road capacity.

High incidence of accidents. According to the statistics of the Punjab Police, 3,000 people are killed every year in roadside accidents in the province. Highway safety is very important to reduce human and economic losses on any highway transport system. Sound traffic engineering principles and uniform standards for traffic control to reduce/minimize the severity and probability of traffic accidents are required at the provincial as well as city level.


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Need to connect city transport with provincial and federal systems. City and provincial Governments need to link efforts with the federal Government to develop a comprehensive transport strategy that promotes integrated land use, improves the transport infrastructure, institutes similar arrangements in all the provinces, prioritizes provision of public transport, improves road safety standards, and minimizes environmental degradation. There are many other issues that need to be discussed for a sustainable integrated transport system in urban areas, including road user education plans, enforcement plans, operation and maintenance (O&M) expenditures, freight, and the appropriate number of bus terminals. The Government has made major investments in transport infrastructure by building roads, underpasses, flyovers, and expressways in Punjab’s larger cities. These investments will ease traffic flow for a certain period but will not tackle all the issues required. Traffic volume and transport and environmental problems will continue to increase. Appropriate traffic engineering and management needs to be promoted. The case of Lahore, a city with a population of 8 million and less than a few hundred traffic signals, illustrates the gravity of the situation. The recently completed draft study49 of Urban Transport in Five Cities of Punjab makes a strong case for an effective transport policy in Punjab. This study highlights the need for such a policy because of: • High population growth rate (around 2% per annum increase) and a growing in-migration. • High volumes of vehicles. The number of vehicles is growing annually at a rate of around

12% in the five big cities of Punjab. • Haphazard planning and poor execution of projects. • Severe traffic congestion and grid-lock. • Extremely high transport costs due to an in-efficient transportation system. • Environmental degradation. • Inadequate institutional setup not coping with the governance and service delivery mechanism

requirements in the transport sector. The study presents the vision of an efficient, economical, environment friendly and well managed comprehensive multi-modal transportation system for the large cities of Punjab by the year 2020. The study proposes the development of multi-modal and integrated long range policies and plans to ease the movement of people and goods in the most cost effective manner at local, national and regional levels. It seeks the provision of a competitive transportation infrastructure to make the big cities of Punjab true hubs of trade commerce and industry. The transport study is the first step towards the required comprehensive transport policy. The Government of Punjab is in the process of considering the detailed recommendations of this study. 6.1.4 Environment One indicator of a good quality of life is a clean environment. This can be disaggregated into (i) air quality, (ii) water quality, and (iii) noise levels. Although there are limited data to evaluate urban Punjab’s environmental conditions, it is safe to conclude that air quality in the larger cities is poor and pollutant concentrations often exceed limits considered safe by WHO. There is a need to strengthen the systems for monitoring of overall environmental conditions in the urban areas of Punjab. Based on sporadic information from different sources the Daily Dawn Newspaper last year published an overview of the environmental conditions in Lahore (Box 6.2).

49 Dainichi (2007) Urban Transport Study for Five Cities of Punjab Province, Draft Final Report, July

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Box 6.2: The Level of Pollution in Punjab’s Provincial Capital Lahore, once famous for its parks and gardens, is rapidly becoming the most polluted city in Punjab. Two major players in this catastrophe are (i) the smoke emitted by vehicular traffic, and (ii) dust. According to a recent study by the Punjab Environment Protection Department, there are high levels of hydrocarbons and NOx in the air. The NOx standard set by WHO is 106 ppb, but levels at Chairing Cross on the Mall stand at 328 ppb. That this part of Lahore is a “VVIP route” and one that is looked after most indicates the intensity of pollution problems in other congested areas of the city where traffic remains either jammed or moves very slowly. Two-stroke auto-rickshaws, motorcycle-rickshaws, diesel-run wagons, and buses are responsible for emitting harmful gases like SO2, CO, and NO. As much as 4,726 tonnes of waste is generated in the nine towns under the CDG, which has a lifting capacity of only 3,853 tonnes. The collected waste is not disposed of scientifically at disposal sites: only a small proportion is disposed of, while the rest is dumped in low-lying areas in and around the city, leading to environmental and health hazards. Lack of financial and human resources and poor physical infrastructure are the major reasons for poor management of waste disposal. Lahore spends Rs. 500 per ton of solid waste every day compared with the Kolkata Municipal Corporation in India, which spends about Rs. 1,160 per ton and the Delhi Municipal Corporation, which spends Rs. 1,450 per ton on collecting and disposing of waste. The CDG lacks data on the generation and dumping of industrial waste. In industrial estates, industrial units dump their rubbish on the roads where it is collected by the CDG free of cost. However, the authorities now plan to charge domestic and commercial consumers, as well as industries, for their municipal services. Source: Based on Dawn (2006).

Status of Air Pollution Air quality is generally poor in the larger urban centers of Punjab50. For example a comparison of SO2 data with international environment air quality standards (EAQS) conducted for the Urban Unit of the Government of Punjab shows that levels in Lohari Gate in Lahore were 2.1 times higher than the Japanese standard and 1.8 times higher than WHO guidelines. Key Issues in Air Quality Management Legal issues. There is a plethora of laws that directly or indirectly affect urban air quality management in the cities of Punjab, but many are not properly enforced. This is primarily due to the absence of political will, low levels of capacity, and poor governance mechanisms in provincial and city Governments. Low levels of vehicle maintenance. Vehicular emissions, especially from diesel engines and two-stroke three-wheelers, account for a large proportion of urban air pollution. The problem is exacerbated by low levels of vehicle maintenance among users, a defective automotive fuel policy, and easy access to new and second-hand vehicles. Unchecked industrial pollution and lack of waste management. The air quality in Punjab’s larger cities is being gradually degraded by emissions from industrial activities and improper disposal of waste. Municipal and healthcare waste is often incinerated in dumps and open bins, causing air pollution. There is currently no information on indoor air pollution, which some observers also feel to be a serious problem. The pollution control authority is poorly staffed, lacks technical resources, and is subject to political pressures. For pollution control in the industrial sector, the present policy relies on industry-specific emission/effluent standards, based on the best available technology. This gives no incentive to reduce pollutant concentrations. An appropriate policy would be to measure the quantity of pollutants and levy tax at a rate that rises with quantity of pollutants found. Lack of transparency. The experience of industrialized countries has shown that firms react to popular pressure. To generate such pressure, citizens should be given the right to information. The effluent quality measurements of all firms should be publicly available so that citizens are aware of which firms are responsible for damaging their air and water, and to what extent. 50 This information is based on an un-published report on Air Quality. Profile for the province of Punjab

prepared by the Urban Unit prepared in 2006


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Recent Government Initiatives Tackling pollution caused by the transport sector. In a series of bold initiatives, heavily polluting two-stroke three-wheelers were banned from being inducted into the on-road fleet in 2001. Government agencies are currently engaged in removing around 100,000 two-stroke three-wheelers from public service by 2007. A green financing scheme has been initiated to facilitate the uptake of cleaner four-stroke three-wheelers. This shows that the Government is dedicated to sustainable means of production and consumption. However, there has been considerable opposition to the move, necessitating the provision of subsidies to rickshaw owners to give incentive to their switchover to the new technology. Promoting clean fuels. The Government is working with the private sector to promote the use of cleaner, cheaper fuels such as compressed natural gas (CNG) and liquefied petroleum gas (LPG). This helps decrease air pollution and provides a more economical fuel source, especially for low- and middle-income users. Promoting better vehicle maintenance practices. In order to address shortfalls in the quality and efficiency of existing motor vehicle inspection systems, the transport department is currently seeking to initiate a motor vehicle testing project in Lahore, which could be up-scaled to other cities. Institutional and legislative measures. To improve the infrastructure deficit, a rapid mass transit system is being considered for speedy approval and implementation. The Provincial Motor Vehicles Act has been enacted to tackle growing problems of motorization. The Punjab Government’s planning and development department has established an “urban unit” to address urban issues in an integrated and holistic way. Some additional measures that could help reduce vehicular pollution in particular are listed in Box 6.3.

Box 6.3: Vehicular Pollution Management Measures Immediate measures to curb vehicular pollution could include: • phasing out old vehicles from urban areas, • introducing catalytic converters for vehicles, • introduce unleaded petrol in all urban areas, • monitoring vehicle emissions effectively, and • taxing vehicles for differential pollution causes. Long-term measures could include: • introducing four-stroke engines (for fuel efficiency and low emissions), • improving fuel quality, • improving urban public transport systems, • improving road quality for smoother flow of traffic, • setting strict emission standards for new vehicles, and • introducing strict vehicle inspections penalizing owners of vehicle that emit large volumes of

pollutants. Institutional Strengthening with a Focus on Financing Capital Investments for Punjab Cities How to raise the resources to finance the activities that cities can undertake is an important policy issue. It is especially crucial for small cities, which have a lower revenue base. Rough estimates from international experience show that providing universal coverage for water, sanitation, and other social services requires about 6 percent of GDP. Financing physical infrastructure raises investment requirements by a further 5 percent of GDP. It should be noted that not all this investment for urban development has to be made by the Government. Some can be financed by private sources, since supplying some of these services can be a profitable business. Nevertheless, the Government would be called on to finance a large share of investments for city development. The federal Government often resorts to domestic borrowing, external borrowing, and domestic taxation/user charges to finance such investments. Decentralization

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and devolution in 2001 has brought forward the issue of local Governments making investment decisions for the development of cities in Punjab. In Pakistan, while investment decisions concerning social services delivery and physical infrastructure have been devolved to the city Governments, financing is still provided by the federal/provincial Governments through special development packages or borrowing by local Governments from higher levels of Government. Donor funds are channeled for the development of cities through the federal and provincial Governments. Despite this assistance, it is still important to strengthen municipal finances to improve service delivery in small and large cities. A recent study conducted by the World Bank (2006)51 for the Government of Punjab highlights the potential of the Urban Immovable Property Tax for meeting local urban revenue needs in Punjab. This study indicates that the reductions and exemptions in the existing taxation system are distorting and reducing the tax base. As compared with the international practice, the current exemption of all residential properties up to 5 marlas (125 sq yards) is quite large. The study estimates that this exclusion alone reduces the tax yield by 25 percent. In order to increase revenues in an equitable, stable and efficient taxation system, this study highlights the need to make information collection more reliable. This can be done through the coordination of City District Government (CDG) and Tehsil Muncipal Administrations (TMAs). The transformation of the UIPT into a real local tax can help to immediately enhance revenue from this source. This requires sound tax management and administration, a reliable, consistent and consolidated fiscal database with updated and harmonized annual rental value (ARVs), revised exemptions and up to date payment records for each property and by each taxpayer at both the CDG and TMA levels. The study recommends revision of the role of city district government (CDGs) with sufficient capacity building so as to achieve this objective. Large cities have access to their own revenue on a larger scale than small cities. They also have better administrative capacity to deliver these services. In view of the large share of population residing in small cities, the Government of Punjab has launched a special project named the Punjab Municipal Services Improvement Project (PMSIP) for the period 2006–11 to enable small cities to provide services more effectively. The PMSIP, a World Bank-funded project worth Rs. 3,540 million, has been designed to provide resources to small cities where private sector may be reluctant to become involved in service delivery. This project is being implemented by the Government-sponsored Punjab Municipal Development Fund Company (PMDFC), which has been mandated to upgrade TMAs’ institutional capacity and infrastructure development. Under the Devolution Plan of 2001, TMAs are responsible for provision of municipal services but their financial and institutional capacity does not match the functional responsibility assigned to them under the Punjab Local Government Ordinance 2001. The PMSIP addresses these infrastructure and capacity constraints by offering grants for capacity building. It first pilots these changes and only up scales successful pilots. The eligibility criterion covers all TMAs in Punjab (except TMAs falling under city districts). TMAs are eligible for a PMSIP grant for capacity building and infrastructure development. There is also a provision to provide grants for building capacity in the PMDFC and the Government of Punjab. The project aims to improve TMAs’ institutional development by introducing: • performance management systems (see Box 6.4), • urban planning, • geographic information systems (GIS) (see Box 6.5),

51 World Bank and Urban Unit (2006) “Property Taxes in the Punjab” The World Bank South Asia Region

and The Urban Unit, P&D Department, Government of the Punjab, Lahore.


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• mapping of municipal services, • financial management systems, • website development, • complaint tracking system, • database development of municipal services, municipal properties, and municipal finance, and • training staff and holding workshops, including international exposure visits. Box 6.4: Performance Management System for TMAs Performance management is a systematic approach to improving performance through an ongoing process of establishing strategic performance objectives; measuring performance; collecting, analyzing, reviewing, and reporting performance data; and using that data to drive performance improvement. It has been successfully adopted by many local bodies around the world, and enables them to provide better service delivery at considerably lower costs. With the technical assistance of the Urban Institute in Washington, DC, the PMDFC has tried to implement this concept in targeted TMAs under the PMSIP. A performance management system will not only measure TMAs’ performance but also identify potential areas for capacity building and infrastructure interventions. Source: PMDFC.

Box 6.5: Performance Management System for TMAs GIS is a widely adopted tool for sustained town planning around the world. However, in a country like Pakistan, even the concept of town planning is not followed in its true sense. The PMDFC has taken the initiative and introduced the concept of GIS in town planning in the project area. Up-to-date satellite images of 0.6 m resolution of targeted towns with updated data on their municipal services will help TMAs plan and formulate spatial plans and land use policies Source: PMDFC.

In addition, the Government is carrying out the necessary preparatory work for the Punjab Large Cities Development Policy loan to meet the challenge of making large cities attractive places in which to live and providing a conducive environment for business and industries to prosper. The proposed project will be implemented with the assistance of the World Bank, utilizing a loan of $300 million, and will aim to promote economic growth in the five major cities of Punjab through strategic planning, integrated infrastructure investment programs, and improved urban service delivery. The project is likely to focus on the following issues: • Urban planning and land management issues and policy directions, incorporating (i) metropolitan-

level strategic planning, (ii) reform of land use and urban development regulations, (iii) affordable housing, (iv) and modernized land titling and registration systems.

• Municipal finance issues and policy directions, incorporating measures relating to (i) increasing own-source revenues, (ii) reforming the provincial transfer system, and (iii) financial management information systems.

• Strengthened services delivery while concentrating on (i) urban transport, its policy framework, coordination, and collaboration; and (ii) improving governance in public transport.

• Provision of water supply and sanitation. • Solid waste management. • Addressing the issue of urban poverty alleviation, the Poverty and Social Impact Assessment

helps make informed choices regarding not only who lives in the city but also what services are provided to different areas, who benefits from these services, and who pays for them.

• Institution of a program of capacity building at the local Government level to ensure adequate implementation of the reforms.

The improvement of infrastructure and service delivery is also a central theme of the Chief Minister’s Large Cities Package, which aims to improve solid waste management, water supply and sanitation systems and road infrastructure in five cities over a period of three years. Similarly, water supply and sanitation services will be improved over the medium term by converting WASAs into independent entities, accountable to the service users. The Government of Punjab estimates that 77 percent of the population of all areas served by WASAs will have access to piped water, while 81 percent will be served by sewerage facilities.

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6.2. Punjab Government’s Urban Strategy In his pre-budget policy address of June 2004, the Chief Minister of Punjab articulated his Government’s vision. Among the long-term strategies to be developed, an urban strategy was listed as a top priority. This strategy would aim to (i) promote the competitive advantage of cities, particularly larger ones; (ii) develop urban institutions into world-class institutions; (iii) remove infrastructure deficits; (iv) orient planning to make cities efficient living and production areas; and (v) support industrial concentrations as regional clusters. The importance of urban development in the Government of Punjab’s development strategy can be gauged from the fact that in FY 2008, the Government has increased the ADP allocation for the sector by 219 percent over the previous year. The Government of Punjab’s urban development strategy is implemented by the Urban Unit, which works under the aegis of the Planning and Development Board, Government of Punjab. The Unit’s functions have been divided into four sectors, (i) urban planning; (ii) solid waste management; (iii) urban transport and (iv) municipal finance. The work of the Urban Unit is based on an extensive set of analytical studies [Box 6.6] Box 6.6: The Urban Unit – Analytical Studies to Support the Urban Development of Punjab 1. Assessment of Capacity and Capacity Building Institutions in the Development Policy Loan (DPL)

Sectors; 2. In-depth Analysis of Capital Investment Projects/Programs for Five City District Governments; 3. Developing a Context-Sensitive GIS-Enabled Geospatial Database for Five Cities of the Punjab; 4. Urban Transport Study for Five Cities of Punjab Province; 5. Municipal Finance Study; 6. Poverty and Social Impact Analysis (PSIA) Study 7. Develop Comprehensive “City Region Boundaries” for Five Cities; 8. City Development Strategy; 9. Environmental Impact Assessment Study for Social Development of the Walled City of Lahore

(SDWCL) Pilot Project 10. Environmental Impact Assessment for Proposed Landfill Site at Kahna; 11. Assessment of Regulatory and Institutional Framework for Urban Management; 12. Assessment of Institutional Arrangement for Urban Land Development and Management in Five

Large Cities of Punjab; 13. Assessment of Urban Land Development and Management Practices in Place of Five Large Cities of

Punjab; 14. Assessment of Legal and Regulatory Framework for Urban Land Development and Management in

Five Large Cities of Punjab 15. Solid Waste Management Study in nine (9) Cities of Punjab (Phase-I). 16. In-depth GAP Analysis for BPR of UIPT under DPL Source: The Urban Unit - Compendium of Terms of Reference for Consultancy Studies

Each of the sectors within the Urban Unit is responsible for implementation of key projects. In case of the urban planning sector, two assessments (of capacity and capacity building institutions and of the capital investment program in urban areas) have been carried out in addition to work on the development of a GIS based geospatial database for five large cities in Punjab. Work on the regulatory and institutional framework for land use planning in Punjab is underway. The solid waste management sector has initiated work on the solid waste management plan for Punjab and the process of data collection on solid waste management in major cities has been started. The urban transport sector has started work on the urban transport policy in addition to developing a manual for uniform traffic control. In addition, the Unit is designing and implementing the Ferozepur Road pilot project for traffic management. Other projects under development include a centralized traffic signal system for Lahore, and a school bus system for all large cities. The municipal finance sector has recently completed a municipal finance study for five large cities of Punjab.


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6.3 Conclusion Punjab is urbanizing rapidly, and adequate provision of key urban services is proving to be a challenge for the Government. As is the case with rural development, improving the livability of cities requires an integrated approach, with city governments dealing with issues of pollution and environmental degradation, service provision and quality, and the need to ensure availability of adequate and affordable housing. A number of provincial Government departments are working together to implement the Government’s urban development strategy, and coordinate efforts to truly improve living conditions in Punjab’s cities.

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7. The Services Sector The services sector has become increasingly important to Punjab’s economy.52 Its share now exceeds that of all the commodity-producing sectors combined. As indicated in Chapter 2, the services sector as a whole contributes 53.9 percent to Punjab’s GPP and employs a significant proportion of the province’s labor force – wholesale and retail trade alone employs 14.08 percent. 7.1 Linkages of the Services Sector The services sector has great potential for employment generation and poverty reduction due to strong forward and backward linkages, which signify the size of its multiplier effects. This applies to Punjab in particular and to Pakistan in general. At the national level, calculations for the federal Government’s Medium-Term Development Framework (MTDF) 2005–10 (Table 7.1) indicate that the bulk of sales from the wholesale and retail trade sector go to the commodity-producing sectors, signifying a strong forward linkage between these sectors. Similarly, the hotels and restaurants sector also has significant potential, since most of its purchases come from the commodity-producing sectors, signifying strong backward linkages. Transport and communication, banking and insurance, and business services also have strong forward linkages with the commodity-producing sectors. While business services, public administration and defense, education, health, social and cultural services, and personal and household services have strong backward linkages with the commodity-producing sectors, real estate is found to have both backward and forward linkages. Despite its increasing importance over time, very little analysis or information is available on the contribution and potential of the services sector. A survey recently conducted in Punjab provides some details on the sector’s characteristics; its findings are briefly discussed below. In addition, the federal ministry of commerce recently commissioned a survey on domestic commerce, which covered nine cities in Punjab. The results of the survey have not yet been made public, but the survey was a first step toward more structured data collection on Pakistan’s services sector, and should be adopted as an annual feature. Table 7.1: Linkages of Services and Commodity-Producing Sectors in Pakistan 2005

(Rs Million) Sectors Sales to

Commodity Sectors

Purchases from

Commodity Sectors

Balance Linkages

Wholesale and Retail Trade 162,428 5,791 156,637 Strong forward linkages Hotels and Restaurants 760 7,061 -6,301 Strong backward linkage Transport, Storage, and Communications 51,039 48,107 2,932 Strong forward linkages Banking and Insurance 6,762 1,545 5,217 Forward linkages Real Estate Services 2,345 2,998 -653 Both Business Services 12,940 1,854 11,086 Strong forward linkages Public Administration and Defense 1,078 54,396 -53,318 Strong backward linkage Education Services 235 1,668 -1,433 Backward linkages Healthcare Services 50 2,895 -2,845 Backward linkages Social and Cultural Services 79 3,616 -3,537 Backward linkages Personal and Household Services 0 4,190 -4,190 Backward linkages Total 237,716 134,121 103,595 Forward strong relative to

backward linkages Source: Report of Working Group on Services for MTDF, September 2005–10. 52 For the purposes of GDP classification, this sector is defined as consisting of transport, storage, and

communications; wholesale and retail trade; finance and insurance; ownership of dwellings; public administration and defense; and social, community, and private services.

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64

7.2 Rural Investment Climate Survey (RICS) 2005 In order to examine the nature and size distribution of the rural non-farm economy and the factors affecting the current state of investment, the World Bank and Innovative Development Strategies carried out an RICS in all provinces of Pakistan in 2005. The primary purpose of this survey was to examine the nature of rural business activity and the prevailing investment climate.53 The fieldwork on the Punjab survey was completed in June 2005, and covered 10 of the province’s 35 districts and 100 areas (50 villages and 50 small towns). About 1,069 enterprises and 600 households were surveyed. In addition, a community and price module survey was also conducted in each area. The RICS (2005) found that most business activities in rural areas and small towns were related to wholesale and retail trade (47 percent). This share was found to be larger than the provincial share reported as part of Punjab’s GPP. The share of production activities was found to be very low (only 13 percent). Disaggregated rural-urban survey data show that the proportion of service enterprises is higher in urban areas (44 percent) while wholesale and trading activities dominate in rural areas (55 percent). Most of these enterprises are stand-alone units and operate as sole proprietorships. The average employment size was 1.9 persons per unit in rural areas, and 3.7 persons per unit in urban areas. Most workers at each unit were family members. The average numbers of hired workers was 0.6 in rural areas and 1.8 in urban areas. This implies that most enterprises in Punjab are very small, and generally run by owner-proprietors with limited opportunities for paid employment. While the prospects for paid employment are higher in production establishments such as manufacturing, construction, or mining-related activities, the small proportion of such activities in small towns and rural areas implies very limited employment prospects for local people. Friends and relatives were found to be the major source of startup capital, followed by non-agricultural income. Access to formal sources of credit appeared the most important constraint. The lack of access to financial sources, and the poor quality of public utilities (e.g., electricity supply), marketing, and transportation were identified as major constraints. Governance issues and official corruption when dealing with businesses were also reported as significant constraints. Lack of demand and working capital meant that most enterprises did not operate at their optimal level. The surveyed enterprises were also found to lack basic infrastructure facilities. Given these problems and constraints, such enterprises have not been able to maximize the overall benefits of inter-sector forward and backward linkages. The data from the GPP analysis also reveal a similar picture, and is discussed in detail below. 7.2.1 Wholesale and Retail Trade The wholesale and retail trade sector is the largest contributor to Punjab’s services sector according to the GPP data as well as the survey-based data discussed above. This sector has grown at an annual rate of 7.3 percent in Punjab during FY 2001 to FY 2006, while the corresponding rate for Pakistan was 7.2 percent for the same period. This sector generates employment for 14 percent of the employed labor force and, therefore, serves as a major component of domestic commerce. The results of the Economic Census for FY 2005 indicate that nearly half (50 percent) of establishments in Punjab are engaged in wholesale and retail trade, and the restaurants and hotels sector. Most are run by individual owners and employ five or less individuals. These results are roughly the same as those of the RICS (2005). The RICS (2005) found that, of 1,069 enterprises surveyed, 47 percent were in the business of wholesale and retail trade. In rural areas, wholesale and retail trade is the dominant business: nearly 55 percent of these enterprises are located in rural areas. Most of these trading enterprises are very

53 The investment climate in a specific location is the set of factors that shape the opportunities and

incentives for firms to invest productively, create jobs, and expand. This includes those factors that influence costs, risks, and barriers to competition confronting firms (World Development Report 2005).


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small and are run by their owner-proprietors. The number of workers is higher in urban areas than in rural areas. The extremely low number of hired workers (0.6) in rural areas indicates limited employment generation opportunities for paid employment in rural Punjab. Most of these enterprises (50 percent) are new (0–2 years old), and family/friends and non-agricultural income are the two main sources of startup capital. Only 0.79 percent reported getting loans from banks as startup capital. Most of these are located in urban areas and deal in large businesses such as fertilizer or trade, etc. These trading enterprises deal mostly in manufactured items for daily household use, as well as processed and unprocessed agricultural products. A large proportion of sales go to the same district with a variation of own villages/towns, other villages/towns, and other tehsils. Households and other small firms are the major buyers with a share of 81 and 15 percent, respectively. This implies that rural trading enterprises are geographically restricted in terms of forward linkages. This also holds for their backward linkages, which is evident from the fact that most of the purchases are made within Punjab with a variation of districts, tehsils, and union councils. Expanding the linkages will expand the size of these enterprises. Only 2 percent of purchases are reportedly from other provinces. Additionally, most input suppliers are still small firms. The role of the Government, parent company, and large domestic firms is found to be minimal. The enterprises also reported a variety of constraints. Lack of access to financial resources, poor quality of public utilities (electricity supply), and lack of access to markets and transport were identified as key problems. The RICS (2005) found that sales were positively related to higher levels of education and managerial experience. Stand-alone enterprises and those located in small towns have higher sales than those that operate from households and those that are located in villages. The gender of the manager was found to make a difference: enterprises run by women generally had lower sales and profits than the norm. As far as the productivity54 of these enterprises is concerned, the survey found that enterprises located further away from the market had a higher value-added per worker. Larger firms seemed to be less productive in terms of value-added per worker. Household-based firms were also less productive although there did not appear to be significant differences between being located in a village or a small town for a trading enterprise. Despite these constraints, wholesale and retail trade is a rapidly expanding sector and Punjab’s share in the national GDP from this sector is nearly 60 percent. Punjab’s Vision 2020 recognizes the importance of this sector and aims to promote it by (i) developing urban commercial centers, (ii) developing linkages between urban and rural marketing networks, and (iii) providing marketing linkages between micro credit-based activities and a larger marketing network. 7.2.2 Finance and Insurance The finance and insurance sector comprises the banking sector, financial intermediaries, insurance companies, and pension funds. There are various financial institutions in Punjab, for example, scheduled commercial banks, specialized banks, Government organizations, insurance companies, and other non-bank financial institutions.55 In addition, exchange companies also provide financial services such as money conversion and transfers. The sector has only a small share in Punjab’s economy (2 percent) but has grown at a considerable rate (8.7 percent per annum) since FY 2001. Nearly 38 percent of the sector’s total value-added in Pakistan is generated by Punjab. It employs about 1 percent of the total labor force in Punjab, and has strong forward linkages with the commodity-producing sector and sub sectors of the services sector, and forward and backward linkages with the household sector.

54 Productivity is measured by the value added per worker. 55 These include leasing companies, modaraba companies, mutual funds, housing finance, and discount

houses.

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66

7.2.3 Ownership of Dwellings Housing is an important services sub sector. Its value-added is based on owners’ incomes from their dwellings, which can take two forms: • If a dwelling is not used by its owner, but by another person in return for some payment, then

income obtained from this process becomes monetary income called “rent.” • If a dwelling is used by its owner, there is no monetary income but a utility is obtained equal

in value to rent income. This is “imputed rental income.” The sector’s value-added is computed from the rent accruing from owned, rented, and rent-free houses in urban and rural areas separately. Ownership of dwellings contributes 3 percent to Punjab’s GPP. Punjab being the largest province in terms of population, the sector contributes 53 percent to national value-added from ownership of dwellings. The increasing demand for housing units generates economic activity that contributes toward employment generation and hence poverty reduction. According to an estimate, over 120 allied industries are directly or indirectly affiliated with the housing sector, including cement, iron and steel, tiles, ceramics, glass and woodworks, paints, and a variety of fixtures. Activity in the housing sector helps increase production in all these sectors. The growth of the housing sector can also help improve the quality of housing by enforcing land regulations, ownership rights, building and zoning codes, and infrastructure provision. In addition, it generates demand for public utilities, such as electricity, gas, water, and telephone connections. In recent years, demand for internet connections and cable television has also increased considerably. The rent value of a house depends on its locality, construction, and in-house facilities. The need to regulate and support these activities is very important. Recent data from the PSLM for FY 2005 indicate that, in urban Punjab, 81 percent of households live in their own houses, while the rest (19 percent) live in rented, subsidized, or rent-free houses. Most houses use burnt brick/blocks for their boundary walls, and 68 percent use wood/bamboo or iron sheets for the construction of roofs (Table 7.2). Most households also use electricity for lighting, although charcoal and wood are the main sources of cooking fuel, especially in rural areas. Urban residents tend to use gas or oil. The main source of drinking water is tap water in urban areas and hand pumps in rural areas. In rural areas, 50 percent of households do not have a toilet facility. All these inputs are important service-generating activities. Table 7.2: Tenure Pattern and Construction Types in Punjab

Tenure Pattern/Construction Type Urban Areas Rural Areas All Areas Housing Tenure

Own 80.89 93.26 87.32 Rented 12.23 1.35 6.57 Free 5.02 5.28 5.15 Subsidized 1.86 0.12 0.95 Total 100 100 100

Material used in roof construction Reinforced cement concrete/ reinforced concrete box

46.89 17.41 31.56

Wood/bamboo 32.37 55.55 44.42 Sheet/iron/cement 17.57 20.55 19.12 Other 3.17 6.49 4.90 Total 100 100 100

Material used in wall construction Burnt bricks/blocks 94.89 72.06 83.02 Mud bricks/mud 4.42 25.96 15.62 Wood/bamboo 0.21 0.49 0.35 Other 0.48 1.49 1.01 Total 100 100 100

Source: PSLM (2004/05)56.

56 PSLM 2005/06 does not have data on housing.


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The average annual rent computed in Punjab from the HIES (FY 2002) was Rs. 16,479 in FY 2002 with a range of Rs. 1,300 to Rs. 177,000. In FY 2005, this average rent increased to Rs. 19,122 with a range of Rs. 1,500 to Rs. 205,392. The Foreign Investment Advisory Service (2005) points to a number of constraints to growth of this sector including, poor land titling practices, zoning restrictions and restrictive building codes, laws that favor tenants over landlords, and the lack of revenue for local Governments to develop infrastructure. Cartel-like behavior by producers in industries such as cement, also add to these issues. The report recommends revising tenancy laws and reviewing zoning restrictions, making more Government land available for development, using the proceeds from land auctions to develop necessary infrastructure, and promoting dispute resolution in land issues through regular law courts or alternative means of dispute resolution. The report also recommends reducing barriers to entry in industries related to the housing sector, in addition to regulatory reforms such as improving land titling processes and reforming the property tax system. In order to boost house construction activities, the Punjab Vision 2020 aims to increase employment generation activities in the construction and housing industry. This is to be done through a series of steps to boost activity in the sector: (i) rationalizing stamp duty and development charges, (ii) improving commercial zoning regulations and the rent restriction ordinance, (iii) promoting clear and transparent valuation methods for taxation purposes, and (iv) promoting construction of property for rental purposes. 7.2.4 Community, Social, and Personal Services This sector consists of the provision of private services. Based on the United Nations SNA-93 classification, it includes the following services: computer services, business services (including legal, accounting, advertising, and photographic services), education services, medical and health services, community, social, and personal services, cultural and sporting services, services of religious, political, and similar organizations, household services, and other services not classified elsewhere. Punjab’s community, social and personal services sector contributes 62 percent to the national estimates for this sector. The sector has grown at an average rate of 6 percent per annum in Punjab. The Economic Census (FY 2005) indicates that 22.3 percent of establishments in Punjab are engaged in community, social, and personal services. Most of these enterprises are small (employing five people or less) and run by owner-proprietors. The results of the RICS (2005) are similar to the findings of the Economic Census (FY 2005). The RICS (2005) found that, out of 1,069 enterprises surveyed, 40 percent of enterprises in Punjab were involved in community, social, and personal services. The proportion of these services is higher in urban areas (54 percent) than rural areas (46 percent). Like wholesale and retail trade, service enterprises were found to be very small units largely run by owner-proprietors. In these services, the average number of workers is 2.2 persons, which is higher than that for wholesale and retail trade (1.8 persons) and lower than the number of workers in production establishments (5.1 persons). On average, 1.4 family workers and 0.79 paid workers work in the service establishments.57 The number of paid workers is only 0.32 in rural areas and 1.11 in urban areas. This highlights the current limited employment generation through paid employment in these activities in rural Punjab. Services enterprises reported facing various constraints, including lack of access to financial services, poor quality of public utilities (electricity supply), and lack of access to markets and governance. The survey found that household-based enterprises and firms located further away from major cities had significantly lower sales. Enterprises in small towns were found to have significantly higher sales than those in villages. The level of basic infrastructure in the community seemed to be a determining factor. For example, enterprises located in communities with fixed-line telephone connections and 57 The average number of paid workers is found to be higher only in production establishments.

The Services Sector

68

natural gas supply enjoyed higher sales. Unlike trading enterprises, the level of education and experience of the manager did not have a significant impact on sales. However, gender was found to have a significant effect on sales, with female-managed enterprises reporting far lower sales. These results are very similar to those found for trading enterprises. For example, older firms with more experienced managers appeared to be more productive; there was a positive relationship between productivity and distance from the market; and household-based firms were found to be less productive. Overall, there was a negative relationship between productivity and firm size. Tourism is also part of these services. The tourism industry has great potential for absorbing labor and generating income. Punjab has a number of tourist sites that attract foreign and national tourists, but various social and cultural constraints, ineffective promotional policies, inadequate infrastructure and tourist services, and poor law and order has meant that Pakistan’s tourism sector has not developed in line with its potential. The Punjab Vision 2020 lays special emphasis on promoting such services as tourism, hotels, and resorts to improve income generation and employment. The policy envisages the development of tourist resorts, promotion of the hotel and entertainment industry, and development of theme parks. 7.3 Transport and Communications Transport and communications is not only an essential service sector but also provides the hard infrastructure on which the wider services sector can grow. According to the United Nations SNA93 classification, the transport, storage, and communications sector consists of railways, water transport, air transport, pipeline transport, road transport (mechanized and non-mechanized), communications, and storage facilities. The performance of this sector affects that of all other sectors and thus has a strong influence on the province’s economic and social development. The sector not only links production units with markets but also creates economic opportunities by connecting people to markets, services, and information. It also serves as a major source of Government revenue through taxation. For example, in Punjab, nearly 7 percent of provincial revenues in FY 2005 were generated through motor vehicle tax (MVT).58 7.3.1 Transport Sector In Punjab, the transport sector accounts for 10.5 percent of GDP and 20 percent of the services sector. Punjab contributes 55 percent to the national GDP from transport. About 5 percent of the province’s labor force is involved in this sector, and its value-added grew faster (5.8 percent) than the national level (4.1 percent) during FY 2001-FY 2006, mainly because of higher growth in the road sector in Punjab during this time. Total road length has grown by 10 percent per year between FY 2001 and FY 2005, mainly because of the increase in length of farm-to-market roads (from 24,785 km in FY 2001 to 36,138 km in FY 2005: an increase of 7.8 percent per annum). The number of motor vehicles on the road has grown by 8.2 percent per year, the highest growth observed for auto-rickshaws (16.1 percent), followed by scooters/motorcycles (9.9 percent) (Table 7.3).

58 MVT contributed 26 percent in indirect tax revenue and 16 percent in total tax revenue in Punjab in

FY2005.


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Table 7.3: Performance of Transport and Communication Sector in Punjab Year 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 Growth Rate

(2000/01 to 2005/06)* (percent)

Telecommunication Services No. of Departmental Telegraph Offices

202 203 187 288 164 89 -12.8

No. of Telephones (‘000)

1,888 2,060 2,272 2,555 2,952 2,804 6.8

No. of Departmental Telephone Exchanges

1,449 1,408 1,577 1,690 1,785 1,695 2.6

No. of PCOs 38,498 52,014 67,357 184,276 135,822 142,967 24.4No. of Television Sets 2,663,788 2,743,702 2,826,013 2.0No. of Newspapers and Periodicals

63 63 136 136 364 42.0

Postal Services No. of Post Offices 7,355 7,329 7,307 7,156 7,347 0.0No. of Letter Boxes (‘000)

14 12 13 16 14 0.0

Transport No. of Motor Vehicles 2,686,435 2,857,631 3,031,723 3,322,974 3,844,526 4,318,826 8.2No. of Motor Cars, Jeeps, and Station Wagons

526,070 544,337 570,678 618,934 696,820 793,789 7.1

No. of Motorcycles and Scooters

1,519,003 1,631,840 1,741,839 1,938,489 2,313,450 2,669,497 9.9

No. of Trucks (numbers)

32,567 32,670 33,114 33,905 34,730 37,064 2.2

No. of Delivery Vans 46,692 47,232 51,053 54,827 64,217 74,987 8.2No. of Buses 48,928 49,606 51,415 54,116 57,241 62,984 4.3No. of Taxis 16,125 16,193 16,212 16,374 17,801 16,534 0.4No. of Auto Rickshaws 43,947 53,139 61,266 77,970 101,025 107,531 16.1No. of Other Vehicles 453,103 482,614 506,146 528,359 559,242 556,440 3.5

Roads Road Length (km) 43,993 44,827 60,431 65,459 71,799 77,232 9.8No. of Road Accidents 5671 5277 5053 5205 4842 -0.03-

Source: Bureau of Statistics (2006) Note: Growth Rates are for period 2000/01 to 20005/06 in all cases for which data were available for 2005/06 – otherwise are for the period 2000/01 to 2000/04/05. The road and road transport sector supplements the operation of other transport services by carrying commodities from farms and factories to airports, seaports, and railway stations. It thus facilitates the production, distribution, consumption, and exchange of goods, and thereby accelerates the rate of economic growth. Roads serve as basic infrastructure, connect backward areas with cities, and help in reducing regional differences. An improved road transport system will have a positive effect on agricultural production by providing easy access to markets, and facilitating timely delivery of inputs/outputs on/from farms. This helps in reducing price differences among markets and regions. In addition, road transport facilitates the accessibility of the rural population to nearby towns and cities and therefore helps control rural-urban migration. Road transport also plays a crucial role in industrial development, mining, construction, defense, law and order, and social development. The transport and communications sector has strong forward linkages with the commodity-producing sectors. In addition, it has strong linkages with all other sub sectors of the services industry, such as wholesale and retail trade, finance and insurance, and social, community and personal services. The transport sector is the largest consumer of petroleum products, accounting for nearly 62 percent of total petroleum, oil, and lubricants (POL) products in Pakistan as well as in Punjab. It also consumes 3 percent of total gas. The efficiency of the transport sector depends largely on fuel prices and quality of roads.

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70

Because of the rising prices of petroleum products, the pattern of energy consumption is changing in favor of natural gas. The State Bank of Pakistan (2006) estimated the relative price index of oil to gas as 1:1.8; i.e., the per unit cost of oil was 1.8 times higher than that of gas in 2005. However, an increase in petroleum prices has a negative impact on overall business activities in the country. It increases the cost of transporting and handling goods, electricity fuel adjustment, and maintenance, and therefore has a collective effect on the cost of production and business. It has a negative effect on household budgets by increasing transport costs. 7.3.2 Communications Sector Modern communications services facilitate the flow of information and thus play a vital role in increasing the pace of economic growth. Post offices, telegraph, telephone, television, radio, newspapers/periodicals, cellular phones, and the Internet are the main communications services available in Pakistan. The communications sector has also made remarkable progress over the last five years. For example, the number of telephone connections, PCOs, and newspapers/periodicals has increased considerably. However, postal services remained stagnant and telegraphic services show a decline, probably due to increasing use of the Internet. The Pakistan Telecommunication Authority (PTA) has made various efforts to increase telecom access in underdeveloped areas, cut prices, and improved service quality, particularly in Punjab. The performance of these services in Punjab is summarized below.59 Fixed local loop services. About 3,026,982 fixed line connections operate across Punjab, of which 2,303,006 were in urban areas and 723,976 connections in rural areas in FY 2005. Tele-density in Punjab rose from 2.7 percent in 2003 to 3.5 percent in 2005. Wireless local loop (WLL) services. In order to provide WLL services in remote and rural areas where laying landlines is difficult, the PTA has issued 76 licenses to 17 companies for provision of local loop services in Pakistan. So far, only four have started commercial operations. Currently, 128,792 WLL connections are provided by PTCL and Telecard in Punjab. At present, total WLL tele-density in Punjab stands at 0.15 percent, and is expected to increase in coming years. PTCL provides WLL services in 78 cities and towns in Punjab. Cellular mobile services. Currently, there are 7,157,223 cellular mobile phone subscribers in Punjab and cellular penetration stands at 8.27. The number of cellular subscribers in Punjab grew by 86 percent in FY2005. Geographical coverage. Over 365 cities are covered by cellular operators in Pakistan, 200 of which are in Punjab. New companies such as Telenor and Warid are expanding their operations rapidly and it is expected that more cities and towns will soon be covered by these companies. Card payphones. Punjab’s payphone sector has grown rapidly in the last three years, creating employment opportunities at the lowest level. Currently, a total of 162,710 card payphones operate across the province. In order to provide telecom facilities to more remote areas, mobile operators are also allowed to establish mobile PCOs where fixed-line telephones are not available. So far, a total of 25,332 wireless payphones have been installed in Punjab. Internet service providers (ISPs). Internet growth in the country has been very fast. In 1996, there were only 10 ISPs; by June 2005, 275 licenses had been issued. There are currently over 2 million ISP subscribers, and over 1,900 cities and towns have Internet access in Pakistan. There are 87 ISP providers in Punjab, serving some 1.2 million subscribers.

59 This summary is based entirely on Professor Abida Haleem Khan’s article in the daily Nation on 3 October

2005.


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Rural telephony. There has been tremendous growth in the country’s tele-density, following the liberalization of the telecom sector. However, out of 13.67 percent total tele-density, rural tele-density is as low as 1.26 percent. Of the 48,268 villages in Pakistan, only 16,353 or 34 percent have telecom access, which is a matter of great concern. Challenges for PTA. Punjab has the highest tele-density in the country after Sindh. However, tele-density trend in its rural areas (e.g., in southern Punjab) are not very encouraging. According to the article cited in footnote 7, 41.5 percent of the rural population in Punjab has telecom access, but this figure may be disputed as the definition of “rural” is not entirely clear, and the number of villages in Punjab, as cited in the article, does not tally with official census figures. The PTA is making efforts to bridge the gap between rural and urban Punjab and a strategy has been formed to address this issue. Private investment is required to ignite the development of information and communications technology in rural areas. There is need to increase public-private partnerships, create awareness among common people, and encourage commercial banks to introduce financial schemes for rural areas. Similarly, providing cross subsidies, access deficit charges, and universal service funds to operators working in rural areas are other options for increasing rural tele-density in Punjab. Rural tele-centres could also be installed to improve tele-density. In addition, the PTA is taking the necessary steps to expand telecom facilities across underserved and remote areas of Punjab. Under the deregulation policy, a universal service obligation fund has been created to develop telecom facilities in rural areas. This fund will be utilized in consultation with the provincial Governments. Mobile operators have been allowed to establish mobile PCOs in areas where fixed-line telephone services are not available. Use of wireless technology (WLL) has facilitated the extension of telecom facilities to un-served areas. The PTA must explore the possibility of establishing community-based telecasters allowing telecom facilities to be shared instead of having dedicated facilities. Such measures would help to bridge the digital divide, promote the economy, and alleviate poverty. The Government of Punjab aims to improve the important sector of transport and communication. The Vision 2020 focuses on improving inter-city and urban transport, modernizing road networks, and developing mass transit networks for mega-cities. 7.4 Steps to Expand the Growing Services Sector As already stated, the services sector contributes almost 54 percent to Punjab’s economy and absorbs 34 percent of its employed labor force. Most of the enterprises in this sector are small and have little capacity to generate paid employment. Agriculture is still the largest employer, with people working either as owner-operators or sharecroppers. It is possible that some are involved in agricultural as well as non-agricultural activities. According to the HIES (2001/02),60 2 percent of households in Punjab are involved in both agricultural and non-agricultural activities. The analysis presented in previous sections demonstrates the fledgling status of this important sector as well as the strong potential linkages of all sub sectors of the services sector not only with the commodity-producing sectors but also with each other. This great potential has yet to be realized. The lack of financial services, lack of market information system, inadequate road network, and lack of transport and communication facilities have been identified as major impediments to the expansion of the services sector and overall level of business activities. International evidence indicates the importance of various services for the speedy growth of commodity-producing sectors such as agriculture, manufacturing, and construction. For example, a modern and growing agricultural sector needs the support of various services, including accounting services, legal services, soil testing and other laboratory services, veterinary services, repair and maintenance services, and so on. Similarly, all the sub sectors of the services sector depend on each other. For example, a

60 The HIES asks questions about primary and secondary occupations whereas the Labour Force Survey

collects information only on main occupations. This survey is the main source of data on employment. Including secondary occupations would increase the share of employed people in the services sector.

The Services Sector

72

growing tourism sector also needs accounting services, transport services, translation services, customer services, legal services, advertising services, and so on. These linkages are described in Table 7.4.

Table 7.4: Business Services as a “Breakthrough” Sector

To increase competitiveness, this sector… Needs at least these business services: Accounting Computer Consultancy Equipment maintenance and repair Equipment rental and leasing Legal services Market research Research and development Services incidental to agriculture Soil testing and other laboratory services

Agriculture

Veterinary Accounting Computer Consultancy Equipment maintenance and repair Equipment rental and leasing Legal services Market research Research and development Industrial design Industrial engineering

Manufacturing

Packaging Accounting Computer Consultancy Equipment maintenance and repair Equipment rental and leasing Legal Market research Research and development of new methods and material Architectural Consulting engineering

Construction

Design Accounting Computer Consultancy Equipment maintenance and repair Equipment rental and leasing Legal Market research

ICT/telecommunication

Research and development Accounting Computer Consultancy Equipment maintenance and repair Equipment rental and leasing Legal

Finance

Market research Accounting Computer Consultancy Equipment maintenance and repair Equipment rental and leasing Legal Market research

Transport

Engineering

Continued…


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To increase competitiveness, this sector… Needs at least these business services: Accounting Computer Consultancy Equipment maintenance and repair Equipment rental and leasing Legal Market research Advertising Convention Medical, dental, nursing

Tourism

Translation In addition, inputs from one sub sector of the services sector needs the services of other sub sectors and provides inputs to all sub sectors of the services sector. For example, education, business, and financial services depend on telecom services, and the resultant input is useful to all sub sectors (Table 7.5). Table 7.5: Inter-linkages among Selected Services Sub sectors

Inputs From Service Sector Inputs To Education and training Telecommunications All services Business services

IT services and R&D Engineering services Financial services Telecommunications Education and training All services Education and training (teachers) Business services

IT services Management consulting Architecture(schools) Engineering (schools)

Construction (schools) Financial Services Telecommunications Financial services All services Education and training Business services

IT services Market research Management consulting

Telecommunications Business services All services Education and training Business services


Financial Services Telecommunications Air Transport Services Business services Education and training Postal and courier services Business services Distribution service

IT services Health (emergency) services Market research Recreational, culture, sports Management consulting Tourism

Architecture(airports) Engineering (airports, aircrafts) Construction (airports) Financial Services Telecommunications Rail Services Distribution service Education and training Business services


The Services Sector

74

Inputs From Service Sector Inputs To Continued…

Engineering (stations, trains) Construction (stations, bridges, rails) Financial Services Telecommunications Construction services Educational services (schools) Education and training Health services (hospitals) Business services Tourism Architecture services Infrastructure development

for transport services Engineering services


R&D Financial services Environmental services Distribution services (supplies) Transport services (supplies) Telecommunications Tourism Hotels and restaurants Education and training Distribution service Business services Health services

IT services Recreational, culture, sports Market research Transport services Management consulting

Design and packaging Architecture (attraction) Construction (attraction) Financial services Environmental services Air transport

7.5 Recommendations A concerted and integrated strategy is required for effective service sector development in Punjab that recognizes the key linkages identified above. This strategy is already embedded in the overall Vision 2020 but needs to be fully articulated and defined in a framework that links it to ongoing initiatives in education and training. The services sector has great potential for absorbing labor. Skill enhancement through higher education and better training can help expand a business. For example, a small tea stall run by an owner-proprietor with the help of unpaid family workers can be converted into a hotel with better quality of service, a variety of products, and improved management. Such transformation from micro- to medium enterprise can generate employment at all levels, from managers to unskilled laborers. Improved infrastructure is vital for the growth of a business in rural and urban areas. A developed road network, transport, communications, and storage facilities allow easier access to raw material on the one hand and profitable marketing of output on the other. Provision or easy access to various services, such as consultancy and engineering services to help introduce modern production equipment and financial services, are also facilitated by a developed road and transport network. In addition, rural electrification and water management are equally important in setting up a manufacturing or commercial unit in rural areas. These services, as already identified, also generate demand for several other service sector inputs. Information on labor markets—including the supply of labor in different regions as well as demand for labor by different markets and in different regions—is crucial. Such information can be used to determine the needs of the upcoming workforce in terms of training and skill development. In addition, a developed market information system provides information on potential markets that can help establish strong backward and forward linkages.


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Access to and availability of credit has been identified as a severe constraint on various establishments in the survey data that are available. In Punjab, and more generally in Pakistan, informal moneylenders are people’s main source of credit in rural areas. Despite its progress, the microfinance sector is still in its initial stages of development. Three different types of institutions are involved in the service delivery of credit to the needy. These include (i) specialized microfinance institutions (MFIs), including commercial banks; (ii) RSPs; and (iii) NGO MFIs. The Pakistan Microfinance Network (PMN) is the representative body of MFIs in Pakistan, and includes formal sector financial institutions, NGOs, and RSPs. According to the PMN, “the microfinance sector of Pakistan is limited by a narrow range of products and a focus on credit, ignoring the potential of savings, insurance and leasing. The important service sector needs scaling up, product and market diversification in order to ensure greater sustainability, effectiveness and risk management. One factor that may facilitate the growth of MFIs is the ability to learn from the informal financial markets. The study of the informal financial markets can help the microfinance institutions in developing their core niche, in exploring the options for cross-subsidization between markets and in developing viable and demand-driven products and practices. This can help the sector outgrow its current small outreach to a more sustainable size” (PMN 2005). Local Governments can play an important role in setting up businesses. The provision and maintenance of infrastructure and supply of regulatory and legal services depends on the capacity of local Governments. The Government itself can be a strong catalyst for the development of the services sector by outsourcing to specialized private sector agencies the various inefficient and outdated services that it requires to run: this could prove an important means for enhanced efficiency. 7.6 Conclusion Services, taken together, are the largest sector of Punjab’s and the national economy, and have tremendous potential to generate broad-based growth through forward and backward linkages with other sectors. Very little information or documentation is available on the services sector, but recent studies indicate that the sector is dominated by small enterprises (often sole proprietorships) that have little access to finance, few linkages with business services, and have to contend with generally poor public services. Since the sector is composed of a variety of activities, the issues to be dealt with are diverse, and require much more comprehensive data and information than is generally available.

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8. Education The performance of the education sector has remained unsatisfactory in Pakistan throughout the country’s history. Not only is the overall education level low, there are wide gender and rural-urban differences in the provision of, and access to education services. According to the available statistics, the proportion of literate households is much higher in northern Punjab than in central and southern Punjab. The data also indicate that the literacy rate of poor households is about half that of non-poor households, and that this difference is even higher in urban areas. This chapter looks at Punjab’s education indicators, and at recent initiatives in the sector that are expected to yield dividends in the medium term. 8.1 Key Indicators This section looks at some key education indicators in Punjab, and benchmarks the situation with regard to educational attainment. 8.1.1 School Attendance The proportion of females who have ever attended school shows an encouraging trend. The proportion of population that has ever attended school is higher and the gender difference lower among higher-income groups. However, a comparison of data from the PIHS (FY 1996) and PSLM (FY 2006) shows that the proportion of males that has ever attended school has declined over time, not only in Punjab but also in Pakistan overall (Table 8.1). This decline has occurred largely in rural areas.

Table 8.1: Population that has ever Attended School, Pakistan and Punjab

(Percent) Male Female Area

FY 1996 FY 2006 FY 1996 FY 2006 Punjab 70 70 38 49 Urban areas 80 82 58 67 Rural areas 65 63 29 39 Pakistan 69 68 35 44 Urban areas 80 80 57 64 Rural areas 63 61 25 33 Source: PIHS (1995/96) and PSLM (2005/06). 8.1.2 Functionality The PESRP Annual Progress Report (2004/05) shows that the number of public sector functional schools increased from 60,003 to 62,672 in Punjab during FY 2002 to FY 2005. The report also finds that the actual posts filled against sanctioned posts were 87 percent at primary level and 80 percent at middle school level in Punjab as per May 2005. Highlighting the presence of facilities in primary and middle schools, the report says that middle schools are better equipped with water, latrines, electricity, and boundary walls. By May FY 2005, nearly 16 percent of primary schools had no water, 38 percent had no boundary walls, 65 percent had no electricity, and only 59 percent had latrines. Middle schools fare better in terms of available facilities. 8.1.3 Literacy The literacy rate in Punjab is marginally higher than the average for Pakistan. Overall literacy in Punjab is 65 percent for males and 44 percent for females. A remarkable improvement has occurred over time in Punjab’s female literacy rate: it increased from 29 percent in FY 1996 to 47 percent in FY 2006. This increase is higher than average relative to Pakistan (Table 8.2).

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Table 8.2: Literacy Rates in Pakistan and Punjab (Percent)

Male Female Area FY 1996 FY 2006 FY 1996 FY 2006

Punjab 52 66 29 47 Urban areas 65 80 50 67 Rural areas 46 58 20 37 Pakistan 52 65 26 42 Urban areas 66 79 49 64 Rural areas 45 57 16 31

Source: PIHS (1995/96) and PSLM (2005/06). Note: Literacy has been defined as the ability to read a newspaper and to write a simple letter. The MICS (2003/04) provides district-level information on literacy in Punjab. In order to examine the changes in literacy level, it is useful to compare the results of the 1998 Population Census and MICS (2003/04). All districts in Punjab show an improvement since 1998. According to the data, Rawalpindi is on top (78 percent) in terms of literacy, followed by Lahore (74 percent), Sialkot (70 percent) and Chakwal (69 percent). In 1998, there were eight districts where the literacy rate was less than 35 percent; this number fell to one in FY 2004. The ranking by literacy for Rajanpur, Muzaffargarh, and Lodhran (all located in southern Punjab) has not changed since 1998. It is interesting to note that these districts are situated in southern Punjab, where districts with higher literacy are either in central or northern Punjab. In terms of literacy levels, these patterns are fairly consistent with the incidence of income poverty in these regions. Reduction in gender disparity in education is a key MDG and RSP goal. Despite a continuous decline over time, there is still a large gender gap in education. This disparity is lowest in the major cities of Punjab as reported in the MICS (2003/04). During the period from FY 1998 to FY 2004, the overall change in literacy rate for Punjab was about 7 percent (47–54 percent): 6 percent for males and 9 percent for females. The percentage change for females (26 percent) is more than double that of males (11 percent). 8.1.4 Enrolment Rates Gross enrolment rates (GERs) at primary, middle, and matriculation levels across poor and non-poor households indicate an increase over time for both males and females. This increase at each level is higher in Punjab than in Pakistan as a whole, but there is a large rural-urban gap at each level. Enrolment at the middle level is generally measured for the age group 10–12 years. However, the age group 11–13 years showed a higher enrolment rate at this level for both Pakistan as well as for Punjab. This is due to the large number of over-age children who are enrolled in these classes. An exceptionally low enrolment for girls at matriculation level in rural areas was reported in FY 1999 (16 percent), but this had increased to 22 percent in FY 2005 (Table 8.3). The gap between male and female enrolment in rural areas is even wider at this level.


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Table 8.3: Gross Primary, Middle and Matric Level Enrolment Rate in Punjab and Pakistan (Percent)

Punjab Pakistan Male Female Male Female

Education Level

FY 1999 FY 2006 FY 1999 FY 2006 FY 1999 FY 2006 FY 1999 FY 2006 Primary level

All areas 82 98 68 89 80 94 61 80Urban areas 91 112 97 107 95 107 92 100Rural areas 79 93 58 83 75 89 50 71

Middle level All areas 47 58 39 48 48 55 32 42Urban areas 57 66 66 75 62 67 60 68Rural areas 44 54 28 37 43 50 21 31

Matric level All areas 47 55 27 40 53 54 27 35Urban areas 61 74 50 65 66 72 55 58Rural areas 41 46 16 28 47 45 13 22

Source: PIHS (1998/99) and PSLM (2005/06). Notes: GER at primary level: [Number of children attending primary level (classes 1 to 5) divided by number of children aged 5 to 9 years] multiplied by 100. Enrolment in katchi is excluded. GER at middle level: [Number of children attending middle level (classes 6 to 8) divided by number of children aged 10 to 12 years] multiplied by 100. GER at middle level: [Number of children attending matric level (classes 9 to 10) divided by number of children aged 13 to 14 years] multiplied by 100. Despite an increase in enrolment at each level, nearly 9.57 million children of school-going age are out of school (MICS 2003/04). About 36 percent children aged 5–9 are out of school; this proportion is 29.5 percent for the age group 10–12 years, 40 percent for the age group 13–14 years, and 58 percent for the age group 15–17 years. Primary level completion rates, however, improved considerably from FY 1999 to FY 2005, increasing from 38 to 45 percent. The PSLM for 2005/06 collects information on enrolment in all types of schools. The GER in Government primary schools, calculated as the number of children enrolled in Government primary schools divided by the number of children of primary school-going age, indicates an increase in this measure over time. However, there has been a decline in primary level enrolment in Government schools as a proportion of total primary enrolment. Thus, public sector education has been displaced to some extent by the private sector. 8.1.5 Capacity Utilization The utilization of educational infrastructure can be seen in term of student-institution, student-teacher, and teacher-institution ratios at primary and secondary school levels. The data collected by the Education Management Information System (EMIS) indicate that the student-institution ratio at the primary level was less than 100 until FY 2004. In recent years, this ratio has increased to 115 (Table 8.4). Rafiq (1996) draws a boundary line for capacity utilization of a school. He points out that, on average, there should be 40 students in a primary school. This requires a total school enrolment of 200 students. However, he assumes that a school with less than 100 students is under-utilized. The data show that, despite a considerable increase in enrolment at primary level, girls’ enrolment in particular is still low. This implies those girls’ schools are not fully utilized, which suggests that there is capacity for increasing girls’ enrolment without incurring any additional construction costs. Table 8.4 shows that, because of low teacher-school ratios, one teacher teaches a class of 38 students. A low pass rate indicates the intensity of wastage in education, especially at matriculation and higher levels. Despite an improvement from 49 percent in 2005 to 60 percent in 2006, the pass out rate at matriculation level is still not satisfactory. Of the students who passed in FY 2006, 36 percent belonged to the sciences group and 25 percent to the general group. The proportion of girls among

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those who passed was higher than that of boys. However, the proportion of boys in the sciences group is higher, while the general group includes more girls. The data also indicate that the proportion of students who achieved an A+ grade was almost the same among boys and girls in science group. However, in the general group, the proportion of boys with low grades is higher, and is extremely low among those who achieved higher grades (Figures 8.1 and 8.2). Table 8.4: Capacity Utilization at Primary Level in Punjab

Student Institution Ratio Student Teacher Ratio Teacher School Ratio Year Total Boys Girls Total Boys Girls Total Boys Girls

FY 1995 85 99 70 28 28 27 3 3 3FY 1996 88 102 73 28 28 27 3 4 3FY 1997 83 97 69 27 28 26 3 4 3FY 1998 84 100 68 26 28 23 3 4 3FY 1999 94 113 77 30 32 27 3 3 3FY 2000 95 117 74 30 33 27 3 4 3FY 2001 95 113 77 31 34 28 3 3 3FY 2002 94 111 78 32 35 29 3 3 3FY 2003 95 113 79 30 33 27 3 3 3FY 2004 97 112 83 33 35 31 3 3 3FY 2005 110 124 97 37 38 36 3 3 3FY 2006 115 128 103 38 39 38 3 3 3

Source: BOS (2006).

Figure 8.1: Pass Rates for Matric Examination in Punjab by Grade (Science Group)

4954

5966

74

8576

5146

4134

26

1524

0102030405060708090

A+ A B C D E Others

Grades Acquired

% o

f pas

sed

out i

n sc

ienc

e gr

oup

Boys Girls

Source: Bureau of Statistics (2006). Figure 8.2: Pass Rates for Matric Examination in Punjab by Grade (General Group)

9 8 1221

34

50 48

91 92 8879

66

50 52

0102030405060708090

100

A+ A B C D E Others

Grades Acquired

% o

f pas

sed

out i

n ge

nera

l gro

up

Boys

Girls

Source: Bureau of Statistics (2006).


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8.1.6 Dropout Rates Grade repetition and dropout rates are also indicators of wastage in education. However, there is a dearth of reliable information on this important aspect. The PSLM reports the proportion of population aged 10 years and above that had completed primary schooling or higher. This proportion indicates an overall improvement in Punjab from 38 percent in FY 1999 to 45 percent in FY 2006.61 he MICS reports the percentage of overage children currently enrolled in primary school as a proxy for the dropout rate in Punjab. Using the total population of children aged 5–17, nearly 37 percent of “overage” children (10–17 years) were found to be enrolled in primary schools. 8.1.7 Expenditure on Education Total expenditure on education as a percentage of Punjab’s GPP has increased steadily after FY 2004, since the initiation of the Punjab Education Sector Reform Program (PESRP). The distribution of education-related expenditure across broad categories indicates a sharp and substantial rise in expenditure on primary education, especially after FY 2003. A rise in secondary and university education expenditure can also be seen in Figure 8.3. However, expenditure on professional education shows a declining trend. Figure 8.3: Total Expenditures on Education in Punjab (Rs Million)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

1997

/98

1998

/99

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

Rs m

illio

ns

Primary Secondary Univers ity Profes s ional

Source: Department of Education, Government of Punjab. 8.2. Major Initiatives in the Education Sector The Government of Punjab is fully committed to making visible improvements in the education sector. This is evident from the tripling of the allocation for education from Rs 9,200 million in FY 2006 to Rs. 21,480 million in FY 2008. The Government has taken some key initiatives in education in the last three years under the Chief Minister’s Accelerated Program for Education. These include (i) improvement of physical infrastructure in seven universities, (ii) provision of IT equipment to computer labs in schools, (iii) the initiation of a science education project, (iv) provision of libraries to a number of middle and high schools, and (v) the establishment of Child Friendly Schools. The Government’s flagship program in education is the PESRP, which was started in 2003. This program is discussed in greater detail below.

61 This indicator takes into account all those individuals who reported to have completed Class V or higher,

or who are currently enrolled in Class VI or higher.

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82

8.2.1 Punjab Education Sector Reform Program The PESRP focuses particularly on quality and access issues in education. • public finance reforms to realign expenditures at the province and district level toward

education, • devolution and public sector management reforms, • education sector reforms to improve quality of, access to, and governance of the education

system. The PESRP’s key activities are as follows. Provision of missing facilities. Missing facilities, such as electricity, drinking water, toilets, boundary walls, and furniture, are to be provided to all primary schools during the program. Two tranches of Rs. 13 billion each were released to the districts at the end of FY 2006, and Rs. 2.2 billion has been released for July 2007 for provision of missing facilities. Provision of free textbooks. This component aims to provide free textbooks to all students from katchi level to Class V with effect from the academic session starting in FY 2005 and from katchi level to Class VIII with effect from the academic session starting in FY 2007. Free textbooks are to be provided to all students in Government schools in all 35 districts from katchi level to Class X. So far, all 35 districts have received their allocated share of books. Improved teacher management and recruitment. Following rationalization, all remaining teacher vacancies are to be filled on the basis of a higher qualification threshold through a transparent recruitment process. About 49,361 teachers have been recruited so far. A dedicated directorate of staff development has been established for systematic in-service teacher training. Improved teaching materials and curricula. Curriculum development has been opened to input from outside contributors, and open competition introduced among private sector printers to improve the quality of textbooks. Stipends for girl students. To address the gender imbalance in secondary education, a stipend program for girl students in 15 low-literacy districts has been introduced. Nearly 88 percent of eligible recipients have received this stipend. By end-FY 2006, Rs. 1.042 billion had been dispersed to 342,502 girls, with a resulting increase of 45.5 percent in the middle-level enrolment rate in the project districts. Revitalization of school councils. To encourage active public and parental participation in school management and to promote local accountability of teachers, school councils have been revitalized and revamped with majority membership given to students’ parents. Development budgets of up to Rs. 0.4 million have been assigned to the control of the councils. A pilot capacity building project has been undertaken to target 2,400 school councils in six districts, including Attock, Chakwal, Gujrat, Faisalabad, Vehari, and Rahim Yar Khan. Public-private partnership through revamped Punjab Education Foundation (PEF). The PEF has been revamped with enhanced resources and freed of bureaucratic controls. It aims to encourage the involvement of the private sector in education delivery with a special focus on rural areas.


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Box 8.1: Assessing the PESRP

The presence of a reform-minded Chief Minister in Punjab opened the way for new support. When he took office in 2002, he immediately recognized education as an area that needed drastic improvement. To signal the Government’s commitment to education, his first step was to announce the Government’s policy of free education. The Chief Minister then developed political alignment within his cabinet and close political advisors, who worked with a team of reform-oriented civil servants. This was followed by a serious effort to review and design technical aspects of a three-year education reform program. The design process included intensive consultation with all stakeholders, including district Governments, teachers, education department field staff, communities, and civil society. World Bank financing provided the necessary fiscal space to implement the reforms. After implementation began in 2003, the program has continued to be monitored by a high-level provincial steering committee, headed by the chief secretary of the province and including senior bureaucratic leadership from the education, finance, and planning departments. This is supported by a system of robust monitoring and information management that provides the province’s leadership with credible information to help form policy decisions to steer education sector reforms. The program has also benefited from an extensive mass awareness campaign through the print and electronic media. The program is now in its third year of implementation and is supported by a series of annual development policy credits. It is already showing significant gains. Within a year of its inception, enrolment in Government primary schools increased by 13 percent (compared with the previous trend of a less-than-2 percent increase per year). Girls’ enrolment in Grades 6 to 8 in low-literacy districts receiving a stipend increased by 23 percent. A recent school census shows another overall 7 percent increase in the enrolment rate in public schools. Recent household survey data show that net primary enrolment rates in the province increased from 45 percent in 2001 to 58 percent in 2004/05. Source: Based on World Bank. 2005. Education Reforms in Pakistan—Building for the Future. Edited by Robert M. Hathaway.

Monitoring and evaluation. The EMIS has been upgraded for provision of timely and accurate sector-wide information to district and provincial decision makers. Provincial and district monitoring cells have been established to check the quality of civil works, counter teacher absenteeism, and encourage better learning outcomes and teaching quality. A system of third-party validation has been introduced to obtain independent assessments of the quality of various interventions and their outcomes. As a result of these initiatives, enrolment rates have shown remarkable progress after FY 2003 (Figure 8.4). Girls’ enrolment during this period increased to 44 percent from 43 percent. The PESRP aims to improve this to 49 percent. Figure 8.4: Enrolment Rates in Punjab*

0

2000000

4000000

6000000

8000000

10000000

12000000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

An average increase of 1.5% per year 12.7%20.2%

Education

84

Box 8.2: The State Bank’s Evaluation of PESRP The State Bank of Pakistan has conducted an impact analysis of the PESRP by considering two factors. First, did the target group (in this case, Punjab) see a significantly greater improvement in the reform period compared with the pre-reform period? Second, did the target group perform relatively better than the non-target group (the remaining three provinces)? The results indicate a significantly larger improvement in gross as well as net primary enrolment rates during the reform period in Punjab compared with the other provinces, which was not the case in the pre-reform period. The better progress by Punjab in the reform period holds for both male and female groups and for rural and urban regions. The lessons learnt from this program indicate that, if financial constraints are eased, appropriate physical infrastructure facilities provided, and committed and competent teachers employed, then progress can be accelerated toward substantially improving educational access and outcomes in Pakistan. Source: State Bank of Pakistan. First Quarterly Report for FY 2006. 8.2.2 Poverty Focused Investment Strategy (PFIS) In addition to the PESRP, the Government of Punjab’s PFIS emphasizes the consolidation of its already-expanded public school infrastructure, targeting dropout rates, instituting governance and institutional reforms and strengthening education management, and improving quality by focusing on teacher training through continuous professional development, child-friendly environments, and curricula. It strongly advocates taking advantage of the rapid growth of the private sector by encouraging its further growth and incentivizing private schooling through initiatives like the PEF. The literacy sector needs to further target collaboration with the non-formal sector and NGOs and improve gender targeting. 8.2.3 Punjab Devolved Social Sector Program (PDSSP) ADB, while evaluating the PDSSP, has identified a number of reforms needed in the education sector, including the need to (i) develop student-teacher ratios beyond the primary level, (ii) set objective criteria for inter-district transfers, (iii) expand the role of school councils, and (iv) expand facilities for handicapped children. The program also advises that local Governments develop a regulatory framework for private schools, and that authority to award autonomy to educational institutions rests with the district Government rather than the provincial department of education. 8.2.4 Targets for Millennium Development Goals The Government of Punjab has set the following targets to attain the MDGs for education (Table 8.5).

Table 8.5: Key Education Indicators/Medium-Term Targets, Timeframe for Achieving MDGs

Indicator (Percentage)* FY 2002 FY 2004 to FY 2005

FY 2008 Projected Year of

Reaching MDG

2015 MDGs

Literacy rate (population aged 10 years and above) 47 54 65 2013/14 88Net enrolment rate for males at primary level 47 60 76 2012/13 100Net enrolment rate for females at primary level 43 55 70 2012/13 100Net enrolment rate of both at primary level 45 58 74 2012/13 100Gender parity index for tertiary education 0.78 0.88 0.94 2007/08 0.94Source: Chairman, Planning and Development Board. Speech at the Punjab Development Forum, 2006. * All indicators in this table are in percentages except for the Gender parity index which is an absolute number. Technical and Vocational Education In Pakistan, technical and vocational training is offered by private institutions and institutions under various ministries and departments at the federal and provincial level. Informal training through the traditional system of ustad-shagird (teacher-pupil) also provides training to a large proportion of the population engaged in the informal sector as wage earners or self-employed workers. Technical and vocational education has been neglected in Punjab in the past, and little effort has been made to prepare curricula and devise a system of examination for such education. Individual training


85

institutions devise their own courses depending on the skills of their instructors. Examinations are not standardized, and there is no uniform criteria to evaluate graduates of different institutions. The skill concentration of various institutions does not seem to reflect the demands of the marketplace. This is why there is surplus skilled manpower in some trades and shortages in others. Due to this problem of mismatched supply and demand, the expansion of polytechnics has slowed down. Teacher training is crucial for improving the quality of education, but it has been sorely neglected. As a result, the teachers training program suffers from serious problems, such as lack of laboratories, science equipment, libraries, old curricula, and insufficient teaching staff. Table 8.6 gives details of capacity utilization in technical institutions in Punjab.

Table 8.6: Capacity Utilization in Technical Institutions in Punjab

FY 2006 Growth Rate ( percent) (FY1996 to FY 2005)Institution Student-

institution ratio

Student-teacher

ratio

Teacher-institution

ratio

Number Enrolment Teaching

Colleges of Technology/ Polytechnic Institutes

1,063 23 47 1.5 5.4 -0.6

Commercial Training Institutes 335 25 13 1.2 12.4 2.9Vocational Institutes 122 21 6 0.3 4.6 -4.1Training Institutes/ Apprenticeship Training Centers

403 15 28

Vocational Teacher’s Training Institute for Women, Lahore

230 07 31 0.0 -1.9 -3.0

Technical Teacher’s Training College, Faisalabad

405 10 39 0.0 -0.3 -0.7

Source: BOS (2006). As mentioned earlier, on-the-job training is imparted in the informal sector through the ustad-shagird system of skill formation. Because there are not enough formal training institutions to cater to the demand for technical education, and because the skills that these institutions impart are not appropriate to meet the existing demand, the ustad-shagird system of informal training plays an important role. It not only provides training but also ensures employment. This system works on a reciprocal basis and serves the interest of both parties. The Government of Punjab has recently established the Technical Education and Vocational Training Authority (TEVTA). Details of TEVTA’s working are given in Appendix 4. Higher Education The state of higher education is evident from data on the labor market, which is dominated by the uneducated or less educated. In FY 2004, nearly 50 percent of employed people were literate in Punjab. Among these, about 85 percent were matriculates or less, and only 2 percent were graduates or postgraduates. Access to higher education is not very difficult in Pakistan. However, most university programs emphasize only academic education without developing market-specific skills. The lower demand in the job market for many of the subjects taught at these levels leads to unemployment among the educated. According to the Labour Force Survey, of the total employed, 55 percent were illiterate. Among the 45 percent of literates who were unemployed, 6 percent held higher and professional degrees while the education level of the remaining was below matriculation. This means that either the number of existing jobs is not sufficient to absorb the educated labor force or that the education system has failed to create such skills that are demanded by the market. Based on household-level data, Nazli (2005) found that educated laborers earn 10 percent higher wages than uneducated laborers, while individuals in the “professional” category with more than eight years’ education earn 66 percent more than workers in the “labor” category with the same level of education. A positive association between high mean years of education and better occupation highlights the importance of education in choosing a better occupation. Malik and Nazli (2004) also found that, relative to the uneducated, those with some education have a smaller chance of falling into poverty.

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86

The Government of Pakistan is giving special attention to higher education, and established the Higher Education Commission to promote the standard of universities through the quality of research. The number of private universities has increased in the last 10 years. Data for Punjab show that universities in Punjab have grown at an average annual rate of 12.8 percent since FY 1996. Enrolment in these universities has also risen, as has the number of female teaching staff. Looking at the student-institution ratio, the average number of students per university in Punjab was 3,499 in FY 2006. On average, each university employed 187 teachers and the student-teacher ratio was only 16 (Table 8.7).

Table 8.7: Capacity Utilization at Higher Education in Punjab

Year Student-Institution Ratio Student-Teacher Ratio Teacher-Institution Ratio FY 1996 2,738 14 195 FY 1997 2,784 14 193 FY 1998 3,383 16 210 FY 1999 3,122 18 169 FY 2000 3,255 18 180 FY 2001 3,812 21 179 FY 2002 4,071 22 184 FY 2003 3,064 16 197 FY 2004 3,213 16 196 FY 2005 3,155 17 187 FY 2006 3,499 16 215

Source: BOS (2006). Awareness of the linkages between skills learnt and job market absorption has led to an increase in the number of professional institutions in the last 10 years. The data show that there has been remarkable progress in the fields of commerce, computer sciences, and law, although from a very low base. However, the data also seem to indicate that Punjab’s medical colleges are underutilized. On average, there are only seven students per teacher, and average enrolment in these colleges is only 1,409 per college. The data indicate that the number of medical colleges has increased by 4.6 percent although enrolment in these colleges has increased by only 1.49 percent. Similarly, growth in the number of dentistry colleges has been around 7 percent over the last 10 years, while enrolment has only risen by 0.84 percent and the number of teaching staff has declined (Table 8.8). Enrolment in physical education colleges has also declined, while remaining almost stagnant in colleges of education and institutions related to health. Despite the large demand for medical doctors and increase in the number of medical institutions, the stagnant enrolment rate is cause for concern.

Table 8.8: Capacity Utilization at Professional Education Level in Punjab

FY 2006 Growth Rate (FY 1996 to FY 2006) (percent) Institution Student-

Institution Ratio

Student-Teacher

Ratio

Teacher-Institution

Ratio

No. of Institutions Enrolment Teaching Staff

Institutes of Public Health 174 4 47 0.00 -2.72 -1.36Dentistry Colleges 540 11 50 7.18 0.84 4.28Medical Colleges 1,409 8 187 4.62 1.49 2.72Post-Graduate Medical Institutes 169 2 76 0.00 0.88 3.40Medical Institutes 69 5 15 0.00 6.81 3.52Commerce Colleges 696 33 21 7.62 7.92 9.44Homeopathic Medical Colleges Tibbia Colleges Colleges of Education 500 13 39 3.24 4.67 0.96Colleges of Education for Sciences 350 7 53 0.00 0.56 -4.06Physical Education Colleges 210 17 13 0.00 -2.45 1.84Home Economics College 1,301 15 88 0.00 1.29 0.55Law Colleges 304 16 19 5.15 8.57 4.90National College of Arts 561 11 51 0.00 2.11 1.12Institutes of Computer Science 235 13 18 37.97 43.43 40.38Textile Colleges 469 23 20 7.18 8.10 10.84Source: Bureau of Statistics (2006).


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One important factor in the low absorption rates could be the lack of communication between institutions and industrial establishments. Greater coordination between these institutions and industrial establishments would certainly play a positive role, not only in increasing employment but also in ensuring that the education and skill enhancement offered matches the needs of the job market better. 8.3. Conclusion Education indicators in Punjab are generally better than for Pakistan as a whole, but the province is still riddled with disparities in education across region and by gender. The PESRP is perhaps the most ambitious initiative in education ever taken in Punjab, with possibly significant long-term effects. In general, the prominence accorded to education in Punjab in recent years is likely to have positive effects, if the Government adheres to its efforts.

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9. Health and Population Punjab is the country’s largest province in terms of population, and also has the highest population density of the four provinces. Health services in the province tend to be strained and the quality of public health service is, by and large, poor. This chapter looks at key indicators in health and population in Punjab, discusses the issues and constraints that face the sector, and analyzes the key features of the Government of Punjab’s recent initiatives in the health sector. 9.1 Key Indicators The state of key health and population indicators is discussed in this section. 9.1.1 Population and Population Density In 2006, Punjab’s population was around 87.5 million people, equal to about 55.6 percent of the country’s total population. The province occupies 26 percent of the country’s land area. Between 1951 and 1998, its population density increased by 252 percent. Since 1981, the province’s population has grown at an annual rate of 2.64 percent. At this growth rate, Punjab’s population is projected to double by 2026. The total area of Punjab is 205,345 km2, giving it an average population density of 359 people per km2. Administratively, the province is divided into 35 districts, 129 tehsils, and 25,914 villages. The population of a district ranges from less than a million to more than 4 million people. The population density varies further, from 98 people per km2 in Bahawalpur to 3,566 people per km2 in Lahore. The population growth rate in urban areas has outstripped the overall growth rate, and the share of the urban population in Punjab’s total population rose from 17 percent in 1951 to 31.3 percent in 1998. More than 50 percent of the population in Lahore, Rawalpindi, and Gujranwala districts resides in urban areas, while Muzaffargarh, Narowal, and Chakwal are the least urbanized districts. According to the last two population censuses, Lahore and Muzaffargarh recorded the highest population growth rates (3.46 and 3.38 percent, respectively) while Mandi Bahauddin and Jhelum had the lowest population growth rate (1.87 and 1.09 percent respectively). 9.1.2 Basic Demographics Dependency and vulnerability rates are quite high in Punjab. Nearly 47 percent of the population can be classified as dependant, 42.5 percent is less than 15 years of age, and 4 percent is over the age of 65. The real dependency rate is much higher due to low rates of economic participation among females. Of the population aged less than 15, 14 percent was younger than five, and 2.4 percent younger than one. The proportion of women aged 15–49 was 22 percent. Thus, 69 percent of the population comprising women, children, and the aged can be classified as vulnerable. Other basic demographic statistics in Punjab are also a source of concern and put potential pressures on public resources. On aggregate, the total fertility rate was 4.8 per woman, the contraceptive prevalence rate was 30 percent, the crude birth rate 33.8 per 1,000 live births, and the infant mortality rate (IMR) was 73 per 1,000 births. 9.1.3 Basic Health Basic health indicators in the province are poor: the low literacy rate contributes to this since most people are not aware of basic hygiene practices. For example, the MICS (2003/04) reports that only 41 percent of households use soap to wash their hands before eating and 55 percent wash their hands properly after going to the bathroom. Only half of households (52 percent) are aware of the need for iodized salt—65 percent in urban areas and 46 percent in rural areas. The survey finds that about one in 200 people (0.5 percent) had tuberculosis diagnosed in the past year, with the incidence of tuberculosis increasing with age (1 percent in age-group 50–59, 2 percent in age group 70–79, and

Health and Population

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more than 3 percent in those aged 80 and over). Chronic coughs are common among the elderly—5 percent in the age group 50–59 and 10 percent in those aged 70 or more. About 1 percent of the total population suffers from blindness, and 2.5–4.5 percent serum-positive results for Hepatitis B and C have been recorded by the health department. Nearly 25 percent of the province’s population lives in malaria-risk areas. There is low awareness of HIV/AIDS among married women—only 39 percent had some idea of the risks of the disease. 9.1.4 Child Health Immunization coverage increased from 39 percent in FY 1999 to 58 percent in FY 2006 when measured on the basis of records. On the basis of recall, this proportion was 93 percent in FY 2005. The proportion of immunized children is higher in urban areas than rural areas. Punjab fares better than Pakistan as a whole in terms of immunization coverage based on records (Table 9.1).

Table 9.1: Percentage of Immunized Children (12 to 23 Months) in Punjab

FY 1999 (percent) FY 2002 (percent) FY 2005 (percent) FY 2006 (percent) Male Female Both Male Female Both Male Female Both Male Female Both

A. Based on Recall-One Immunization Pakistan 75 70 73 73 75 74 84 82 83 94 94 94

Urban 83 83 83 83 88 86 92 91 91 94 98 96Rural 73 65 69 70 69 70 79 77 78 94 92 93

Punjab 83 80 81 79 81 80 91 90 90 93 93 93Urban 80 84 82 84 93 89 93 93 93 93 100 96Rural 84 78 81 78 77 78 89 88 88 94 91 92

B. Based on Record-Full Immunized Pakistan 34 30 32 26 29 27 49 49 49 49 49 49

Urban 49 41 45 41 44 43 59 62 61 59 61 60Rural 29 26 28 21 23 22 42 41 41 45 44 45

Punjab 42 37 39 30 35 32 59 58 58 56 59 58Urban 51 50 51 48 55 52 66 68 67 69 70 69Rural 38 33 35 24 28 25 53 52 52 51 55 53

Source: PSLM (2005/06). The IMR and under-five mortality rate (U5MR) are important indicators of overall well being. The MICS (2003/04) data indicate that the U5MR in Punjab was 112 per 1,000 births and the IMR was 77 per 1,000 live births in FY 2004. There was a substantial decline in the IMR from FY 1997 to FY 2004, particularly in rural areas, from 123 deaths to 82 deaths per 1,000 live births (Figure 9.1). The survey also found substantial differences between rates in major cities compared with other areas. The children of illiterate mothers recorded higher mortality rates than those of literate mothers. However, the survey reported no significant gender differences in IMR.

Figure 9.1: Infant Mortality Rate in Punjab (Deaths per 1,000 Live Births)

115

89

123

77 7482

0

20

40

60

80

100

120

140

All Punjab Urban Areas Rural Areas

%

1996-7 2003-4

Source: PIHS (1996/97) and MICS (2003/04).


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Significant variations exist in the U5MR and IMR across districts, depending on the level of development. For example, the U5MR was 48/1,000 in Sialkot, 67/1,000 in Rawalpindi, and 68/1,000 in Lahore. After adjusting this rate for mother’s literacy, it increased to 84/1,000 for Sialkot, and 82/1,000 for Rawalpindi and Lahore. Districts with the highest U5MR (more than 140/1,000) included Vehari, Bahawalpur, Pakpattan, Dera Ghazi Khan, Lodhran, Muzaffargarh, Bhakkar, and Rajanpur. Similar patterns are reported for the IMR. A significant proportion of children in Punjab aged under five are underweight, reflecting poor overall health and wellbeing. Lack of adequate food and repeated illness can result in malnourishment. In line with the national trends, the prevalence of malnutrition has not declined over the last 20 years. According to the MICS (2003/04), one third of children (34 percent) are found to be underweight in Punjab.62 No significant differences by area or gender have been found, but districts results vary widely, from 48 percent in Dera Ghazi Khan to 23 percent in Gujranwala. According to WHO standards, an underweight prevalence of over 30 percent indicates a very serious public health problem. As many as 25 of the 34 districts in Punjab fall in this group. Furthermore, there are groups with unacceptably high malnutrition rates within districts. Looking across age groups, the lowest underweight prevalence is found in infants aged 0–5 months (23 percent). This increases to 37 percent among children aged 6–11 months and remains thus up to five years of age. Children who fail to receive appropriate solid/semi-solid foods and are exposed to contaminated water, food, and environments are more likely to fall prey to malnutrition, especially after their weaning period. According to the MICS (2003/04), less than half of all children (44 percent) receive complementary foods (solids and semi-solids) in addition to breastfeeding in the later part of infancy (6–11 months). These added foods are needed to ensure proper nutrition. There are large variations on this account across districts, ranging from 15 to 75 percent. Among the recent reported illnesses, diarrhea is most common (22 percent) among children under five, followed by coughs (15 percent) and high fever (17 percent). The incidence of these three illnesses is more common in rural areas than in major cities, with no significant sex differentials. Diarrhea prevalence is highest in Dera Ghazi Khan (52 percent) and Muzaffargarh (41 percent) and lowest in Lahore, Chakwal, and Kasur (10–11 percent). Coughs are most common in Muzaffargarh and Rajanpur (over 30 percent) and least common in Kasur and parts of Lahore (5 percent or less). The incidence of high fever ranges from over 45 percent in Dera Ghazi Khan and Layyah to less than 3 percent in Pakpattan and parts of Lahore. Overall, the percentage of children suffering from diarrhea in the last 30 days has been stable in Punjab during the last five years (FY 1999 to FY 2005), but risen from 14 to 16 percent for Pakistan. Almost half of all children suffering from diarrhea do not receive proper therapy (oral dehydration solutions) despite an extensive media campaign to this effect. Private health practitioners are most commonly consulted during children’s illness in urban as well as rural areas. 9.1.5 Reproductive Healthcare Improving maternal health is one of the MDGs. The related indicators for this goal are the maternal mortality rate (MMR) and proportion of births attended by skilled health personnel. About 71 percent of births in Pakistan take place at home (PSLM 2004/05). The most common sources of assistance in delivery are trained dais, traditional birth attendants, and family members. The MICS (2003/04) reveals that, in Punjab, a third of women rely on the assistance of a skilled health worker during delivery. The source of assistance, however, varies by city, urban, and rural areas (66, 44, and 26 percent, respectively). Deliveries were mainly attended by a local dai (50 percent), at a private hospital/clinic (16 percent), followed by a trained dai (16 percent), Government hospital/clinic (11 percent), and lady health visitor (LHV) (5 percent) (Figure 9.2).

62 The National Nutrition Survey FY2002 had reported underweight children at 35 percent for children aged

6–59 months in Punjab.


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Figure 9.2: Type of Assistance in Child Delivery-Punjab (2003/04)

5%

11%

16%16%

50%1%

1%

Local Dai Trained Birth Attendant Private HoGovt. Hospital/Clinic LHV LHW

Other/No Health Providers

Source: MICS Punjab (2003/04). The MICS (2003/04) finds a continuing reliance on local dais, not only for child delivery but also for pre- and post-natal care. This is one of the reasons for high maternal mortality rates (MMRs). In FY 04, the estimated number of maternal deaths in the province was 300 per 100,000 live births (MICS 2003/04). The main reasons for the high MMR or any other disability at child-bearing age are lack of antenatal care, illiteracy, early marriage, frequent pregnancies, poor access to health facilities, and non-availability of female doctors. Low awareness and usage of contraceptive methods and high fertility result in high population growth. According to the MICS (2003/04), of the total number of married women aged 15–49, 76 percent were aware of some contraceptive method but far fewer (39 percent) confirmed that they had ever used any contraceptive method. Thus, the total fertility rate remains high: the average rate is 4.7 children per woman in Punjab, with variations ranging from 4.0 to 8.9 children. The lowest rates were recorded in Attock, Khushab, and Chakwal, and the highest in Dera Ghazi Khan, Lodhran, and Layyah districts. This variation can be explained by the varying degrees of socio-economic development and use of family planning services. 9.1.6 Communicable Diseases Tuberculosis The prevalence of communicable diseases is quite high, and most are dealt with through vertical programs in collaboration with NGOs. Tuberculosis (TB) has plagued the country despite many efforts to eradicate it. According to the Millennium Development Report 2005, 160 people out of every 100,000 suffer from confirmed TB. The incidence in Punjab is much higher: according to the MICS 2005, one person out of every 200 (0.5 percent) has been diagnosed with TB in the past year, with the incidence of TB increasing with age (1 percent in age group 50–59 years, 2 percent in age group 70–79 years, and more than 3 percent in those aged 80 and over). This high incidence is due to high population growth and crowded living conditions, lack of adequate immunization, poor healthcare facilities, and incomplete treatment of TB patients. Furthermore, the low levels of treatment compliance and cure rates contribute to the emergence of multi-drug resistance. The Government has declared the incidence of TB a national emergency, and begun a control program of directly observed treatment short courses (DOTS), which has reportedly made substantial progress. Almost all districts in Punjab are covered under this program and a number


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of TB centers are operational. The national target is to detect and cure 80 percent of TB cases through DOTS by FY 2010, while the MDG target for 2015 is 85 percent. Malaria Malaria is another major public health problem and continues to afflict millions of people due to poor environmental and socio-economic conditions, which are conducive to the spread of the disease. Nearly one fourth of Punjab’s population lives in malaria-risk areas. Malarial epidemics in Pakistan occur at intervals of 8–10 years and cyclic reoccurrences are not fully understood. According to Government records in 2004, the number of confirmed malaria cases across the country was 131,179. This is, however, a serious undercount as most people report sick at private clinics. According to the 1988 Malaria Review Mission, approximately half a million malaria cases occur every year in the country. Malaria epidemics generally afflict immunological vulnerable populations, and their explosiveness can strain the capacity of health facilities. People of all ages are susceptible and this flat demographic profile can translate into larger economic consequences. The Government in collaboration with NGOs is implementing a rollback malaria strategy (RBM) in high malaria-risk districts to control the disease. HIV/AIDS The prevalence of HIV/AIDS in Pakistan is low although the risk of HIV infection is quite high. Official sources report a very small number of cases, while UNAIDS/WHO believes that this is an undercount and report the real number of HIV/AIDS cases in Pakistan to be 70,000–80,000. HIV prevalence among vulnerable groups (e.g., active sex workers and separated males) was 0.03 percent in FY 2002 in Punjab. Most cases are in the age group of 20–44 years, with males outnumbering females by a ratio of 7 to 1. Heterosexual transmission accounts for most reported cases (67 percent) but there may be other modes of transmission, including infection through contaminated blood (18 percent), homo/bisexual sex (6 percent), injecting drug users (4 percent), and mother-to-child transmission (1.3 percent). Similarly, the prevalence of sexually transmitted diseases appears on the high side although authentic data are not available. Vulnerabilities do exist although targeting on HIV/AIDS is difficult. The low incidence stage can rapidly change into concentrated prevalence or generalized prevalence as has happened in several other countries. High-risk groups include both male and female sex workers, males separated from their spouses, blood product recipients, and intravenous drug users. Although culturally denied, sexual behavior such as heterosexual and homosexual activity with non-regular partners, low condom use rates, and commercial sex are common, especially in urban areas of the country. Poverty, gender inequities, and the backdrop of demographic risk factors (young population, high fertility rates, and low contraceptive use) reflect an environment with potential to fuel an HIV/AIDS epidemic. Information on all these aspects is not available, which makes targeting for HIV/AIDS difficult. The Government is dealing with the problem under a national HIV/AIDS strategic framework that focuses on target groups like adolescents, youth, and change agents. The province faces several other problems in the health sector due to the large growth in population, environmental degradation, and pressure on natural resources. These include (i) the relatively high prevalence of Hepatitis B and C (2.5–4.5 percent of the population has serum-positive results), (ii) high rates of accidents and other emergencies, and (iii) chronic coughs, which are particularly common among the elderly (about 5 percent in the age group 50–59 and 10 percent aged 70 years or more). In addition, about 1 percent of the population is estimated to be blind. 9.2. Health Infrastructure Punjab has the largest health infrastructure in Pakistan, comprising a three-tier system divided into primary, secondary, and tertiary levels. The primary healthcare facility network comprises basic health units (BHUs) and rural health centers (RHCs), and spreads from the smallest administrative unit or union council to the markaz level. Tehsil and district headquarter hospitals form the secondary


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level and provide basic specialties, and inpatient and diagnostic facilities. The tertiary level includes hospitals that are attached to medical colleges and provide general and highly specialized services. All these are located in large cities. In the public sector alone, there are more than 5,400 health facilities ranging from the primary healthcare level to the tertiary level, and including 308 hospitals, 1,333 dispensaries, 295 RHCs, 2,456 BHUs, 41 TB centers, 454 sub health centers, and 513 maternal and child health centers (Bureau of Statistics 2006). In the private sector, there are 65 hospitals and 46 dispensaries providing services in the province, as well as a flourishing private practice by public sector health practitioners. The department of health employs nearly 100,872 personnel, including more than 9,309 medical and dental specialists. The data show that the number of hospitals/dispensaries and number of beds in hospitals/dispensaries per million of population has declined, while the number of doctors, nurses, and dentists has increased. Despite this massive investment in health infrastructure, quality medical services are available only in big cities. The medical facilities in small towns and Union Councils are still rudimentary (i.e. in RHCs/BHUs). The PIHS (FY 2002) indicates that in rural Punjab, only 3 percent households have access to Government hospitals, 4 percent to RHCs, and 18 percent to BHUs as compared to 41 percent to a hakim/homeopath. Most of the health facilities have inadequate medical supplies and lack basic medical or related equipment. A majority does not have a working refrigerator, telephone, functioning operating room, X-ray machine, laboratory and even a blood pressure apparatus. However, most of these facilities have examination tables and provide family planning services. It is very worrisome to note that without any laboratory, blood bank and functional operating room, most of these facilities provide the facility of minor surgery and stitching and child delivery. The PIHS (FY 2002) reports that public sector health services are underutilized. For example, the average daily attendance at BHUs is recorded at only 22 patients, including two clients weekly for family planning services and three antenatal check-ups. Similarly, at RHCs, there are three family planning clients and seven antenatal checkups per week; the daily number of visiting patients is about 69. At tehsil headquarter hospitals, outpatient services are well attended, but the utilization of beds and reproductive health services generally remains low. The PDSSP’s preparatory report points out that low utilization of services is a result of inappropriate staff and skill mix, short working hours, absenteeism, and the large number of vacant posts in less affluent areas. 9.3. Issues and Constraints Sector issues relate mainly to (i) inadequate health and population planning coverage for the poor, particularly women, in rural areas and urban slums; (ii) low quality of healthcare; (iii) misgovernance and misplaced priorities; and (iv) low healthcare financing. Hence, health indicators like the MMR and U5MR have remained poor and there is an increased incidence of communicable diseases. According to the PFIS, almost 40 percent of the burden of disease in Punjab is related to communicable diseases, 12 percent to reproductive health problems, and 6 percent to nutritional deficiencies. This poor health status poses a grave threat to per capita income and to productivity and poverty reduction efforts. Some of the key issues that face the sector are discussed below. 9.3.1 Management Issues Institutional responsibilities for healthcare management are scattered and planning has remained weak. The management of preventive health is dispersed among the three tiers of Government—federal, provincial, and district. Under devolution, health service delivery has been assigned to districts, while control over resources remains with the province. Development of public healthcare facilities and the required human resources for these facilities are not well planned. The health system is biased toward the urban elite (tertiary care bias) against provision of primary healthcare. Human resource availability is skewed, with a relative oversupply of doctors and shortage of nurses and paramedics. There is also a shortage of qualified healthcare managers and planners, leaving doctors to perform these functions and resulting in the misuse of resources. With diffused responsibilities, the


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sector operates in the almost complete absence of regulatory practices and codes of conduct. The Health Management Information Systems (HMIS) data are generally poor and the data that are generated are not analyzed or used for management or monitoring. Public healthcare facilities dominate the sector, but the quality of care in these facilities is low because of the poor physical environment in which patients are treated and the low quantum/quality of inputs (healthcare providers, equipment, and medicines). 9.3.2 Personnel Issues The shortage of qualified personnel, especially nurses and health technicians, contributes to poor standards. The non-availability of medical personnel with appropriate skills and motivation in BHUs, RHCs, and other public facilities is a serious issue, and adversely affects poor and vulnerable groups. Medical staff is poorly trained; pre-service training arrangements are weak and there are few in-service refresher courses and training opportunities. Available budgets are hardly enough to cover staffing needs, and staff has few incentives to serve in remote rural areas. In general, staff compensation is low and the work environment not pleasant at rural primary healthcare facilities. Hence, staff absenteeism is common and staff motivation and morale remain low. 9.3.3 Lack of Equipment and Medicines The non-availability of diagnostic equipment and medical supplies is a general complaint. Doctors usually demand very costly and state-of-the-art equipment, but most of this equipment is either underutilized or misused. Often, the operating staff is not sufficiently trained to operate the available equipment, and equipment breakdowns/disrepairs are quite common. Operating manuals are either not available or not followed. Budgets for acquisition of medicines are inadequate and misappropriation and pilferage common. 9.3.4 Inadequate Funding Funding shortages partly explain the poorly staffed and resourced health facilities in rural and hard-to-reach areas. With paucity of funds, it has not been possible to adequately compensate staff, give it the incentives needed to carry out unpleasant work, and provide a suitable work environment. The low level of funding for the non-salary budget (equipment, medicines, supplies, and maintenance) has led to further deterioration in the quality of service. The private sector is less organized and has limited healthcare capacity. Patients prefer to visit private clinics for common ailments because of the short working hours at public sector facilities and the poor attitude of staff. The private health sector comprises mostly small private clinics manned by a general duty doctor, a paramedic/nurse, or a less qualified person. There are few state-of-the-art private tertiary care hospitals, and those that exist tend to manage low-risk patients at very high charges. Moonlighting (after-office hours practice) by public sector medics is also very common and at times unscrupulous. For emergencies and acute sickness cases, the preferred place for treatment is public sector hospitals because of the relatively better quality of services and availability of high-quality electro-medical equipment. 9.4. Health Sector Reform Program (HSRP) Initially, the Health Sector Reform Program (HSRP) was launched in 2004-05 to provide missing facilities in 295 Rural Health Centres (RHCs) and 2456 Basic Health Units (BHUs). The District Governments are implementing this program. In order to speed up implementation of this program, NLC has also been engaged to take up civil works on missing facilities in RHCs and BHUs. This program is to be completed in all respects by June, 2009. To strengthen Primary Health Care, BHUs in 12 districts are being managed by the Punjab Rural Support Program, on the pattern of R.Y. Khan Model. Further, in view of success of BHU Gujrat


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Model implemented in collaboration with National Commission for Human Development (NCHD), the Government of Punjab has decided to extend this model to 11 districts; namely, Attock, Jhelum, Mandi Bahauddin, Sialkot, Gujrat, Muzzaffargarh, Khanewal, Jhang, Sheikhupura, Sargodha and Bahawalpur. NCHD will develop an integrated Primary Health Care Model including school health, outreach services and community participation. It will cover 780 BHUs in a period of three years at a cost of Rs. 2.90 billion for effective service delivery and capacity building at the district level. After completion of this program, the sustainability of this model will be ensured through the management of BHUs by the Local Health Committees. Feasibility studies about other health initiatives like Coroner Service, Geriatric Health, Trauma/Stroke Centre, and Mental Health Care are also under process through PDSSP. PDSSP’s “Minimum Service Delivery Standards” (MSDS) to be followed at various health facilities, have been prepared and circulated to all stakeholders and will be finalized soon. The MSDS would be complemented by development of SOPs and Standardized Medical Protocols for the Devolved Health Sector. To overcome the shortage of trained General and Specialized Nurses of international standard, the Punjab Government has developed partnership with the Fatima Memorial Hospital, Lahore. This long term public-private partnership will lead to provision of 340 trained nurses every year: 140 nurses with Basic Nursing Diploma ( 3 years in general + 1 year midwifery), 100 post Basic Specialization (1 year Diploma), 50 post RN BSc. Nursing Degree (2 years) and 50 BSc. Nursing Degree (4 years). This initiative will also facilitate Health Department to upgrade and meet the shortage of faculty in the existing 45 General Nursing Schools. Punjab needs an improved health delivery system that guarantees better planned, managed, and monitored patient-centered medical care. The ideal health delivery system would be one that links performance in terms of outputs with inputs and maximizes use of financial resources. Besides effectiveness, this system should seek to improve equity of access, be responsive to the emerging burden of disease with a focus on the MDGs, consumer satisfaction, and other pro-poor interventions. The Government of Punjab understands this need for comprehensive reforms in the health sector, and accordingly, the HSRP being implemented in the province has the following key objectives: • improve health delivery services with significant reduction in the incidence of diseases and

measurable impact on MDGs, • better health management systems with a well thought-out strategy for patient care, • greater focus on preventive healthcare, particularly in the rural areas, • improved primary, secondary, and tertiary healthcare through effective and high-quality

referral system and optimal utilization of facilities, • establishment of community/catchment’s hospitals and trauma centers, • targeting of the poor, women, and children and other vulnerable population groups, • enhanced capacity for planning, costing, and budgeting through MTBF exercises. Strategic interventions under the HSRP include (i) greater allocations and other policy measures to overcome the inadequacies in primary and secondary healthcare services; (ii) reduce the widespread prevalence of communicable diseases, urban-rural imbalances, professional and managerial deficiencies in district health systems, and basic nutrition gaps in the target population; and (iii) improve the deficient health education system, mental health, and the unregulated private sector. Key interventions under the HSRP include integration of all primary healthcare services at the BHU level, implementation of a standardized service delivery package in the devolved setup, provision of missing facilities in RHCs/BHUs, up gradation of facilities in hospitals and training institutions, staff rationalization, improved capacity for data analysis and research, and purposeful community participation and public-private partnership in the delivery of health services. The program also aims to reform the medico-legal system, design and implement school health and child nutrition programs, and design social protection and health insurance programs for the poor.


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The mission of the department of health is “to provide quality health care services to the community through efficient and effective service delivery system that is accessible, equitable, culturally acceptable, affordable and sustainable.” The current status and intermediate targets set by the department to achieve the MDGs are given in Table 9.2. Table 9.2: MDGs Targets: Indicators of Health in Punjab

Indicator Baseline FY 2004

Targets 2009

MDGs 2015

IMR per 1,000 live births 77 66 40U5MR per 1,000 live births 112 94 52Proportion of under-1-year children immunized against measles 66 77 >90Prevalence of underweight children under 5 years of age ( percent) 34 24 <20Coverage of Prenatal Care ( percent) 42 50 -MMR per 100,000 live births 300 232 140LHW’s coverage of target population (households covered by LHWs)

35 89 100

Incidence of TB per 100,000 population (total no. of new cases reported)

457 270 45

Proportion of population in malaria-risk areas using effective malaria prevention and treatment measures ( percent)

25 52 75

Utilization rate of BHUs (patients per day) 22 35 -Utilization rate of RHCs (patients per day) 70 95 -

Source: Department of Health (2006) and PFIS (2005). An improved health delivery system is of utmost importance to ensure that these targets are achieved. The reform program attempts to set up a delivery system that is better planned, managed, and performance-oriented; maximizes the use of resources; improves equity of access; and is responsive to the emerging disease burden. 9.5. Expenditure on Health In line with the policy emphasis on social services provision, the Government of Punjab has made hefty budgetary allocations for the health sector. The revised expenditure on health amounted to Rs.20.12 billion in FY 2005 compared with Rs. 6.93 billion in FY 2002—an average compound growth of 42.7 percent per annum.63 The Government proposes to raise the sector budget further over this larger base in the next three years. According to the MTDF, the total health expenditure allocation has risen to Rs. 6.5 billion in FY 2008 (Table 9.3).

63 This represents much larger growth than at the national level. According to the Pakistan Millennium

Development Report 2005, Pakistan’s public expenditure on health grew to Rs36.08 billion in FY2005 from Rs19.21 billion in FY2002, showing a cumulative growth rate of 23.4 percent per annum.


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Table 9.3: Health Sector Resource Allocation (Rs. Million) FY 2007 FY 2008 Sub sector

Capital Revenue Total Foreign Aid

Total Capital Revenue Total Foreign Aid

Total

Preventive Health Care Program 500.00 1108.03 1608.03 501.9 2109.93 1000.00 2128.70 3128.70 186.31 3315.00i) Prevention care 0.00 358.03 358.03 501.97 860.00 0.00 554.70 554.70 186.31 741.00ii) HSRP 550.00 750.00 1,300.00 0.00 1,300.00 1000.00 1574.00 2574.00 0.00 2574.00Tertiary care hospitals/medical education 539.48 542.52 1,082.00 0.00 1,082.00 1018.90 1191.10 2210.00 0.00 2210.00Medical education 153.80 61.20 215.00 0.00 215.00 251.87 73.13 325.00 0.00 325.00R&D 4.71 38.29 43.00 0.00 43.00 19.56 11.0.44 130.00 0.00 130.00Chief Minister's Accelerated Program 560.15 239.85 800.00 0.00 800.00 427.55 92.45 520.00 0.00 520.00Total 1,808.14 1,989.89 3,798.03 501.97 4,300.00 2717.88 3595.82 6313.70 186.31 6,500.00Source: Punjab MTDF, 2006 and 2007/10


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The available details from the MTDF data indicate that for FY 2008, 51 percent of total resources for the health sector will be used for preventive health, 34 percent for tertiary care hospitals and medical education, and 40 percent will be distributed through the HSRP, the achievements of which are summarized in Appendix 5. Box 9.1: Innovative Healthcare Models in Punjab

The Government of Punjab has tried a variety of innovative models in recent years to improve the quality of healthcare in the province. The first of these was the Rahim Yar Khan model, which was launched in April 2003 under the Chief Minister’s Initiative on Primary Healthcare. The project restructured the primary healthcare system through the reorganization of BHUs in rural areas, by outsourcing the management of all BHUs in the district to an NGO, the Punjab Rural Support Program (RSP) for a period of five years beginning 15 April 2003. All resources budgeted for BHUs were transferred to the RSP, with the NGO being made responsible for rendering accounts for management and operation to the district Government at the end of each financial year. RSP’s main achievement in this regard was checking absenteeism among healthcare personnel and ensuring a supply of medicines in the BHUs, both measures that succeeded in noticeably improving patient use of the health facility. The model has since been extended to 13 additional districts in Punjab and is reported to be working well. Another innovative model has been initiated in Gujrat and is based on the principle of partnership in primary healthcare. The Gujrat model uses local Governments and, more specifically, citizen community boards (CCBs) established in UCs to carry out a systems analysis of existing health facilities, as well as to establish community health needs through a door-to-door baseline census. The CCB is then active in redefining the roles and responsibilities of BHU staff, ensuring supply of medicines, and establishing an effective referral system. Thus, CCBs assume responsibility for monitoring facilities at BHUs. The Gujrat model stresses institutionalized community involvement in the interest of making the reform of primary healthcare facilities more sustainable.

Punjab’s budgetary expenditure on health has risen to about 0.6 percent in FY 2007, compared with 0.3 percent in FY 2002, as a result of these relatively large allocations in the past few years. This level of health expenditure is, however, still very low compared with international practice, which averages about 2 percent of GDP for all low- and middle-income countries. Budgetary allocations for non-salary inputs are generally insufficient and of particular concern, due to which Government health facilities have remained underutilized. Box 9.2: Punjab Emergency and Ambulance Services—Rescue 1122: A Success Story

The Government of Punjab has launched the “Punjab Emergency and Ambulance Services” on a pilot basis in Lahore to establish the first trained emergency rescue medical and ambulance service in the province. The objective is to cater to emergency situations and reduce morbidity and mortality by providing efficient and effective rescue and transportation to victims of accidents, disasters, and other emergencies. Rescue 1122 is a free service. The service includes emergency medical treatment of emergency victims at the incident site and during their transportation to the nearest hospital. These services are available in case of emergencies like fires, road accidents, collapsed buildings, and other medical emergency at home. This pilot project became functional on 10 October 2004 and was completed on 30 June 2005 at a cost of Rs. 100.21 million. The Punjab Economic Research Institute (PERI) has evaluated the project by conducting a survey that covered victims/patients, doctors, the officers concerned, as well as beneficiaries of the Fire Brigade Department, Edhi Trust, and a cross section of the public in various localities of Lahore. The results of the evaluation survey are given below. • About 94.2 percent of respondents expressed full satisfaction while 5.8 percent were satisfied. • The average response time of Rescue 1122 ambulances was 7.2 minutes compared with 27 and 36

minutes by the Fire Brigade Department and Edhi Trust ambulances, respectively. • Doctors at major public sector hospitals emergencies ranked Rescue 1122 Services ahead of ambulances

from the Edhi Trust and Government hospitals. • Rescue 1122 ambulances have trained staff who respond swiftly and provide emergency medical

assistance in time. • During its test run and awareness creation period, the service has rescued over 8,000 victims of road

accidents, medical emergencies, and other disasters. • Public awareness of the service is, however, low (52.8 percent). The role of Punjab Emergency Services has been extended to include management of accidents, fire and disaster. Rescue service has also been launched in Faisalabad and Rawalpindi. Its expansion to Gujranwala, Multan, D.G. Khan, Bahawalpur, Sialkot, Murree, Sargodha, R.Y. Kkan and Sahiwal is underway. Source: Based on PERI (2005).


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9.6. Conclusion As with education, health indicators are better for Punjab than for Pakistan, but much needs to be done to make health facilities fully operational and to improve standards of care. The recently initiated HSRP is expected to have a significant impact on the coverage and quality of healthcare in the province. The Government of Punjab has also used some innovative approaches to improve basic health provision services, and these have set the momentum for further reform in the sector.

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10. Mainstreaming Gender in Development Like most countries of the world, women in Pakistan face bigger challenges and fewer opportunities than men. One of the findings of the Participatory Poverty Assessment carried out recently shows that women are among the poorest and most vulnerable communities in the country. Pakistan is amongst the highest in the world for maternal morality rates. Women’s access and control over productive resources are limited. Lack of skills, limited opportunities in the job market, and social and cultural restrictions limit skills, women’s vulnerability vary across classes, region and the rural/urban divide.”64 This chapter looks at key indicators of gender inequality, and assesses the Government’s efforts to reduce gender disparities in the province. 10.1 Key Indicators Most of the indicators available on gender are for Pakistan as a whole rather than for Punjab. Nevertheless, these indicators are useful to assess the status of women in the country, while allowing for the fact that there will be variations across provinces, and in regions within a province. More than half of women are plagued by poverty of opportunities regarding income, health, and education compared to a little over a third of men. Unlike most countries in the world, in Pakistan a higher percentage of men than women are expected to live to age 60. Male-female disparity in education remains very high. A recent World Bank report on Pakistan’s Poverty Assessment covering 1990 to 1999 claims that the gender gap in literacy has not decreased since 1970. Even where overall poverty of opportunity has been steadily declining, the male-female gaps have actually widened. Improvements for males have been much more pronounced and rapid. In contrast, female poverty within different dimensions has displayed very slow change in the last 25 years. Women today are poorer, less healthy and less educated relative to men than they were in 1975.65 The 2005 Human Development Report (HDR) ranks Pakistan at 135 out of 177 countries in terms of the human development index and 107 out of 140 in the gender-related index which bears this out in Table 10.1. This report also indicates that the fertility rate in Pakistan is 4.3 per woman; the MMR is 500 per 100,000 live births; adult female literacy rate is 35 percent; the female economic activity rate (for women over the age of 15 years) is only 37 percent, which is 44 percent of the male rate [HDR (2005) reported in Table 10.1].

Table 10.1: Indicators of Gender Development Index

Indicator Female Male Life Expectancy at Birth 63.2 62.8 Adult Literacy Rate (percent, age 15 and above) 35.2 61.7 Combined Primary, Secondary, and Tertiary Gross Enrolment Ratio (percent)

31 43

Estimated Earned Income (PPP $) 1,050 3,082 Source: HDR (2005). The Punjab-specific data that is available is also indicative of significant gender inequality in the province. Women comprise less than 5 percent of public sector employees in Punjab, and are mainly engaged in departments related to the social sectors, such as education and health. The representation of women at the decision making level of is 3 percent, which is negligible. Gender disparity in education in Punjab is estimated at 11 percent, which is the lowest of the four provinces in Pakistan (Balochistan has the highest gender disparity at 34 percent). There has been a decline in the gender gap in terms of gross enrolment at the primary level from 15 to 11 percent during the period from FY 2002 to FY 2005. This decline is due to the relatively greater increase in female gross enrolment ratio (GER) compared to male GER. This decline is higher in rural areas

64 Draft Poverty Reduction Strategy paper (Summarized version) 65 "The Human Face of Poverty," in a Profile of Poverty in Pakistan, February, 1999.

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(from 19 to 14 percent), whereas the urban areas show a slight increase in gender disparity (from 2 to 3 percent). However, a marginal increase has been observed in the gender gap in net enrolment rate at the primary level in Punjab. As gender gap in GER at the primary level declined during the same period, this implies that the number of over-age children attending primary school is quite substantial. However, no improvement has been observed in the gender gap in literacy during the period from FY 2002 to FY 2005. The Labor Force Surveys show that female labor force participation rates in Punjab have increased from 16.8 percent in FY 2000 to 24.9 percent in FY 2006. The computation of the female labor force participation rate generally excludes all females who participate in such household activities that produce goods or services at home, even if these goods and services are eventually made available in the market.66 If such women are considered to be employed, the female labor force participation rate would be significantly higher. Table 10.2 presents data on the Labor force participation and unemployment rates in Punjab.

Table 10.2: Labor Force Participation, Unemployment and Underemployment Rate in Punjab*

(percent) Labor Force Participation Rate Unemployment Rate Year Female Male Female Male

FY 2000 16.8 72.7 15.25 7.00 FY 2002 19.9 71.6 14.36 6.96 FY 2004 21.8 71.8 6.68 9.64 FY 2006 24.9 72.6 6.92 5.72

Source: Labor Force Survey (various issues), Government of Pakistan. Note: *All these rates are for age ten and above. The incidence of unemployment in Punjab is higher amongst women as compared to men. In FY 2004 this rate was higher for males, but the latest data shows that the trend has reversed once again. A majority of employed females are concentrated in agriculture (70 percent), followed by manufacturing (15 percent) and services (13 percent). A majority of females were found working as unpaid family helpers (53 percent), followed by employees (30 percent) and the self employed (16 percent). This pattern was reversed among males, i.e., 43 percent of males were self-employed, 37 percent were employees and 19 percent were unpaid family helpers. Out of the proportion of working women, only 1 percent belonged to the professional category and 1 percent worked as administrative and managerial workers. A majority was found concentrated either in agriculture (48 percent), or in craft related work (15 percent) or in elementary occupations (27 percent). According to the Labor Force Survey (2005/06), the proportion of female employees in the informal sector was 8 percent. The informal sector is composed of either the self-employed or wage employees. The proportion of unpaid family helpers is very low in the informal sector as compared to the agricultural sector. A majority of males is found to be concentrated in the self-employed category, whereas most of the females worked as wage employees. A majority of males in this sector was found to be involved in wholesale and retail trade and related work as managers, while females in the manufacturing sector worked primarily as craft and related workers. As has already been argued, this is basically a result of low levels of skills and capital as well as cultural inhibitions faced by female workers.

66 These activities are: agricultural operations such as ploughing, sowing, transplanting rice, cotton picking,

etc; processing food such as grinding drying seeds; livestock operations; poultry raising; construction work such as mud plaster etc; collection of firewood; fetching water; stitching/sewing; shopping; washing clothes; child care; helping in children homework; house cleaning; etc


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10.2 Government Initiatives The Government of Punjab has taken the following initiatives to mainstream gender issues into provincial development plans. 10.2.1 Gender Reform Action Plan The Government of Punjab is striving to adopt quotas as temporary special measures to increase the number of women in both appointive and elective positions at local and national levels to fulfill its obligations to international commitments. Further, under the National Plan of Action announced in September 1998, the National Policy for Development and Empowerment of Women (March 2002) and the Ten Year Perspective Plan (2001–2011), the Government of the Punjab launched a Gender Reform Program in the province in August 2002. At the outset, the program carried out analytical studies in the province and on this basis developed reform proposals, which were shared with stakeholders and have now been compiled into an action plan known as the Gender Reform Action Plan (GRAP). The Plan is designed to trigger actions that will result in gender mainstreaming in provincial departments. The reforms proposed under GRAP specifically target political participation, institutional structures, women’s employment in the public sector, policymaking and fiscal processes in the Government, and capacity development of women. GRAP primarily focuses on institutional change to achieve gender equity. GRAP has been approved by the Provincial Development Working Party, at a cost of Rs 605.370 million. The following reform agenda will be implemented through this Plan. Policy review and reform. A gender focused review of existing polices will be initiated under GRAP, to bring provincial policy in line with the goals of the National Plan of Action. The White Paper of the Finance Department will include a table with a policy statement referring to women in each sector and indication of resource allocation for women’s development. Gender-responsive budgeting. Gender responsive budgeting will be introduced in education and health sectors as a pilot project under GRAP, and budget call letters will be modified accordingly. A separate stipulation will be added under budget demands with allocation of an order code for ‘women’s development’ in the federal and provincial budgets and also creation of new codes in each sector for women specific facilities and functions. All departments will be directed to separately indicate their women specific capital expenditures and show such details as a proportion of their total capital outlays. A separate section will be created within the ADP for all sectors to indicate women specific investments in the capital budget. In addition, an analytical study on gender responsive budgeting will be initiated. Collection of gender-disaggregated data. GRAP will sponsor the design and introduction of gender disaggregated database systems and indicators in the federal and provincial Bureaus of Statistics. More details of the Government’s gender mainstreaming efforts are given in Appendix 6. 10.3 Conclusion Gender-disaggregated data, to the extent that it is available, indicates serious disparities in male and female status and achievements in health, education and employment. There is an urgent need to collect more gender disaggregated data to be able to present a clearer picture of the status of women in the province. Recent efforts by the Government of Punjab to give more representation to women and to remove gender disparities need to be seen through, as the long term effects of these initiatives can be significant.

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11. LAND Land use patterns in Punjab are changing rapidly due to changes in agriculture cropping pattern, urbanization and industrialization. The area put to non-agricultural uses is increasing as a result of development activities involving more and more land use for industrial sites, housing, transport systems and recreational purposes. This Chapter, however, is focused on the issues of land connected with agriculture development only. Land is a vital non-renewable resource. The contribution of land to agricultural development is dependant on how this vital resource is protected against the phenomenon of land degradation, success in arresting excessively high trend of diversion of agricultural land for non-agricultural uses, extent of access to land by different groups in rural areas, improved tenancy terms and the security of land titles. This chapter provides a brief discussion of some of the major land issues impinging on efficient use of land and its equity outcomes. In addition to providing information on the changing profile of land ownership and land operational holdings, an attempt is made to assess problems faced by people in registering and recording transactions in land. Secure titles to land facilitates collateralization of land for obtaining credit and helps in improving incentives to invest in agriculture for accelerated agricultural growth. In this regard recent efforts by the Government of Punjab in improving the land records service delivery are also discussed. 11.1. Land Use Since independence, cultivated area in Punjab has increased by about 41 percent. Table 11.1 presents statistics on land use in Punjab. Between 1990/91 and 2005/06, the cultivated area has increased from 11,819 thousand hectares to 12,510 thousand hectares. The factors responsible for the increase in cultivated area are increasing population and increased water supply. Increase in production outpaces increase in cultivated area as cropping intensities have increased over time. 11.2. Changes in the Pattern of Land Ownership Land ownership in Pakistan and its provinces is highly skewed. The inequality in land ownership has increased over time. Table 11.2 presents an average measure of land inequality i.e. the Gini coefficient of ownership holdings for four years i.e. 1972, 1980, 1990 and 2000 for Pakistan and its four provinces. The Gini coefficient increases from 0.66 in 1972 to 0.75 in 2000 for overall Pakistan. A sharp increase in inequality is found for the two provinces of Punjab and NWFP. In the case of Sindh and Balochistan, the Gini coefficient decreases slightly. However, it should be noted that the extent of inequality in land ownership in all provinces and Pakistan is quite high. There is also a difference in the pattern of change in land distribution over time. The Gini coefficient for Pakistan remains constant till 1990 and then increases sharply in 2000. In Sindh and Balochistan, a decline in the coefficient is observed throughout the period. The Gini coefficient, as already pointed out, is an average measure of land distribution. A disaggregated picture of land ownership is presented in Table 11.3 for the census years of 1990 and 2000. The share of small holdings i.e. < 5 acres in total number of holdings increases from 54% in 1990 to 62% in 2000. However, their share in owned areas does not increase by that proportion. In farms above 50 acres, the share in the number of holdings falls from 2 percent in 1990 to 1 percent in 2000 and the share in land owned also decreases from 34 percent in 1990 to 30 percent in 2000.

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Table 11.1: Land Use in Punjab (Population in Thousand Persons and Area in Thousand Hectares)

Reported Area

Cultivated Area Un-Cultivated Area Cropped Area

Area Sown

Year

Population (000)

Total Net Sown Current Fallow

Total Culturable Waste

Forest Area not Available for Cultivation

Total More than once

1 2=(3+6) 3=(4+5) 4 5 6=7 to 9

7 8 9 10=4+11 11

Cultivated area per Person (Hectares)

1990/91 62,886 17,106 11,819 10,806 1,013 5,287 1,839 462 2,986 15,065 4,259 0.1870 1991/92 64,829 17,537 12,073 10,920 1,153 5,464 1,767 438 3,259 14,862 3,942 0.186 1992/93 66,841 17,459 12,024 10,866 1,158 5,435 1,913 449 3,073 14,985 4,119 0.179 1993/94 68,877 17,420 12,113 10,875 1,238 5,306 1,785 465 3,056 14,832 3,957 0.175 1994/95 70,942 17,423 12,133 11,136 997 5,290 1,736 471 3,083 15,645 4,509 0.171 1995/96 73,010 17,455 12,230 11,266 964 5,225 1,634 490 3,101 15,912 4,646 0.157 1996/97 75,042 17,512 12,221 11,232 989 5,291 1,643 489 3,159 15,914 4,682 0.162 1997/98 74,205 17,573 12,228 11,168 1,060 5,345 1,689 485 3,171 15,963 4,795 0.164 1998/99 75,986 17,563 12,265 11,209 1,056 5,298 1,725 483 3,090 15,804 4,595 0.161 1999/00 77,810 17,565 12,347 11,193 1,154 5,218 1,667 484 3,067 16,004 4,811 0.158 2000/01 79,446 17,609 12,348 11,009 1,339 5,261 1,610 494 3,157 16,057 5,048 0.155 2001/02 80,875 17,609 12,428 11,037 1,391 5,180 1,715 496 2,969 16,104 5,067 0.153 2002/03 82,330 17,606 12,534 10,954 1,580 5,072 1,593 512 2,967 15,962 5,008 0.152 2003/04 83,861 17,618 12,553 10,914 1,639 5,064 1,543 506 3,015 16,413 5,498 0.149 2004/05 85,318 17,618 12,553 10,914 1,639 5,065 1,543 506 3,016 16,412 5,498 0.147 2005/06 (P0

86,812 17,520 12,510 10,600 1,910 5,010 1,540 490 2,980 16,680 6,080 0.144

Notes and Sources: 1. For Area:: i) Directorate of Agriculture Crop Reporting Service, Punjab, Lahore (Secondary Source) ii) Deputy Commissioners, (Primary Source)

2. For Population: data are from Punjab Development Statistics, Bureau of Statistics, Punjab, Lahore 3. Population figures are as of June 30 for each year.

.


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Table 11.2: Gini Coefficient for Ownership Holding YEAR 1972 1980 1990 2000 Pakistan 0.66 0.65 0.66 0.75 Punjab 0.63 0.62 0.62 0.71 NWFP 0.68 0.69 0.65 0.86 Sindh 0.69 0.63 0.63 0.67 Balochistan 0.69 0.68 0.70 0.68 Source: Government of Pakistan, Agriculture Census Reports, Various Issues Table 11.3 Percentage Distribution of Land Ownership in Punjab Percentage of Holdings Percentage Distribution of Owned Area Farm Size (Acres) 1990 2000 1990 2000 5< ( Acres) 54 62 12 15 5-<12.5 28 25 21 24 12.5-<25 11 8 18 16 25-<50 5 4 15 16 50-<150 2 1 17 15 >150 * * 17 15

Source: Census of Agriculture, Government of Pakistan (various issues) It should also be noted that the per capita availability of land has shown a falling trend as increase in population has outpaced the increase in cultivated area. In view of the increasing preponderance of small holdings, the size of small holdings has fallen drastically. It should be further noted that the menace of water-logging and salinity67 has reduced the quality of cultivated area per capita. Decreasing access to owned land has an important implication for poverty alleviation. Ownership of land allows the poor to use land as collateral. It further assures the poor land owners of the future flow of returns from investment attached to their land. As a result of increasingly reduced access to land, the small landowners in Punjab are under increasing threat of being forced into poverty. It should be noted, however, that access to land is only one of the factors impacting on the poverty status and the effectiveness with which non-land resources are deployed in the agricultural sector. A host of other factors like access to employment opportunities within the rural areas and/or in urban areas are perhaps more important in moving rural people out of poverty. The importance of remittances from outside agriculture to the rural households for poverty reduction is evident in the case of rainfed areas where average productivity of land is lower and the dominance of small and marginal holdings is higher compared with irrigated areas. In contrast to these facts, poverty head-count rates in rainfed areas are lower than in irrigated areas. Larger remittances received by households in rainfed areas explain lower poverty rates. 11.3. Changing Trends in Operated Area by Tenure and Farm Size The Gini coefficients shown in Table 11.4 show a high degree of inequality in the distribution of operational holdings. However, it is interesting to note that the concentration in access to land use is less concentrated than is the case for land ownership. For all tenurial classes taken together, the distribution in the NWFP and Balochistan is more unequal than that in Sindh, Punjab and overall Pakistan. The distribution of operational holdings has worsened considerably over the 1972-2000 period as the Gini coefficients have increased over time for each tenure type. Among the different tenurial classes, the distribution of farm area has been relatively more unequal in the case of owner-operated farms.

67 Data on this issue are presented in the chapter 12 on Water in the Punjab Economic Report 2006. A

Section on land degradation in this chapter also presents some pertinent information in this regards.

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Table 11.4: Gini Coefficient for Operated Area by Mode of Tenancy Type of Tenancy Total Operated Area Owner- Operated Owner-Tenant

Operated Tenant Operated

1972 Pakistan 0.52 0.61 0.47 0.40 Punjab 0.49 0.58 0.43 0.40 NWFP 0.64 0.62 0.58 0.61 Sindh 0.43 0.57 0.46 0.32 Balochistan 0.64 0.68 0.61 0.47




Table 11.5 further supports the conclusion reached on the basis of average measures of Gini coefficient. The smaller sized farms have witnessed relatively sharper deterioration in access to farm area if measured relative to their share in number of farms. Table 11.5: Percentage Distribution of Farm Operated Area for Punjab

No. of farm (%) Farm Area (%) Mean Farm Area (Acres) Size of farm 1990 2000 1990 2000 1990 2000

< 5 ( Acres) 47 58 11 16 2.2 2.1 5-<12.5 34 28 27 28 7.7 7.6 12.5-<25 12 9 22 19 16.4 16.6 25-<50 5 4 16 16 31.5 31.5 50-<150 2 1 14 13 70.4 70.3 >150 * * 10 8 311.8 296.1 Total 100 100 100 100 9.3 7.6

Source: Agricultural Census Reports for 1990 and 2000, Government of Pakistan. 11.4. Land Degradation in Punjab Agricultural land in the province of Punjab is under threat of degradation from several natural and man-made factors. There are various manifestations of the phenomenon of land degradation such as deforestation, desertification, salinity and sodicity, soil erosion, water-logging, depletion of soil fertility and negative nutrients balances. Whatever is the cause of land degradation, the land becomes unproductive if it is not restored to its original condition. The care and management of land resources requires lot of resources to arrest severe forms of land degradation. The agricultural production is severely impacted directly from the degraded land quality. Diversion of resources from other sources to restore land back to its original quality also hurts agricultural growth as resources are diverted from other productive uses.


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Data on the quantity of land eroded each year and/or cumulatively are not easily available. We present below information on extent of land degradation culled from different sources of degradation. We also include a brief discussion of possible areas of policy interventions to arrest severe forms of land degradation. The discussion below is organized by sources of degradation. 11.4.1 Salinity and Sodicity Various data sources have reported different estimates of area affected by salinity and sodicity in Punjab. This discrepancy is due to different criteria and methodology used by various reporting agencies. The extent of area affected by salinity and sodicity is presented in Table 11.6 In majority of the soils of plains in Punjab, the rainfall is usually low and the evapo-transpiration is higher than the annual precipitation resulting in build up of salts in the soil profile and their accumulation on the soil surface. In Punjab, 2.67 million ha of area is affected with salinity and sodicity (WAPDA, 1981). The majority of salt-affected soils are saline-sodic in nature. The salt affected soils are causing potential reduction in yield. Table11.6: Soils Affected by Various Types of Salinity and Sodicity (in million hectares)

Type of Soil Punjab Pakistan Soils with surface/patchy salinity and sodicity Irrigated 0.472 0.598 Un-irrigated - - Gypsiferous saline/saline-sodic soils Irrigated 0.152 0.972 Un-irrigated 0.124 0.820 Porous saline sodic soils Irrigated 0.790 1.103 Un-irrigated 0.501 1.023 Dense saline sodic soils Irrigated 0.0977 0.130 Un-irrigated 0.530 1.633 Total: 2.667 6.281

Source: S&R Directorate, SCARP Monitoring Organization, WAPDA Lahore, 2001-03 Different measures have been undertaken by various agencies in the province to combat this problem. Significant works undertaken by WAPDA include installation of tube wells for vertical drainage, surface drainage and to some extent tile drainage. The Punjab Irrigation Department has been allocating additional canal water supplies to the farmers to meet leaching requirements of saline soils. Similarly, gypsum was supplied at a subsidized rate for the reclamation of sodic soils in the province. Scientists of various organizations like Pakistan Agricultural Research Council (PARC), Univ. of Agriculture, Faislabad and NIAB have developed innovative approaches of Saline Agriculture in which the salt affected lands are put under suitable salt tolerant vegetation. The increased economic return in the form of biomass coupled with the associated soil improvement is the key feature of this approach as farmers are persuaded to adopt saline agriculture. 11.4.2 Water Logging In the Seventies and Eighties, the problem of water logging in Punjab province was quite extensive in canal irrigated areas. The relevant data pertaining to late Eighties are presented in Table 11.7. Some reports presently indicate the waterlogged area in Punjab is less than 0.05 mha. It appears that problem of water logging may not be as serious now as it was in the past. The problem of water logging has been reduced due to prolonged drought in late 1990s and excessive mining of ground water.

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Table11.7: Extent of Waterlogged Area (in million hectare)

Water table depth Punjab Pakistan a) Cultivated area 0.686 1.427

100 to 150 cm 0.239 0.318 50 to 100 cm 0.078 0.292 Less than 50 cm 0.368 0.816

b)Uncultivated area (less than 150 cm)

0.010 0.142

Total: 0.695 1.569 Source: SCARP Monitoring Organization, WAPDA, Lahore. 11.4.3 Deforestation and Desertification The area under forest in Punjab province is 0.48 million hectares. Due to severe arid and semi-arid climatic conditions, the uncultivated area is practically devoid of any vegetation. The bare soil is exposed to harsh climatic factors accelerating the pace of desertification. Large scale de-forestation for the purpose of timber and fuel wood also results in enhanced land degradation. Due to increase in population, the consumption of household firewood is increasing at a high rate. Punjab’s woody biomass may be totally consumed unless correctives steps are taken with some urgency. The lopping of trees for commercial purposes has also greatly accelerated forest depletion. Unrestricted livestock grazing is also a severe threat. The statistics on afforestation and regeneration is given in Table 11.8. Table 11.8: Area Afforested and Regenerated (million hectares) in Punjab during 1997/98 to 2001/02

Punjab Pakistan Year Area Afforested Average regenerated Area Afforested Average regenerated

1997/98 0.003 0.003 0.021 16.5 1998/99 0.005 0.003 21.1 17.0 1999/00 0.008 0.002 25.6 14.0 2000/01 0.007 0.005 25.8 14.2 2001/02 0.007 0.004 25.3 13.2

Source: Agricultural Statistics of Pakistan, 2004/05 The above mentioned data indicates that only a modest effort is being made for increasing the area under forests in the province. This practice needs to be upscaled for arresting land degradation in Punjab. 11.4.4 Soil Erosion Soil erosion implies loss or removal of surface soil material through the action of moving water, wind or ice. The extent of the area affected by water and wind erosion is given in Table 11.9 and Table 11.10 respectively. About 1.904 million hectares of area is affected by water erosion and about 3.804 million hectares is affected by wind erosion in Punjab province. Soil erosion is taking place at an alarming rate and is mainly due to deforestation. Water erosion is prominent on steep slopes such as the Potohar track and surrounding areas, an area which is extensively used for cultivation. The highest recorded rate of erosion is estimated to be 150-165 tonnes/hectare/year. The Indus River carried the fifth largest load of sediment (4.49t/h) in the world in 1990. According to some estimates the Indus is adding 500,000 tonnes of sediment to the Tarbela Reservoir every day, reducing the life of the dam by 22% and the capacity of reservoir by 16%. Wind erosion has a relatively lower impact than water erosion. However, the combination of the two is devastating. This reduces the productivity of the land by 1.5-7.5% per year. This affects almost one-fifth of the area in Punjab.


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Table 11.9: Area Affected by Water Erosion (in million hectares) Degree of erosion Punjab Pakistan Slight (sheet & rill erosion) 0.061 0.328 Moderate (sheet & rill erosion) 0.896 3.635 Severe (rill, gully and/or stream bank erosion) 0.588 5.640 Very severe (gully, pipe & pinnacle erosion) 0.357 3.446 Total: 1.904 13.050

Source: Directorate of Soil Conservation, Punjab, Lahore Table11. 10: Area Affected by Wind Erosion

(in million hectares) Degree of erosion Punjab Pakistan Slight 2.251 2.595 Moderate 0.279 0.469 Severe to very severe 1.274 3.081 Total: 3.804 6.173

Source: Directorate of Soil Conservation, Punjab, Lahore 11.4.5 Depletion of Soil Nutrients Due to very low organic matter content (usually around 0.5 %), the Punjab soils are inherently of poor fertility. Almost all agricultural soils are deficient in nitrogen and phosphorus. Potassium deficiency in Punjab soils, which was not a soil fertility problem earlier, is increasing rapidly due to the indiscriminate use of only nitrogenous and phosphatic fertilizers. Various public and private organizations in the Punjab are reporting a soil potassium deficiency in the range of 20-40%. For that reason, NPK formulations for various crops have also been introduced in the province. Among micronutrients, singnifical field scale deficiencies prevail in case of zinc, boron, and iron. Presently more than 2.5 million nutrient tonnes of fertilizers are being used out of which more than 75% is nitrogenous fertilizer. This situation results in highly imbalanced fertilizer application to Punjab soils resulting in the mining of several plant nutrients. The nutrient balance sheet of Punjab soils is represented in Table 11.6 which reflects a severe mining trend. Punjab province shows a negative nitrogen balance, although over time in Punjab the deficit is declining. Over the decade, negative phosphorus balances did not change significantly in Punjab. In 1985/86, the level of deficit was highest in Punjab. However, in 1995/96 they were all fairly similar. Potash balances have deteriorated over the decade. Table 11.11: Nutrient balance Sheet in Pakistan (1985/86 and 1995/96)

N (kg/ha) P2O5 (kg/ha) K2O (kg/ha) Province 1985/86 1995/96 1985/86 1995/96 1985/86 1995/96

Punjab -19.2 -8.6 -10.5 -10.7 -23.7 -27.3 Pakistan -15.6 -9.4 -9.8 -10.9 -20.0 -25.8

Source: National Fertilzer Development Centre, Islamabad, Pakistan 11.4.6 Proposed Strategies To address the soil degradation issues and to ensure sustainable agriculture production practices the following interventions need to be promoted: • Precision land leveling of agricultural fields • Appropriate water management practices to save water for more area to be cultivated. • Promotion of water harvesting techniques including deep tillage, micro catchments

management, and construction of mini-dams. • Use of land for sustained agricultural production by adopting tillage practices according to

antecedent properties of soils and inclusion of leguminous crops in rotations • Protection of land during monsoon season. • Avoiding expansion of cultivation to marginal and sloping land.

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• Adoption of suitable water erosion control measures i.e. gully plugging, water diversion structure, cultivation of cover crops, provision of mulches etc.

• Use of organic and inorganic amendments for amelioration of brackish ground waters and salt affected soils like gypsum, press mud, farmyard manure and green manures etc.

• Residue management as well as use of bio-fertilizers to supplement chemical fertilizers. • Promote the balanced fertilizer use in the cropping system. • Large scale adoption of saline agriculture technology for economic utilization and

improvement of salt affected lands. • Appropriate range management practices like reseeding and protection/controlled grazing of

vast rangelands. 11.5. Land Management Issues There are numerous issues in land management over and above the implementation of land reforms that affect overall agricultural growth and development. Most of these issues arise out of the way land markets are organized and function in Punjab. The essential pre-requites of a well functioning land market are the availability of accurate information about interests of different people on a parcel of land, security of titles to land and an easy and cheap system of registering and recording the land transactions. Unfortunately these pre-requisites are not well established and lead to severe constraints to efficient land use and the effective and equitable distribution of agricultural incomes. In Punjab, the British had put in place an elaborate system of land administration. This system, inherited by Pakistan, has however decayed in many respects due to meager resource allocation for the routine land administration and the involvement of revenue officials in the development work by the government after independence in 1947. The changed role given to the Revenue Department had resulted in the neglect of their normal work in the area of land administration. Although there are many issues and themes in land management, discussion in this section is limited to the processes relating to titling procedures of agricultural land such as land records preparation and its updating, registration of land transfers, land mutation, resolution of disputes in land matters and the land use regulation. The intention is to describe the present situation in Punjab and identify areas for policy improvement. Appendix 7 describes at some length the type of records kept and the institutional setup that collects this information. 11.5.1 Status of Land Titling The situation of agrarian laws in Punjab for providing titles to land as well as the factual position with respect to records-of-rights and their accuracy is not satisfactory. This state of affairs has arisen primarily from the weakness in the original intent of the agrarian laws which was to collect land revenue and not to provide conclusive titles to land. In other words, the records of rights in land are only revenue record and not a title of land. The title to land is only incidental to keeping of land records. The agrarian laws dealing with land administration are patterned on the laws prevailing during the British period. Under those laws, the king was the proprietor of all lands. The rights of any individual to have any kind of right in land were subject to payment by him of land revenue. The two foremost laws enacted during this period were the Bombay (Sind) Land Revenue Code, 1879, and the Punjab Land Revenue Act, 1887, which have been unified into one integrated law called the West Pakistan Land Revenue Act. 1967. Sections 42-45 of this unified Act enumerate the rights, the acquisition or loss of which gives rise to an alteration in the records-of-rights and the mutation procedure connected therewith. Section 52 of the Act attaches the presumption of correctness to the records-of-rights prepared at the time of the Settlement, as also to any entry made in the records-of-rights or in the periodical records in accordance with the provisions laid down in sections 42-45 and the rules there under.


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Box 11.1: Establish Property Rights

11.5.2 A Revenue Record and not a Title68 It should be noted that the present law does not profess to provide for a State certificate of title to land under the aegis of a public authority. The records-of-rights and other documents based on the land records, by virtue of provisions in the land laws, are presumed to be accurate. These entries only provide presumptive status of rights under land laws. Many court rulings have also maintained that entries in the land records are not sacrosanct, and that the revenue records are not the documents of title and that it is permissible to challenge the entries for determining the title to land. This lacuna in law has been the basis of litigation in land matters. This unhappy position has arisen due to the fact that the agrarian laws were not framed with the objective of providing a state guarantee of title to land. 11.5.3 Registration of Land Documents The Registration Act, 1908, which is the model Act on which the present Act in Punjab is based, provides for the registration of documents but not for the registration of titles. The registration of documents is compulsory in some cases and voluntary in others. It is compulsory where some provision in the Transfer of Property Act (for example, Section 543 in the case of an outright sale of an immovable property) or some provision in the Registration Act (for example, Section 17 dealing with various transactions concerning immovable property) provides for compulsory registration. In all other cases, unless provided by a special law, registration of documents is optional, particularly in the case of wills. The registering officer is not supposed to concern himself with the validity of the document. Since the Land Revenue Act was unified in 1967, the Land Revenue Acts in all provinces became identical. There are, however, minor variations in the administrative set-up of the provinces for land management. The ambiguity in laws has led to incessant litigation and clogging of the judicial machinery. The dispute settlement machinery is also not very efficient to settle the disputes in a speedy manner as would be seen from discussion in a subsequent Section on ‘Contract Enforcement’. 11.5.4 Land Acquisition The land acquisition by government is sometimes needed to promote public interest when land presently under some use is needed for some other use like irrigation, flood control or other projects benefiting sectors other than agriculture. Good land acquisition practices should ensure fair compensation and transparent procedures. The Land Acquisition Act of 1894, as amended from time

68 This subtitle is based on Kardar S. 2007

Land markets cannot function without accurate, secure and universally accessible systems of registering and recording land transactions. In Pakistan, the records of rights in land specifies fiscal responsibility, i.e. the person in whose name the property is registered is responsible for paying tax on the property, and is presumed to be the owner. However, land title is incidental in this process. Since the State does not guarantee title, litigation on property ownership is common, particularly in rural areas. The same issue carries over to property registration, where the Registration Act lays down procedures for registration of a transaction but does not guarantee that the transaction is valid. If land markets are to develop in Pakistan, and the burden of land related litigation in courts is to be reduced, it is imperative to develop a system of registration of titles, and to establish a centralized land registry system for urban land. Reform is also required to make the registration of property documents compulsory, and to reduce the system of multiple appeals in law courts in property cases, among other measures. See: Kardar, S. 2007. Establishing Property Rights Through a Secure System of Land Title Management. PIDE Policy Viewpoint No. 3. March.

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to time, prescribes procedures to be adopted while acquiring land. Compensation provided is much lower than the market prices and the procedures of acquiring land are arbitrary and cumbersome. Generally, the small landowners end up bearing the loss from land acquisition as they are the group whose land is acquired first. 11.5.5 Registration of Land Sales The registration of land sales by the buyer of land is subject to the provisions of Transfer of Property Act, the Stamp Act and the Registration Act. Registration by itself does not prove the title. It may not necessarily be consistent with a previously registered transaction. The registration documents are required to be sent to the land revenue officials for facilitating mutations. Land revenue officials do not have to send the mutation records to the registration officials. The Registrars, in collusion with deed writers, often indulge in corrupt practices and are a source of land disputes. The legal expenditure including Stamp Duty, Registration fee, Capital value tax and Local taxes are high. In the province of Punjab in 1995, such taxes amounted to 19% of the value of land sales. The illegal fees further add to the cost of sales. At least one week is required to register the sales deed in the Sub-registrar’s office. 11.5.6 Land Use Regulation There is no comprehensive policy on regulating land use in rural areas. There are no zoning regulations in Punjab. Government land is leased for a specific use. In case land is used for any other purpose, the lease can be cancelled. Conversion of private agricultural land for other uses i.e. commercial, industrial or residential is taking place without any check. A government permission is required for any changes of land use and the revenue officials are required to ascertain objections from neighbors and its environmental consequences. In practice, permission by government is given in routine. The common land in the villages cannot be used by any person for his own personal benefit. Although there are detailed land use statistics in the revenue records, not much use is made of this information for formulating plans for better use of land resources. 11.6. Contract Enforcement A contract is a legally binding agreement between two parties to achieve certain mutually agreed upon objectives. The Punjab Land Revenue Act, 1967 and Punjab Tenancy Act, 1887, govern the various contractual obligations between parties in the field of the Land Revenue Administration. An important feature of Land Dispute adjudication is that the jurisdiction of the civil court is barred in revenue cases, but in cases of disputes regarding the title to land, the civil court is the proper forum. The disputes about contract enforcement may include recovery of rent, restoration of tenancy, incorporation of transfer of property by oral transactions, by registered sale deeds, by the decree of the court in revenue record, ejectment of tenants, land leases and grants, particularly of land jointly owned etc. In particular, illegal possession of land by those who are powerful is becoming a common practice and is a source of many disputes. Under the new system of devolution, there is not much change in the functioning of the Revenue courts. The work of Deputy Commissioner, Assistant Commissioner and Commissioner has been transferred to District Officer (DO) (Revenue), Deputy District Officer (DDO), (Revenue) and EDO (Revenue) under the new system of devolution. The Land Revenue Laws and operational capacity of the revenue courts remain same. However, people still prefer to come to the revenue courts because, compared to the civil courts, these courts are more accessible, cheaper and less time – consuming. The rich and the powerful prefer the civil courts in order to perpetuate their hold through procrastination of the judicial process. Following could be some of the remedial measures given the constraints of the system to improve the enforcement of contracts in the Land Administration.


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On-the-spot inspections. There should be an on spot inspection and summary method of disposal with adequate safeguards for reaching at the true situation. Long protracted litigation creates further complication in enforcement of contracts.

Rationalization. There should be reduction of tiers (for most revenue cases), the last court of appeal

should be DDO (Revenue) and not Board of Revenue as is the case presently. Bar jurisdiction of civil courts. Strengthening of the law by barring the jurisdiction of civil courts in

revenue matters. Frequent intervention by the civil courts on the pretext of enforcing legal procedures (and determining legal rights of the contesting parties) is one of the major stumbling blocks in the way of an efficient and effective contracts enforcement.

Fix time limits for decisions. Fixing time limits for each category of land dispute and imposing a law on

the postponement of hearing by revenue courts on administrative grounds should help expedite the settlement of dispute.

Social Engineering. The land-related disputes are due to both the poor quality of land records, ambiguous

laws and sociological and economic factors. The need is not only to improve basic land records but also to engage in social engineering.

Establish open courts. Open courts and Grievance hearing days by senior officials can reduce the

transaction costs of obtaining legal redress. 11.7. Key Issues, Recent Progress and Some Policy Suggestions The analysis so far has dealt with two related issues in the land market that have bearing on efficiency and equity aspects of land utilization. The land reforms of the redistributive type and the provision of tenure security to the tenants was attempted by previous governments mainly because the private land market was not achieving a socially desirable outcome for the tenants and small farmers. The land reforms by and large did not achieve the objectives on the implementation stage for political economy and administrative reasons. The implementation of land reforms was entrusted to Federal and Provincial Land Commissions which were separate entities than the land revenue administration. The legal processes of resumption of land beyond the fixed ceilings were complicated and subject to judicial determination. The slow pace of the land resumption was a direct outcome of the procedure adopted for implementation of land reforms. The land records and the procedures adopted for its updating were designed by the British mainly for the collection of land revenue. An elaborate system of preparation of land records with respect to land ownership, operation, transfer through sales and inheritance was prescribed. A hierarchy of the administrative machinery was set up for the preparation of records and supervision of the work by junior officials. A dispute settlement mechanism was also put in place. This system has been continued by different governments after the creation of Pakistan. Due to the involvement of revenue officials in the development work, the land record system has deteriorated. The basic flaw in the land management system is that it was not designed to give the title of land to the owners of land in a conclusive manner. The titles were presumptive titles and did not provide a state guarantee to land. There is, therefore, a need to switch over to a system which provides conclusive titles to land. Punjab government needs conduct a special land Survey to confer conclusive titles to land for different land owners. The present records-of-rights need to be updated during this Survey. Titles of land should then be registered after a due process of extensive consultation with all stake-holders in land matters. In case of any dispute, the courts should give their decision on whom titles should be bestowed. The introduction of this system should facilitate the sale and purchase of land and facilitate the development of land market. It may also be helpful to integrate land sales and land mutation processes in one administrative wing so that the work of both is facilitated. Land disputes would also become fewer after the titling procedures are reformed. This would be so if the titling mechanism is ensured to be transparent.

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Once this Survey is conducted and the results are verified through the dispute settlement mechanism, the land records need to be computerized using experience of pilot programs already conducted by the Punjab government in some districts. Modernized and updated land records are an essential pre-requisite for improving functioning of the land markets and moving towards more efficient, equitable and competitive farming structure in Punjab. Once this proposed system is in place and functioning, the Government may scrap the obsolete and dysfunctional system currently in place under the supervision of the revenue department. The overriding objective of accurate land records is to promote greater efficiency through faster information retrieval, transparency and reduction of transaction costs for the land owners. A detailed study69 carried out in December 2005 as part of the preparation of the Provincial Program Punjab Land Records Management System (PP-LRMIS) funded by the World Bank listed many problems in the existing system including complicated manual procedures with many levels of oversight, lost or destroyed records, lack of access to the records by other agencies and parties, and a lack of transparency. Difficulties that are more fundamental include the fact that the record of rights does not cover all land and the record of rights does not provide certainty in rights. This study also presented an assessment of the Four Pilot Projects (Kasur, Lahore, Rahim Yar Khan and Gujrat) undertaken to strengthen land records in Punjab. The problems described in the assessment of the Kasur pilot project are indicative of the issues facing the efforts to computerize land records in Punjab. Accoridng to this study ‘the pilot project faced considerable challenges. A large number of records needed to be computerized (about 2.2 million). These records were maintained by 210 Patwaris. There were inaccuracies in the existing records. The general opinion of Revenue staff was that the project objectives were impossible. The Revenue staff in the District had many other commitments and low computer literacy and was generally suspicious of the project, feeling that the project would affect their interests. The original deadline for project completion was June 2002. This was extended to June 2003. The project never progressed to the planned third phase of operational launch. Although the project did not achieve its full objectives, it did dispel the myth that the land records could not be computerized. Almost all the land records in the District were computerized. However, the pilot results demonstrated a number of weaknesses. The software was not comprehensive and not all of the land records could be computerized. The database could not be updated automatically for mutations. The cost of data entry was significantly higher than the manual system. Time schedules slipped and there were delays in funding. The technology used was outdated and difficult for both data entry and data retrieval. Lastly, the project did not anticipate the difficulty experienced in training Revenue staff in the use of computers” The Lahore pilot project which is regarded as “a significant step in the computerization of land records in Punjab” also faced a host of problems. A presentation at a workshop in May 2005 by the project manager for the pilot highlighted the following problems/issues: • errors in the record • the effort required in capacity building capacity for the Patwari • the requirement of a Patwari for data entry • the effort required to educate the public • various administrative, technical and operational constraints. • resistance from existing HR • lack of an IT vision • slow decision power • conflict between the old system and the new technology and questions about the legality of the

computerized record.

69 Provincial Program for Land Records Management and Information System: (PP-LRMS) - Business

Process Reengineering Study December 2005


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These experiences with the pilot projects highlight the complexity and enormity of the tax at hand. The government of Punjab needs to scale up the pilot experiments to the entire province. In this regards, the land administration system must ensure meeting several key performance criteria including giving security of title to each parcel of land, minimal possible transaction costs of land transfers and registration, financial sustainability and completing the cadastre in time and keeping the information on land updated. In early 2007 the Government of Punjab signed a concessional loan agreement with the World Bank to improve business processes and increase institutional capacity at the provincial, district, and lower administrative levels, and put in place an automated land record system [see Box 11.2] Box 11.2 Improving Land Records Service Delivery

11.8. Conclusion In spite of numerous attempts to reform the systems of land titling and property registration in Punjab, as well as attempts to make systems of tenure more equitable, the land market remains opaque and complicated. The government has made some attempts to make rural land administration systems more transparent, but during implementation has repeatedly run into resistance from powerful vested interests. Nevertheless, reform of land administration and titling is a crucial element in the promotion of an appropriate business environment, while more equitably systems of land tenure can have significant impact on productivity in agriculture. These are areas where the government needs to take concerted action in the medium term.

The Government of Punjab is committed to improving the quality of land records services provided to the population. To assist in this objective the World Bank approved a US$45.65 million credit to the Government of Punjab on January 25, 2007 to improve land records service delivery, contributing to long-lasting tenure security and more efficient operation of land markets. The Land Records Management and Information Systems Project is designed to upgrade the land records management system for the Province by revising current business processes and associated legislation and regulations. It will also establish Service Centers where land records will be maintained and available to the public in digital form, and pilot linkages between the land records system and the system for registration of deeds. The existing overall dispersed and non-transparent nature of land records in all the Provinces of Pakistan including Punjab makes land rights uncertain, and negatively impacts economic development. Land transactions are relatively high cost, and disputes about land rights are caused, among others, by the inefficient and archaic land records system, which has undergone very little change since the 19th Century. This constrains the efficient operation of land markets and results in land prices that are in excess of the discounted value of potential agricultural earnings from land. The project will help improve business processes and increase institutional capacity at the provincial, district, and lower administrative levels, and put in place an automated land record system. It will also include a set of public outreach activities. The goal will be improved service delivery to the population. Under the Project, extracts from the land records (fards) will be provided within 30 minutes of application at the Service Centers. In the current system it frequently takes weeks for this process to be completed. The total transactions costs associated with obtaining land record extracts are expected to be reduced by 80 percent. By improving tenure security this project will increase access to land and credit especially for the poor whose rights remain largely unprotected.” The credit, from the International Development Association (IDA), the World Bank’s concessionary lending arm, has 35 years to maturity and a 10-year grace period. Source: World Bank (2007) Press Release, 2007/217/SAR

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12. Water Pakistan’s population is projected to reach 173 million by 2011 and 221 million by 2025. Its requirements for food grains and other agricultural and forestry products will increase accordingly. The Government considers maintaining food security and producing exportable surpluses of crops such as cotton and rice to be important policy objectives. To achieve these objectives, agricultural production will have to expand considerably in the future. Judicious use of the country’s scarce water resources is crucial to ensure food security and maintain growth in the economy. 12.1 Future Water Requirements: National Scenario Two demand scenarios are presented in the Pakistan Water Sector Strategy (2002) document: (i) a high-demand scenario based on production targets given in the Ten Year Perspective Plan, and (ii) a low-demand scenario based on high per capita demand projections for 2002 as given in the Report of the National Commission on Agriculture (1988). Both demand scenarios hold constant per capita demand and project total demand on the basis of population. Under the high-demand scenario, meeting production targets would require the cropped area to increase to 30.88 million hectares (Mha) by 2010 and to 31.83 Mha by 2025. Compared with a cropped area of 22.7 Mha in 2000, this represents a large increase that will require the addition of new areas and large investments in irrigation and drainage works. The low-demand scenario implies that cropped area needs to increase to 26.1 Mha by 2010 and to 26.26 Mha by 2025. The targets of the low-demand scenario are largely achievable through the intensification of existing cropped area without significantly expanding into new areas. The water requirements of both demand scenarios are presented in Tables 12.1 and 12.2, respectively. The high-demand scenario envisages improvements in irrigation efficiency by 45 percent by 2010 and by 50 percent by 2025. Assuming that the aforementioned gains in irrigation efficiency can be realized, canal water diversion requirements would be 170.44 million acre feet (MAF) in FY 2011 and 155 MAF in FY 2025. The lower figure for FY 2025 is the consequence of expected water savings due to higher irrigation efficiency. In the absence of additional storage, the mean annual surface water availability would remain at 103.81 MAF, translating into a shortfall of 39 percent by FY 2011 and 33 percent by FY 2025. The requirements of the domestic and industrial sectors would be in addition to the agricultural water demands mentioned above. Urban domestic and industrial water use was 4.3 MAF in 2002 and is projected to increase to 7.1 MAF by 2011, and to 12.1 MAF by 2025.70 Rural domestic water use was 0.8 MAF in 2002 and is expected to increase to 1.86 MAF by 2011 and to 3.2 MAF by 2025. Table 12.1: Irrigation Water Requirements for High-Demand Scenario

Year 2000/01 2010/11 2024/25

Requirement/Availability

(BCM) (MAF) (BCM) (MAF) (BCM) (MAF) Net Water Requirement Net Irrigation Water Requirement 95.32 77.31 133.10 107.95 134.70 109.25 Groundwater Availability for Consumption use 37.91 30.75 38.54 31.25 39.14 31.75 Net Surface Requirements for Irrigation 57.41 46.56 94.57 76.70 95.56 77.50 Irrigation Efficiency 0.4 0.4 0.45 0.45 0.5 0.5 Canal Head Requirement 143.53 116.42 210.16 170.44 191.11 155.00 Mean Annual Surface Water Available 128.0 103.81 128.0 103.8 128.0 103.81 Shortfall 15.53 12.61 82.16 66.64 63.11 51.20 Shortfall ( percent) 10.82 39.09 33.02

Source: Pakistan Water Sector Strategy (2002), Annex 4.2.1B, Table 11. 70 National Water Strategy. National Water sector Profile, Volume 5. Government of Pakistan. Ministry of

Water and Power. Chief Engineering Advisor/Chairman Federal Flood Commission. October 2002. p. 122.

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Table 12.2: Irrigation Water Requirements for Low-Demand Scenario Year

2000/01 2010/11 2024/25 Requirement/Availability

(BCM) (MAF) (BCM) (MAF) (BCM) (MAF) Net Water Requirement Net Irrigation Water Requirement 95.32 77.31 109.65 88.94 113.52 92.08 Groundwater Availability for Consumption Use 37.91 30.75 38.53 31.25 39.14 31.75 Net Surface Requirements for Irrigation 57.41 46.56 71.12 57.69 74.38 60.33 Irrigation Efficiency 0.4 0.4 0.425 0.425 0.45 0.45 Canal Head Requirement 143.53 116.42 167.35 135.74 165.28 134.07 Mean Annual Surface Water Available 128.0 103.81 128.0 103.81 128.0 103.81 Shortfall 15.53 12.61 39.35 31.93 37.28 30.26 Shortfall ( percent) 10.82 23.51 22.565

Source: Pakistan Water Sector Strategy (2002), Annex 4.2.1B, Table 11. The low-demand scenario assumes that irrigation efficiency will rise to 42.5 percent by 2010 and to 45 percent by 2025. Accordingly, the canal water diversion requirements for 2010 will be 135.74 MAF and 134.07 MAF in FY 2025. Thus, the supply shortfall will be 12.6 MAF or 11 percent in 2000, which is against established water requirements. The shortfall will be 31.93 MAF or 23.5 percent in 2010 and 30.26 MAF or 22.6 percent in 2025. Even if the low-demand scenario is assumed to prevail in the future and the shortfall of 12.6 MAF in 2000 against established water requirements is accepted, it will be necessary to create additional storage of 19 MAF in FY 2011 and 18 MAF in FY 2025. The framework for allocation of additional water supplies from storage already exists in the Water Accord. In Pakistan, storage capacity is low compared with other countries. According to the World Bank,71 about 900 days of flow can be stored in Murray-Darling and Colorado basins, while this figure is 500 days for South Africa’s Orange River (Figure 12.1). India can store between 120 and 220 days of flow of its major peninsular rivers. As against this, the dams currently available in the Indus Basin can store barely 30 days of average flow. Figure 12.1: Storage Capacity of Various Semi-Arid Basins

Given the backdrop of the emerging national water scenario, this chapter focuses on water in Punjab, using a holistic approach. Part I deals with water resources and irrigation, starting with an overview of

71 Pakistan’s Water Economy: Running Dry. World Bank, 2005. p. xii.


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the water resource base of Punjab, which includes both surface and groundwater resources. The extensive irrigation infrastructure of Punjab is considered next and the present-day replacement value of irrigation assets as well as deferred maintenance estimates are discussed. This is followed by an overview of allocations for irrigation and drainage projects under the MTBF. The main focus of Part I is on the Punjab Irrigation Sector Reform Program, which has four main components: (i) institutional and policy reforms, (ii) water management reforms, (iii) irrigation service delivery reforms, and (iv) on-farm water management reforms. A set of recommendations is presented on moving ahead with the reform process in coming years. Part I concludes with an analysis of agricultural water use and provides recommendations for enhancing water productivity and meeting the emerging shortfall in irrigation water supplies. Part II deals with WSS services and industrial water use. In the context of water-related MDGs, access to water supply and sanitation coverage in the province is examined. This is followed by a discussion of key issues in WSS service delivery. The focus of Part II is the ongoing devolution process in the WSS sector. Recommendations for moving head with devolution of service delivery are also presented. Part II concludes with a discussion on industrial water use and proposes measures for protecting water resources from pollution caused by disposal of untreated industrial effluents. Part I: Water Resources and Irrigation 12.2 Geography and Climate of Punjab The Indus plains stretch south of the Himalayas for almost 1,000 miles to the Arabian Sea coast. This region is underlain with rich alluvial deposits more than 1,000 feet deep. The breadth of the plains varies from about 200 miles to less than 100 miles. The narrowest part is the region between the Sulaiman Mountains and Thar Desert, where the plains are only 80 miles wide. This region, known as the “Indus Corridor,” also marks the divide between the Upper and Lower Indus Plains, which roughly correspond to the administrative boundaries of the provinces of Punjab and Sindh.72 Punjab has several distinct geographical regions. The northern part consists of the Potohar Plateau, which has an average elevation of 1,500 feet and is about 150 miles long and 60 miles wide. The characteristic feature of Punjab, however, is its fertile alluvial plains that have been formed by constantly shifting rivers of the Indus system. These are a part of the Great Indo-Gangetic Plains. In the southeastern part of the province lies the Cholistan Desert comprising sediments deposited by the ancient Ghagra-Hakra River system. The area is now covered with sand dunes. Most rainfall occurs in the two-and-a-half-month monsoon season beginning from July. Temperatures and humidity start declining from September. December and January are the coldest months, with most cloudy days in the year falling in this period. January and February have sporadic winter rainfall that sometimes extends into March. Spatial rainfall patterns are highly variable. Rainfall intensity is highest in the northern mountains (at locations such as Murree, where average annual rainfall over the last decade has been 1705.6 mm).73 Of the main cities in Punjab, average annual rainfall in Rawalpindi is 1151.7 mm, Lahore is 659.2 mm, Faisalabad is 380.5 mm and in Multan, average annual rainfall is 192.2 mm (Table 12.3). In the plains, relatively good rainfall occurs on the strip of land near the foothills that is about 400 miles long and 160 miles wide, and comprises the districts of Sialkot, Gujrat, Jhelum, and Rawalpindi. Southern Punjab receives far less rainfall.

72 More precisely, the upper Indus Plains should include Peshawar Valley, and Bannu Basin, which are

administratively not part of the Punjab province. 73 Data on average annual rainfall from 1996 to 2005 calculated from Punjab Development Statistics, 2007.

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Table 12.3: Average Annual Rainfall (mm) at Selected Locations in Punjab, 1996 to 2005 Murree Rawalpindi Sialkot Sargodha Lahore Faisalabad Multan 1705.6 1151.7 1009.2 488.5 659.2 380.5 192.2

Source: Based on information in Punjab Development Statistics 2007. 12.3 Surface Water Resources 12.3.1 River Flows The snowmelt of the northern glaciers feeds the Indus River system that drains the Punjab plains. This system consists of the Indus and its main tributaries: the rivers Jhelum, Chenab, Ravi, and Sutlej, all of which join the Indus on the left side. For the period from FY 1976 to FY 2004, the average annual total flow of all rivers (Table 12.4) in the Indus system was 148.79 MAF, most of which (81.79 percent) occurred in the kharif (summer) season and the remaining (about 18 percent) in the rabi (winter) season. Under the Indus Water Treaty, control of the eastern rivers was handed over to India and of the western rivers (Indus, Jhelum, and Chenab) to Pakistan. For the period FY 1976 to FY 2004, the aggregate annual average flow of the eastern rivers at rim stations located at Balloki and Sulemanki was 8.17 MAF. Table 12.5 presents flows in the western rivers during the post-Tarbela period. Table 12.4: Total River Flows (MAF) of Western and Eastern Rivers

Kharif Rabi Total Year Period Average

1975/76 to 1979/80 128.64 25.32 153.96 1980/81 to 1984/85 118.96 24.74 143.71 1985/86 to 1989/90 116.28 30.31 146.59 1990/91 to 1994/95 138.32 30.59 168.91 1995/96 to 1999/00 129.29 28.58 157.87 2000/01 to 2003/04 95.00 19.96 114.96 Overall average 121.98 26.81 148.79

Source: WAPDA and I&PD (courtesy Mr M. H. Siddiqi, Consultant I&PD). Table 12.5: Western River Flows (MAF) at Rim Stations

Jhelum at Mangla

Chenab at Marala

Indus at Kalabagh

Total Western Rivers’ Flows at Rim Stations

Period

(Total: Kharif and Rabi) Kharif Rabi Total Period average flows 1975/76 to 1979/80 23.00 29.03 87.50 116.76 22.78 139.54 1980/81 to 1984/85 22.45 27.02 87.21 113.78 23.08 136.85 1985/86 to 1989/90 24.40 27.04 88.18 111.68 27.94 139.62 1990/91 to 1994/95 27.94 27.95 104.34 130.76 29.47 160.23 1995/96 to 1999/00 23.45 28.59 96.23 121.95 26.32 148.27 Annual flows 1995/96 28.04 31.81 98.91 129.70 29.06 158.76 1996/97 29.04 31.88 100.34 137.49 23.77 161.26 1997/98 24.02 28.29 89.93 110.14 32.09 142.23 1998/99 21.72 27.94 99.89 124.98 24.57 149.55 1999/00 14.43 23.05 92.09 107.45 22.12 129.57 2000/01 12.55 19.93 70.40 86.32 16.56 102.88 2001/02 11.85 18.89 66.38 79.85 17.27 97.12 2002/03 17.39 23.49 76.94 94.97 22.85 117.82 2003/04 22.68 25.86 89.11 115.78 21.87 137.65 Overall average 23.13 27.15 90.35 115.57 25.05 140.62 Maximum 32.00 32.84 112.18 141.53 35.14 172.10 Minimum 11.85 18.89 66.38 79.85 16.56 97.12

Source: WAPDA and I&PD (courtesy Mr M. H. Siddiqi, Consultant I&PD). The aggregate annual average flows in the three western rivers is 140.62 MAF, of which 115.57 MAF on average occurred during the kharif season and only about 25.05 in the rabi season. An important


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feature of river flows is their variability. For example, the maximum annual flow during the period under consideration was 172.10 MAF while the minimum annual flow during this period was 97.12 MAF. This variability has generated one of the most intense debates in the country on the feasibility of developing additional reservoir storage. The Indus Waters Accord of 1991 forms the basis of water allocation and distribution between the provinces. Table 12.6 presents broadly the apportionment of Indus waters between provinces (Para 2 of the Accord). Implicit in the adoption of the higher figure in Para 2 of the Accord is the need for creation of additional storage capacity in the Indus River system. Table 12.6: Apportionment of Indus Waters between Provinces (MAF)

Area Kharif Rabi Total Punjab 37.07 18.87 55.94 Sindh* 33.94 14.82 48.76 NWFP 3.48 2.30 5.78 Civil canals** 1.80 1.20 3.00 Balochistan 2.85 1.02 3.87 Total 77.34 37.01 114.35

Source: Water Accord 1991, Para 2. * Including already sanctioned urban and industrial uses for metropolitan Karachi. ** Ungauged civil canals above rim stations. In the above table, Punjab’s annual share is 55.94 MAF, which is split into 37.07 MAF during the kharif season and 18.87 MAF in the rabi season. The accord also provides for sharing balance river supplies, including flood supplies and future storage as follows: Punjab, 37 percent, Sindh, 34 percent, Balochistan, 12 percent, and NWFP, 14 percent. In a water shortage situation below 114.35 MAF, water sharing between the provinces occurs on the basis of the actual average use of each province over the five-year period 1977/82.74 12.3.2 Sediment Transport and Surface Water Quality The Indus River and its tributaries transport considerable amounts of sediment from their upper mountain catchments, causing silting in the major reservoirs located at Tarbela, Mangla, and Chashma (Table 12.7). Table 12.7: Loss of Storage Capacity in Main Reservoirs due to Silting

Live Storage Capacity (MAF) Reservoir Year Commissioned Initial Year 2001 Year 2025*

Mangla 1967 5.3 4.4 4.0 Chashma 1971 0.7 0.4 0.3 Tarbela 1974 9.6 7.9 6.2 Total 15.6 12.7 10.5

Source: Cited in National Water Policy, Draft Final Report, Volume II, December 2002, from 9th Five-Year Plan. * Projected figures. The original total design capacity of these reservoirs was 15.6 MAF. However, it is estimated that, by 2025, the deposition of silt will reduce their storage capacity by 33.12 percent to 10.5 MAF. Unless additional storage is developed, the resulting water shortages will adversely affect agriculture and other sectors of the economy. The rivers also bring in salts. Salt concentrations in river water are higher during winter when rainfall in upper catchments is of low intensity and water from snowmelt is also low. Around January, total dissolved solids in the rivers’ northern reaches75 are observed at levels between 200 to 250 parts per million (ppm). These fall to about 125 ppm in the monsoon season, before rising back to 200 to 250 74 These ‘actual average system uses for the period 1977-82’ referred to as Para 14(b) uses that would, as

per the Water Accord, form the guide line for developing future regulation pattern. 75 This refers to measurements taken on Indus at Attock, Jhelum at Mangla, and Chenab at Marala.

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ppm by the end of the year. Thus, the quality of naturally occurring surface water flows in the upper Indus plains is good, provided it is not subject to pollution caused by human activities.76 Pollution from untreated urban and industrial wastewater flows, however, is a serious issue in Punjab that poses a threat to the quality of water resources. Below, we provide a brief assessment of the situation with respect to the pollution of the major rivers flowing through Punjab.77 The Jhelum River, especially its northern reach, is largely free of pollution because no industrial clusters or mega-cities are in close proximity. The dissolved oxygen content was well above 7.0 mg/l, and biochemical oxygen demand (BOD) was 2.2 mg/l downstream. By contrast, the Chenab River was heavily polluted because of inflows of urban and industrial pollution. Various stretches, adding up to 12 percent of the river’s length, were completely depleted of dissolved oxygen. BOD downstream of Faisalabad was 4.2 mg/l. The Sutlej River, especially during low flow periods has no dissolved oxygen over 24 percent of its length. The BOD in this river near the town of Kasur was 4.9 mg/l. The most polluted of all the rivers in Punjab is the Ravi. According to estimates, 47 percent of municipal and industrial pollution loads discharged into all rivers go into the Ravi. During low flows, the 62 km stretch between Balloki and Ravi acts as a sewerage drain and is completely devoid of dissolved oxygen. On the basis of mean annual flows in the Ravi, the BOD downstream of Lahore was 77 mg/l, reflecting the impact of municipal discharges. The upper reaches of Indus River had a dissolved oxygen content above 8.5 mg/l and the BOD downstream of Attock was measured at 2.9 mg/l. However, due to industrial discharges from Punjab and Sindh, heavy metals such as nickel, lead, zinc, and cadmium have been found in Indus waters, although their concentrations are below WHO prescribed levels. 12.3.3 Drainage Many areas of Pakistan and Punjab suffer from water logging and salinity because of poor drainage. Salts carried in surface water and mobilized through unregulated groundwater pumping accumulate in the root zone, adversely affecting crops and agricultural productivity. According to the Drainage Master Plan (DMP),78 12 percent of gross commanded area in the country has a water table depth of up to 150 cm (5 ft), while 27 percent of surface soil is saline (4 percent moderately saline, 7 percent severely saline, and 6 percent sodic). In Punjab, 4.5 percent of irrigated area is waterlogged and 12 percent is saline, needing treatment. Many experts estimate the loss of agricultural productivity due to salinity to be 25 percent. Therefore, reclamation of lands through provision of drainage is essential. In Punjab, which is divided into seven drainage basins with a gross covered area of 4.39 Mha, drainage facilities have been provided through 8,065 (fresh groundwater) FGW and 2,256 saline groundwater (SGW) tube wells, 3,883 km surface drains, and 2,810 km of subsurface drains. To meet drainage needs, the DMP envisages the use of surface drains, subsurface (pipe) drainage, and bio-saline agriculture/soil reclamation. The capital cost79 of planned interventions in Punjab under the DMP comes to Rs. 49,866.628 million, which includes Rs. 1,406.206 million for surface drainage, Rs. 967.712 million for subsurface (pipe) drainage, and Rs. 72.578 million for bio-saline agriculture/soil reclamation. The capital cost of the entire DMP is Rs. 125,981.073 million.

76 The qualification is really important because significant amounts of untreated domestic and industrial waste

water pollute rivers in Punjab. This is discussed in detail in subsequent section. 77 Based on Government of Pakistan (2002). National Water Sector Strategy. Vol. 5. Ministry of Water and Power.

Office of chief Engineering Advisor/Chairman Federal Flood Commission. 78 Drainage Master Plan of Pakistan, Volume 1, Water and Power development Authority, Water resources

Planning Organization, Planning and Design Division, Lahore, December 2005, See p.1. 79 See ibid. Table 6.1 p, 22.


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12.3.4 Floods Despite major investments in reservoirs that regulate river flows and in flood protection, many areas in the country face flood hazards. Between 1955 and 2001, estimated flood costs were roughly $10 billion in direct losses in addition to loss of over 6,000 human lives.80 Areas prone to flooding include riverine lands adjacent to rivers in the Indus Basin, high-torrent areas prone to flashfloods caused by intense local rainfall on steep denuded mountainsides, and areas with poor drainage where urban settlements and agricultural lands are affected by ponding water after heavy monsoon rains. The National Water Strategy assigns priority to protecting major human settlements (main cities, key secondary cities, and towns), areas of concentrated economic activity, and infrastructure against flood hazards. It stipulates that flood-risk planning and regulatory zones should be delineated and adopted by all agencies in their planning processes.81 12.4 Groundwater Alluvial deposits of considerable thickness underlie the upper Punjab plains. These deposits, whose thickness is reported to be in excess of 300 meters (1,000 feet), have high transmission and constitute a very productive, unconfined aquifer system. Groundwater resources are exploited to supplement surface water supplies to meet the growing water demand of agricultural and urban/industrial sectors. There are indications that pumping is far in excess of natural recharge, at least in some areas. For example, due to continuous lowering of the groundwater level in the aquifer caused by unregulated pumping, water tables have fallen to 60-70 feet below the natural surface level in Kamalia and Pakpattan.82 Shortage of canal water during droughts tends to exacerbate the problem of groundwater overdraft. Figure 12.2 depicts trends in groundwater development in the province. Figure 12.2: Evolution of Tube wells in Punjab

0

200000

400000

600000

800000

1000000

1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05(p)

No.

of T

ubew

ells

Total Diesel Electric

There are serious issues of groundwater quality in Punjab. The Indus and its tributaries cause an inflow of 33 Mt of salts annually. About 24 Mt of salts are retained in the system, of which 13.6 Mt are retained in Punjab and the remaining in Sindh. An additional 24.7 Mt of salts are mobilized by fresh groundwater tube wells. Spatial variations in groundwater salinity are considerable. About 75 percent of incoming salts in Punjab end up in fresh groundwater zones.83 Saline groundwater zones tend to be towards the center and lower parts of the doabs where distance from recharging rivers is

80 National Water Strategy, National Water Sector Profile, Volume 5. Ministry of Water and Power, Office of

Chief Engineering Advisor/Chairman Federal Flood Commission. October 2002. See Pp-58-59. 81 National Water Strategy, Volume 2, Ministry of Water and Power, Office of Chief Engineering

Advisor/Chairman Federal Flood Commission.. October 2002. See Pp-78-79. 82 Consortium of ARCADIS-EUROCONSULT, NESPAK, NDC & Halcrow, ‘Groundwater management and

regulation in Punjab: Synopsis of achievements and the way forward’, Groundwater Regulatory Framework Team, Punjab Private Groundwater Development Project, I&P Department, Government of Punjab 2002. See p.3

83 Pakistan Water Sector Strategy (2002), Vol. 5, pg 75.

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greater. This underscores the crucial dependence of usable groundwater on recharge from surface water sources. Table 12.8 provides information on the spatial distribution of groundwater salinity. Table 12.8: Distribution of Groundwater Quality Zones

Doab

Gross Area (Mha) < 1,000 ppm (Mha)

1,000-2,000 ppm (Mha) >2,000 ppm (Mha)

Rechna 3.188 2.436 0.403 0.349 Chaj 1.488 1.102 0.124 0.262 Thal 3.083 1.831 0.672 0.580 Bari 3.312 2.377 0.453 0.483 Bahawalpur 2.677 0.414 0.795 1.469 Total 13.464 8.161 2.447 3.143 Percent of Total 100 59 18 23

Source: National Water Policy (2002). Draft Final Report (December), vol. II. Although salinity measured in terms of total dissolved solids is widely used as an indicator of water quality, other water quality indicators such as sodium adsorption ratio (SAR) and residual sodium carbonate (RSC) are more useful in terms of characterizing the impact of irrigation with saline groundwater on the soils. The Directorate of Land Reclamation now regularly collects information on water quality and reports EC, SAR and RSC levels. The results from their water quality monitoring program are provided below in Table 12.9.


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Table 12.9: Groundwater Quality Status in Different Groundwater Monitoring Units of Punjab, 2005 (Area in ha) EC > 1.5 = Unfit SAR > 10.0 = Unfit RSC > 2.5 = Unfit Status Groundwater Monitoring Units

Fit Unfit percent Unfit Fit Unfit percent Unfit Fit Unfit percent Unfit

Fit Unfit percent Unfit

Lahore 1,675,810 356,486 18 1,869,771 162,528 8 1,294,727 737,572 36 1,206,283 826,014 41

Bahawalpur 973,215 1,963,974 67 1,999,800 937,357 32 2,369,352 567,840 19 795,169 2,141,994 73

Sargodha 637,866 440,983 41 858,036 220,813 20 754,746 324,104 30 546,612 532,238 49

Dera Ghazi Khan 790,922 926,396 54 1,394,023 323,295 19 1,625,153 92,166 5 751,804 965,514 76

Faisalabad 82S,015 960,816 54 1,083,877 705,954 39 1,031,031 758,802 42 710,446 1,079,386 60

Thal 1,182,685 1,303,685 52 1,602,956 883,414 36 2,109,481 376,890 15 1,070,947 1,415,423 57

Multan 1,509,905 961,041 39 2,132,543 338,400 14 2,137,717 333,226 13 1,366,572 1,104,371 45

Punjab 7,599,419 6,913,381 48 10,941,006 3,571,761 25 11,322,205 3,190,599 22 6,447,832 8,064,940 56 Source: Directorate of Land Reclamation, Punjab, I&PD, Canal Bank Moghalpura, Lahore.

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Because canal water supplies often fall short of irrigation demands and the use of groundwater is not regulated, farmers often use groundwater to supplement irrigation supplies. The problem is especially acute in zones with saline and sodic groundwater where the use of saline groundwater degrades soils. Saline groundwater intrusion into adjacent FGW zones has been observed in some areas of Punjab, which is the result of excessive pumping in the latter zones. FGW zones located down-gradient from SGW zones are also vulnerable on this account. The Punjab Private Sector Groundwater Development Project notes that, in the Chaj Doab, about 200 FGW Salinity Control and Reclamation Project (SCARP) tube wells located in the vicinity of SGW were abandoned because of increased salinity. Another problem is depletion of the freshwater lens overlying the saline groundwater aquifer due to over-pumping. Farmers in areas where freshwater occurs only in the upper layers of shallow aquifers have found an ingenious way of harnessing this crucial resource by adopting skimming wells technology (nalka bores). As in the case of conventional tube wells, pumping by skimming wells is also unregulated. The project report warns that 10,000 skimming wells are vulnerable to exhaustion of their overlying freshwater layer. These issues, if not adequately addressed in the near future, could cause degradation of land resources and depletion of aquifers, with serious implications for the sustainability of rural livelihoods. 12.5 Irrigation Infrastructure The Indus River feed a large irrigation system. Apart from the three reservoirs at Mangla, Tarbela, and Chashma, there are 19 barrages for regulating water and 12 inter-river link canals. The total length of link canals is nearly 850 km. The total design capacity of all link canals is 161,100 cusecs with individual design capacities canals ranging from 4,000 to 22,000 cusecs (Tables 12.10 and 12.11). Table 12.10: Salient Features of Link Canals

Discharge (Designed)

Link Canal Headworks

Cusecs Chashma-Jhelum Link Chashma 21,700 Taunsa-Panjnad Link Taunsa 12,000 Marala-Ravi Link Marala 22,000 BRBD Link RQBS System

Marala (through Upper Chenab Link Canal Primarily fed by Mangla Dam (R. Jhelum)

7,000

Rasul-Qadirabad Rasul Barrage 19,000 Qadirabad-Balloki Qadirabad Barrage 25,000 Balloki-Sulemanki I Balloki Barrage 14,900 Balloki Sulemanki II T-S-M-B System

Balloki (through BSI) Fed from Indus (through C-J Link), Jhelum and Chenab

9,000

Trimmu-Sidhnai Trimmu Barrage 11,000 Sidhnai-Mailsi Sidhnai Barrage 10,100 Mailsi-Bahawal Sidhnai Barrage through Mailsi siphon 4,000 Haveli Link Trimmu Barrage 5,300 UCC Internal Marala 5,200 UJC Internal Mangla 2,000

Source: (a) Table 3.2, National Water Policy Draft Final Report (December 2002) Vol. II, p. 3–7, and (b) Communication with Mr M. H. Siddiqi, I&PD, Government of Punjab.


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Table 12.11: Details of Punjab’s Canals Canal Source (Headworks) Authorized Full Supply Discharge (Cusecs)

1. Upper Jhelum Canal Mangla Dam 12,500 2. Lower Jhelum Canal Rasul Barrage 5,297 3. Marala-Ravi Internal Marala Barrage, MR Link 2,013 4. Upper Chenab Canal Marala Barrage, UCC Link 16,500 5. BRBD Internal Marala Barrage, BRBD Link 1,907 6. CBDC Marala Barrage, BRBD Link 2,400 7. Upper Dipalpur Canal Marala Barrage, BRBD Link 2,300 8. LCC Canal Khanki Barrage, QB Link 15,500 9. LBD Canal Balloki Barrage 9,841 10. Lower Dipalpur Canal BS Link 3,991 11. Upper Pakpattan Canal Sulemanki Barrage 6,604 12. Fordwah Canal Sulemanki Barrage 3,390 13. Eastern Sadiqia Canal Sulemanki Barrage 5,800 14. Rangpur Canal Trimmu Barrage 2,719 15. Haveli Canal Trimmu Barrage, Haveli Link 5,200 16. Sidhnai Canal Sidhnai Barrage, SM Link 4,200 17. Lower Pakpattan Canal SM Link 1,700 18. Lower Mailsi Canal SM Link 4,909 19. Qaimpur Canal Islam Barrage 589 20. Upper Bahawal Canal Islam Barrage 1,000 21. Lower Bahawal Canal SMB Link 6,700 22. Panjnad Canal Panjnad Barrage 9,005 22a. Abbasia Link Canal Panjnad 5,000 23. Abbassia Canal Panjnad Barrage 1,095 24. Thal Canal Jinnah Barrage 9,500 25. CRB Canal Chashma Barrage 5,015 26. DG Khan Canal Taunsa Barrage 8,300 27. Muzaffargarh Canal Taunsa Barrage 8,900 Total 161,875

Source: (a) Table 3.2, National Water Policy Draft Final Report (December 2002) Vol. II, p. 3–7, and (b) Communication with Mr M. H. Siddiqi, I&PD, Government of Punjab. At present, the Indus basin irrigation system is the largest contiguous irrigation system in the world, serving an area of 14 Mha (36 million acres). The system has 45 main canal commands. Twenty-four main canal commands are located in Punjab, serving 8.41 million hectares of culturable command area (CCA) (Table 12.12). The Punjab irrigation system also includes 2,794 secondary canals known as distributary and minor canals. Outlets installed on the distributaries feed watercourses. As a rule, the outlets are not located on the main canals. There are 5,800,000 outlets, each serving an average area of 145 ha. The Irrigation and Planning Department (I&PD) Strategic Reform Unit has estimated the cost of rehabilitation of assets to be Rs. 144,933.688 million. Table 12.13 provides details of assets.

Table 12.12: Features of Punjab’s Irrigation System

Features Unit No. of main canal commands 24 No. of distributaries/minors 2,794 Length of main canals/branches (km) 6,429 Length of distributaries/minors (km) 31,214 Length of inter-river link canals (km) 850 CCA (Mha) 8.41 No. of outlets 5,800 CCA per outlet (ha) 145

Source: Irrigation Department, Punjab.

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Table 12.13: Summary of revised (2006) Costs of Rehabilitation of Assets S.No. Description C.C.A/C.A

(1000 AC) Costs of rehabilitation Work

(Million Rs.) 1 Bahawalpur Zone (i) Bahawalnagar Circle 1496 3,611,158 (ii) Bahawalpur Circle 1223 6,437,611 (iii) Rahim Yar Khan Circle 1363 2,094.953 Total Bahawalpur Zone 12,143.722

2. Development Zone (i) Small Dams Circle 284.980 (ii) Dev. SCARP III Circle -- (iii) Mechanical Circle Lahore -- (iv) Machinery Circle Lahore -- Total Development Zone 284.980

3. D. G. Khan Zone (i) Derajat Circle 1202 4,011.204 (ii) Muzaffargarh Canal Circle 935 3,187.020 (iii) Project Circle D.G. Khan 1347 268.440 Total D. G. Khan Zone 7,466.664

4. Faisalabad Zone (i) LCC-West Circle 1135 6,484.194 (ii) LCC-East Circle 1808 19,340.156 (iii) Q B LINK Circle 3,699.031 (iv) Faisalabad Drainage Circle 7016 671.754 Total Faisalabad Zone 30,195.135

5. Lahore Zone (i) Depalpur Canal Circle 1642 3,799.926 (ii) UCC Circle 1249 6,749.000 (iii) Link Circle 162 2,513.628 (iv) Lahore Drainage Circle 4318 7,075.400 Total Lahore Zone 20,137.954 6 Miscellaneous (i) Taunsa Barrage PMU 12,000.000 (ii) IRI Buildings -- (iii) Directorate of Hyd. (Buildings) -- (iv) Directorate of Hyd. (General) -- (v) Directorate of Land Reclamation -- Total Miscellaneous 12,000.000

7. Multan Zone (i) Haveli Canal Circle 1348 12,966.616 (ii) Mailsi Canal Circle 820 2,411.456 (iii) Nilibar Circle 1420 9,405.611 (iv) LBDC Circle 1731 10,755.585 (v) Development Circle 600.661 Total Multan Zone 36,139.928

8. Sargodha Zone (i) Thal Canal Circle 2193 12,151.710 (ii) Lower Jhelum canal Circle 1476 9,452.528 (iii) Upper Jhelum Canal Circle 537 4,110.533 (iv) Drainage Circle 9818 850.514 Total Sargodha Zone 26,565.285 Grand Total 144,933.668

12.5.1 Canal Irrigation System Issues Lack of storage. Increasing water demands have created the need to more fully harness the water resources of the Indus Basin, especially surface water resources. The aggregate storage capacity of the existing dams in the basin is much lower compared with that in other semi-arid countries. In addition, the meager storage capacity available in the Indus River system is being progressively lost due to silting in the major reservoirs.


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Problems in design. The present irrigation system was designed for much lower cropping intensities than are the norm in most irrigated regions of Punjab. Outmoded design intensities are no longer able to cope with higher water demands. Authorized water allowances are not fully rationalized for the existing cropping intensities and crop water requirements of various canal commands. The result is that some canal commands face extreme water scarcity while others might have adequate and, at least in some cases, possibly more than adequate water. Low conveyance efficiency. Low conveyance efficiencies of the canal system cause a very significant portion of total canal water diversions to be lost, with relatively less water reaching the farm gate. Tube wells recoup some of this water in freshwater zones. However, percolation in saline water zones is irrecoverable and represents a genuine resource loss. Maintenance and repair (M&R). Punjab has an extensive irrigation and drainage network. Inadequate funding for maintenance and repair work in the past has led to an accumulated backlog of over Rs. 120 billion in deferred maintenance. Due to this, the infrastructure stock has deteriorated and its performance has been adversely affected. The SCARP tube wells, originally installed to control water logging and salinity, have outlived their purpose. Although the Government is transitioning SCARP tube wells, the remaining tube wells place a significant burden on the recurrent budget. This is in addition to the losses of I&PD workshops. Financial sustainability. The irrigation system lacks financial sustainability arising from (i) low recovery of abiana, and ii) low budgetary allocations for maintenance and rehabilitation. Improvements in the operation of the irrigation system as well as in abiana collection and assessment are required. Moreover, abiana proceeds collected by the revenue department become part of provincial revenues rather than being retained by and used for the M&R of the irrigation system. On the other hand, low budgetary allocations for M&R and rehabilitation have led to deferred maintenance and low system performance as mentioned above. Institutional reforms. The irrigation establishment has grown over time and the good practices followed in the past need to be reinforced. There is need for institutional reforms within the irrigation establishment. Distribution issues. Water distribution lacks transparency and rent-seeking activities cause actual allocations to be different from water entitlements. This problem is compounded by the lack of properly calibrated flow measurement gauges and trained and motivated staff with adequate mobility to check malpractices and ensure compliance with water entitlements. Low farmer participation. Farmer participation in the management of the irrigation system has been minimal. Farmers’ access to canal water supplies is inequitable, this inequity being especially acute between the head and tail of the system. However, efforts are being made to progressively improve service delivery and involve water users in the management of the system (e.g., in LCC East Circle). Farmers at the tail-reaches rely more on groundwater due to inadequate water reaching the tails of the system. The quality of groundwater is poor, especially in regions away from the main recharge zones. Farmers using saline or sodic groundwater face land degradation and lower productivity. Pollution. Pollution of irrigation supplies has increased because of the unregulated disposal of effluents into canals, drains, and natural streams. Floods. Periodic floods damage crops, property, and surface water infrastructure, in addition to causing loss of human life. To address the water sector challenges, the Government of Punjab has developed a vision and strategy and prepared a medium-term framework for implementing broad-based reforms in the Punjab irrigation sector. The next section presents the investments envisaged under the MTBF, followed by a description of the Irrigation Sector Reform Program, which is supported by the World Bank through a

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$100 million Punjab Irrigation Sector Development Policy Loan. This will be the first in a programmatic series of three development policy loans to support the Government of Punjab’s medium-term Irrigation Sector Reform Program during the next three years. 12.6 Water Sector MTDF The Punjab water sector’s mission statement is to “provide adequate and reliable irrigation supplies to culturable lands of Punjab aiming at enhanced agricultural productivity, sustainable development with focus on holistic management, and broad-based institutional reforms.’’ The Framework of Action that follows from it includes the following: Increase public investments for modernization of irrigation infrastructure Develop and practice holistic approaches to the use of surface and groundwater

ad for enhancing the agricultural productivity Implement measures to reverse environmental degradation and groundwater

mining Promote broad based institutional reforms (already initiated through FOs in

LCC area) aiming at transparency, efficiency and autonomy to sustain the resource base an infrastructure

Extend and improve drainage, flood protection, hill torrent management an command area development interventions in riverain and rain fed (Barani) areas

(Chief Minister’s Pre-Budget Policy Address, June 13, 2007) These reforms are supported by the medium-term investment framework for the period FY 2007-08 to FY 09-10 (see Tables 12.14 to 12.16). Table 12.14: Irrigation and Drainage Projects

(Rs. Million) FY 2007 No. Sub sector

Foreign Aid Total FY 2008-09

(Total) FY 2009-10

(Total) 1. Survey, Investigation, and Research 0.000 242.455 214.0 177.448 2. Irrigation 0.000 1,565.186 1,414,470 1,576.960 3. Drainage and Reclamation 0.000 1,096.578 754.000 650.000 4. Flood Works 0.000 197.900 510.000 600.000 5. Small Dams 0.000 1,383.660 1,135.015 1,643.540 6. Foreign-Aided Project 5,040,930 5,803.005 8,776.180 11.280.791 7. Buildings 0.000 289.904 44.000 30.000 8. Power Works 0.000 148.298 0.000 20.000 9. Misc. Works 0.000 93.500 152.335 21.261 10. Chief Minister’s Accelerated

Programme. 0.000 179.514 0.000 0.000

Total Water and Power Sector 5,040,930 11,000.000 13,000.000 16,000.000 Table 12.15: Projects Funded by Federal PSDP (Rs. Million)

Allocation 2007/08 Name of Project Est. Cost Exp. for June 07 Federal Prov. Share Total

Irrigation System Rehabilitation Project 19,519.000 4,537.700 2,700.000 - 2,700.000 Lining of Irrigation Channels in Punjab

3,0996.000 1,256.000 1,500.000 - 1,500.000

Punjab Barrages Rehab. and Modernization Project Phase I

1,647.800 895.000 500.000 - 500.000

Flood Sector Programme (To accommodate Projects of all Provinces)

3000.000 950.000 1,800.000 -- 1,800.000

Rehabilitation of Sidhnai, Mailsi Link Canal

745.896 139.940. 110.000 150.000 260.000

Extending Bhakar Flood Bund from Rd 42-72

549.643 - 50.000 50.000


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Table 12.16: Allocations of Foreign-Funded Projects Allocations

2007/08 Name of Project Est. Cost Exp. for

June 2007 Prov. Donor

Share Total

2008/09 2009/10

Taunsa Barrage Rehabilitation and Modernization

11,232.378 6,292.665 195.000 3,105.000 3,300.000 0.000 0.000

LCC “B” 91,42.248 44.005 215.000 545.300 760.300 3,000.000 2,227.021 LBDC 17,176,200 - 150.000 617,630 767.630 2,000.000 4,000.000 Constructing additional VR bridges on Distys and Minors in CRBC Division Taunsa Sharif

45.660 0.590 7.975 30.000 37.975 0.000 0.000

Rehabilitation and modernization of Jinnah Barrage

6000.00 - 1.00 5.000 6.000 300.000 300.000

Rehabilitation and modernization of Islam Headworks

1000.00 - 1.00 5.000 6.000 500.000 494.000

Renewable Energy Development Sector Investment Program (Construction of hydel power station) (Marala chianwali, Pakpattan, Okara and Deg Outfall)

4,001.000 - 132.000 537.000 669.000 844.180 1.174.770

Computerised decision support system for real time water management

207.000 0.000 48.000 0.000 48.000 95.000 64.000

Optimizing canal and groundwater management to assist water user Association in maximizing crop production and managing salinisation with Australian Assistance

80.000 0.000 7.000 7.000 14.000 30.000 36.000

Project Preparation of Punjab Irrigation Agriculture Improvement Program (PIAIP) PC-II

609.000 0.000 1.000 163.000 164.000 150.000 295.000

Improvement of Punjab Irrigation System

7,059.000 0.000 1.000 10.000 11.000 300.000 300.000

Rehabilitation and modernization of Khanki Headworks

2,500.00 0.000 1.000 5.000 6.000 300.000 300.000

Improvement of Thal Canal System

3,000.000 0.000 1.000 5.000 6.000 200.000 300.000

Improvement of Pakpattan Canal System

2,500.00 0.000 1.000 5.000 6.000 200.000 300.000

12.7 Punjab Irrigation Sector Reforms The Government of Punjab is in the process of implementing a comprehensive package of reforms under the Punjab Irrigation Sector Reform Program (PISRP). The reforms, supported through a series of Development Policy Loans (DPL) from the World Bank, focus on participatory management, and aim at improving service delivery and sustainability of irrigation infrastructure through effective participation of farmers at all levels of irrigation management. The total commitments under the programmatic series of Development Policy Loans during FY 2006-FY 2007 are US$ 300. The DPL1 and DPL2, involving amounts of US$100 million equivalent each, have been approved and disbursed. The DPL3 is expected to be processed in FY 2008. The GO Punjab is committed to sustaining and consolidating the reform process beyond 2008/09 by continuing to monitor the outcomes, undertaking holistic strategic reforms when needed, and by supporting the reforms through investment projects for improving participatory management and for rehabilitation of irrigation infrastructure and conveyance network.

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The reforms program is built around the following four pillars: Pillar-I deals with institutional and policy reforms for improving the management and maintenance of the irrigation system with a view to ensure its long-term physical and financial sustainability. The specific objectives are to prepare and implement policy framework for an asset Management plan and to establish a cost-sharing policy that makes financing of O&M explicit in terms of public sector and users’ contributions. The reforms also aim at ensuring adequate budgetary allocations for maintenance and repairs, and divesting to the private sector a number of activities currently carried out by public sector. Pillar-II focuses on Water Management Reforms and emphasizes the critical importance of water entitlements, and measurements to make intra-provincial water allocations and distribution more transparent. The component aims at building on the existing platform of water entitlements. Towards this end, the IPD has developed an Irrigation Management Information System (IMIS) and started posting daily water accounts of all 24 main Punjab canals on its website. This component also aims at promoting sustainable groundwater use. The groundwater management enabling activities to be implemented include preparation of regulatory framework for groundwater management. Pillar-III targets Irrigation Service Delivery Reforms for improving quality, efficiency and accountability of irrigation services through greater farmer participation, institutional reforms, and the use of contractual arrangements among water supply agencies and users. The objective is to create a transparent and efficient system of irrigation service delivery in accordance with water entitlements and to facilitate the entry of new players in the system to help professionalize irrigation services and to make them more efficient. It is envisaged that responsibility for O&M and abiana (water charges) collection will be devolved to water users (Farmers’ organization – FOs). Contractual arrangements will be promoted that clearly specify the rights and obligations of bulk water suppliers and users. Pillar IV deals with On-farm Agricultural Water Management Reforms for improving farmers’ incomes by enhancing water productivity and diversification towards high value crops. The former objective will be achieved through introducing water conserving irrigation technologies, and land leveling. Moreover, the component will support private-public partnerships to disseminating new technologies for enhancing water use efficiency. It will also encourage linkages between agribusiness and farmers. Major reform initiatives under DPL are:84

Preparation of a 5-10 year Asset Management Plan Realistic O&M funding on the basis of updated yardsticks An effective O&M performance evaluation system for greater transparency and accountability Evolving a framework for O&M cost sharing Establishment of 2 AWBs and 100 FOs during each of the next two years. Developing a comprehensive system for monitoring and evaluation of canal allocations and canal

operations. Greater transparency and accountability through display of canal flow data on the website More details on the Irrigation Sector Reforms are found in the Appendix-8.

84 Source: ‘Punjab Irrigation Sector Development Policy Loan’. Presentation made by the Secretary Irrigation

and Power Department, Government of Punjab, at Punjab Development Forum, May 5, 2006


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Box 12.1: Development Policy Loan (DPL) Key Development Outcomes and Monitorable Indicators Pillar I: Ensuring the sustainability of Punjab’s irrigation system Development outcomes

• Hydraulic infrastructure made safer and sustainable, and enhanced financial accountability. Monitorable indicators

• Reduction (5 percent) in accumulated deferred maintenance each year. Benchmark 120 billion in 2006. • Budget allocations for M&R in accordance with MTBF. • I&PD’s annual electricity expenditures on Government tube wells reduced from Rs.792 million to Rs.

200 million in FY 2008. • Abiana collection improved to 85 percent by FY 2008 in areas with farmers’ organizations and to 65

percent in non--farmer organization areas. Pillar II: Making water allocation and distribution more transparent Development outcomes

• Capacity and system created for transparent administration of water and sustainable management of water resources.

Monitorable indicators • Canals equipped with calibrated water measuring devices linked to Irrigation Management Information

System. Fifty percent of canals covered by FY 2008. • Groundwater overdraft mitigated in critical areas.

Pillar III: Improving irrigation service delivery Development outcomes

• Improved equity of water distribution in accordance with entitlements. For distributary canals with irrigation management transfer, delivery performance ratio increases to 75 percent by FY 2008.

Monitorable indicators • Number of IMT agreements increase to 283 by DPLII against baseline 83.

Pillar IV: Encouraging new technology to increase productivity Development outcomes

• Increase in water productivity, employment, and incomes of participating farmers. Water use efficiency increases.

• Diversification and shift to high-value crops achieved. Monitorable indicators

• 4,000 new watercourses improved in FY 2007 and FY 2008. • 200,000 ha land leveled in FY 2008. • 5,000 ha under pressurized irrigation system by FY 2008.

Source: Program document on a proposed Punjab Irrigation Sector Development Policy Loan. Report No. 35955-PK World Bank. 27 April 2006. See Appendix 7. Under the PISRP, Farmers’ Organizations (FOs) have assumed responsibility for operation and maintenance of distribution system and for collection of users’ water charges (Abiana) in LCC East, LCC West, and CRBC.85 Moreover, 2 Pilot Area Water Boards in Faisalabad zone (LCC East and LCC West circles) and one Pilot Area Board in Multan zone (LBDC Circle Sahiwal) have been fully operationalized and Irrigation Management Transfer Agreements (IMTA) completed in 2006. Similar institutional arrangements for empowerment of FOs are in the process of being implemented in Bahawalnagar and Derajat Canal Circles. Initial monitoring indicates that progress is being made in terms of improved service delivery and sustainability. The M&R budgets and investments to clear backlog of deferred maintenance have increased substantially, which has contributed towards making hydraulic infrastructure safer and has enhanced its physical sustainability. The collection of Abiana in areas where FOs are operational has increased. Even more importantly, equity in the distribution of irrigation water has also improved in these areas.

85 The information on progress made under the reform program is provided by Member Engineering, P&D

Department, Government of Punjab

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12.8. Agricultural Water Use Average canal withdrawals in Punjab during 1977–82 were 54.59 MAF, nearly 63 percent of which were in the kharif season and the remaining in the rabi season. Generally, there is considerable year-to-year, as well as, intra-year variation in canal water withdrawals. For example, in recent years (FY 1992 to FY 2003), the coefficient of variation86 for annual canal water withdrawals was 9.2 percent. In comparison, the coefficient of variation for rabi canal withdrawals was 18.8 percent, indicating that intra-year variability was much higher. Figure 12.3 presents annual as well as seasonal canal water withdrawals during FY 1996 to FY 2005. The patterns of inter-year as well as seasonal variability of canal water supplies are easily noticeable. Greater control of river flows to improve availability in drought years will be possible after commissioning additional storage. Figure 12.3: Punjab Canal Withdrawals, Apr to Mar (MAF)

Source: Based on data provided by Directorate of Water Resources Management, WAPDA, Lahore. A striking feature of Figure 12.3 is that the impact of drought during 1998 to 2001 is clearly discernable. During periods of canal water shortages, farmers tend to rely more on groundwater, over which they have relatively greater control compared to canal water. It is generally believed that in the absence of groundwater regulation, there are persistent trends towards unsustainable levels of groundwater use, and this problem becomes especially acute during drought years. The declining water tables that result from pumping in excess of natural recharge can be clearly seen in Figure 12.4 for the drought years.

86 Coefficient of Variation expresses standard deviation as a percentage of mean.


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Figure 12.4: Water Table Decline in SGW Zone of Chaj Doab, 1998 to 2001

Source: Cited in Water CAS, World Bank 2005. Delivery performance of canals is highly variable with farmers at the tail end of the system receiving much less water. These farmers also have to rely on groundwater much more than farmers at the head. Groundwater, however, is not an independent water resource. About 80 percent of groundwater recharge in Punjab is from surface water resources in the form of seepage from rivers, canals and other surface water bodies; and return flows from irrigation with surface water or groundwater.87 In a normal year, irrigation with groundwater means simply recycling the recharge from previous season because overall abstractions remain sustainable. From a basin perspective, therefore, surface water constitutes the primary renewable water resource in Punjab. Exploitation of groundwater for irrigation and other purposes serves to increase the basin-wide efficiency of water use without adding to availability of renewable resource.88 The increasing use of groundwater is not sustainable in the long run. If groundwater use is not regulated, over pumping could lead to aquifer depletion. In some areas, degradation of groundwater quality may also occur because of the intrusion of deeper saline water into the shallow sweet water lens. Moreover, irrigation with saline water tends to depress crop yields. If the water is sodic, continued irrigation could seriously degrade land quality, thereby undermining the sustainability of rural livelihoods. There is scope for conserving water by enhancing irrigation efficiency through the use of improved conveyance systems, precision land leveling, and modern irrigation practices, as well as by adopting water-conserving technologies such as drip and sprinkler systems. There has been considerable emphasis on improving conveyance efficiency through watercourse improvement program partly funded by the Government. A relatively small proportion of farmers opt for precision or laser land leveling. Other water conservation technologies, such as drop and sprinkler systems, are used by even fewer farmers. Their reluctance could be partly due to additional cost, including the transaction costs of machinery services, capital cost of additional equipment for pressurized irrigation, and energy costs. Technical problems such as the clogging

87 See for example the water balance presented in Steenbergen, F.V. and S. Gohar (2005), “Groundwater

development and management”. Background Paper # 12, Country Water Resources Assistance Strategy, background paper # 5, World Bank, March, 2005.

88 It, however, makes substantial addition of salts to the topsoil, especially in saline groundwater zones.

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of nozzles in drip irrigation systems when used with saline water also deter the adoption of these technological packages.89 It should be noted that the water conservation packages mentioned above improve conveyance efficiency and field-level application efficiency. Much of the savings comes from preventing seepage or percolation losses, which constitute groundwater recharge. They do little to enhance basin-level water use efficiency. Despite this, the tremendous appeal of the above mentioned water-conserving technologies is due to the fact that they enable farmers to utilize scarce water supplies at a time and place chosen to maximize productivity and farm incomes. Farmers depend on surface water for the bulk of their irrigation supplies. Tube well operations are more often timed to coincide with canal water turns to dilute salts in the groundwater. The water conveyance systems and field layouts are designed for flood irrigation with gravity flow surface water systems. Under these circumstances, the integration of pressurized irrigation technologies with the irrigation system represents a future challenge for the agricultural research and extension establishment, water managers, and for farmers themselves. It will require major changes in cropping patterns, water distribution system, and water pricing. 12.9. Water Requirements for Crops in Punjab According to the Directorate of Land Reclamation,90 Punjab’s crop water requirements at canal head, calculated on the basis of average cropped area for the period 1998 to 2002, were 106.62 MAF.91 Of this, 70.90 MAF were required for the kharif season and the remaining 35.72 MAF for the rabi season. During this period, average annual canal withdrawals were only 49.0 MAF with 33.9 MAF available in kharif and 15.1 MAF in rabi. Tube wells added an estimated 38 MAF92 of groundwater to give total water availability for agriculture of about 87 MAF.93 Although tube wells have assumed a significant role in augmenting irrigation water supplies, their sustainable yield depends on aquifer recharge. There are indications that usable groundwater recharge is less than the actual amount pumped. Estimates of total recharge and usable recharge vary. The Government considers the latter to be in the 12 to 15 MAF range.94 The uncertainty regarding these

89 Of course, additional costs of pressurized irrigation systems and water-conserving technologies would add to

cost of production. These would have to be balanced against improvements in productivity so as to not make farm products more expensive than before. The expected productivity gains are likely to come from alleviating water constraint and better control over timing and reliability of irrigation supplies that is would to become possible with the said technological package.

90 Ali, C.K. M. A. Javaid, M. Javed, “Water allowance of all canals of upper Indus Basin irrigation system: The current status” Directorate of Land Reclamation, Punjab Irrigation and power Department, Canal Bank Moghalpura, Lahore 2004.

91 Ahmad (2005) estimated net crop water requirement for irrigated area in 2002-03 in Punjab were 78.4 BCM or 63.7 MAF. See Ahmad, S. “Water balance and evapo-transpiration” Country Water Resources Assistance Strategy, background paper # 5, World Bank, March, 2005

92 See Table 3 (p.9.) Streenbergen F. and S. Gohar (2005) for estimated groundwater abstractions during a “normal year”. Their estimate of drought year pumpage is 41.5 MAF

93 Qureshi, A.S., T. Shah, and M. Akhtar (2003), Table 9 reported total number of tube wells in Punjab was reported to be 566,446 and total pumpage was 43.4 BCM. The number of tube wells reported by Directorate of Agriculture Crop Reporting Service, Punjab was 610,750 for the year FY2002. Based on the latter’s time series, growth rate of tube wells was calculated to be 5.79 percent per annum. This was used to project total number of tube wells in 2002/03 to be 646,101, which is about 14 percent higher than estimate provided by the study. This factor was used to estimate total groundwater pumpage at 49.5 BCM.

94 The National Water Sector Investment Planning Study (1990) Vol. I. (see Table 3.9, p. 3-33) defines usable recharge as recharge in areas with groundwater salinity less than 3000 mg/l, which comes to 23.1 MAF for Punjab. However, the report notes, “it is doubtful if much use is made in the Indus plains of groundwater with salinity towards the upper end of the range assumed in Table 3.9, and it is then usable only after mixing with canal water”. According to the study, the Sindh Government considers limit of usable groundwater to be TDS 2000 mg/l and the range 750-2000 as marginal. The Punjab Government considers usable recharge in that province to be 12-15 MAF. If recharge to groundwater aquifers with salinity <1500 mg/l is considered as


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quantitative estimates could easily focus attention away from the critical point that much of the groundwater recharge (80 percent, according to some reports) is dependent on surface water. Saline groundwater zones are saline because they are located away from recharging rivers and typically lie in the center of doabs in Punjab. Increasing the availability of surface water would also increase groundwater recharge. This fact and the huge imbalance between water demand and supply mentioned earlier underscores the need to create additional storage in the Indus river system. In Punjab, nearly 39 percent of the cropped area is under wheat, the main food staple. Of the other important food crops, rice accounts for 11 percent of cropped area. Thus, the main food crops account for about 50 percent of the area cropped in Punjab (Figure 12.5). Based on estimates of crop water requirements of individual crops for FY 2003 (Figure 12.6) reported in Ahmad (2005), the share of these crops in total net crop water requirement (CWR) is 49 percent, which is roughly proportionate to their share in cropped area. This, however, marks the differences within the group. The wheat area is 41 percent but its share in total CWR is only 29 percent; the rice area is only 11 percent but its share in total CWR is 20 percent. Rice CWR share is almost twice its share in cropped area. Figure 12.5: Shares of Major Crops in Cropped Area in Punjab 2005- 06

Figure 12.6: Shares of Major Crops in Terms of Water Requirements

w heat 29%

Rice20%

Cotton19%

Fodder10%

Sugarcane11%

Other11%

The same is true of sugarcane, a cash crop that accounts for 4 percent of cropped area in Punjab but which, as a high delta crop, has an annual water requirement of about 1,200 mm. On the basis of cropped area, this translates into 8.8 BCM of water requirement, which is about 11 percent of total CWR. Thus, the share of sugarcane in total CWR is twice its share in cropped area in the province.

usable, then Punjab usable recharge would come to 19.5 MAF, which narrows the range of sustainable recharge estimates.

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Many people have questioned whether Punjab has a comparative advantage in the production of sugarcane. However, sugar is a sensitive commodity. A fall in domestic sugar production will expose the country to the higher variability of international sugar prices and a higher import bill as well. There may be some scope to maintain domestic sugar production levels by promoting sugar beet cultivation, which has a water requirement of 600 mm or roughly half that of sugarcane. By contrast, fodders represent 13 percent of cropped area while their water requirements are 10 percent of the total CWR in the province. Given that livestock value-added is higher than all the major crops, this represents a potential opportunity. There is scope for improving livestock and fodder productivity by using water and other inputs at optimal levels. 12.10 Issues at the Agriculture-Water Nexus The following are the main issues at the agriculture-water nexus. Inadequate canal water. Present canal water supplies are inadequate for meeting the requirements of the agriculture sector. Without increasing agricultural productivity, it might not be possible to meet the food and fiber needs of a growing economy. Water productivity. Water productivity is low in Punjab. This is due to low yields per acre of crops and low irrigation efficiency. For example, yields of wheat in Pakistani Punjab are roughly half those of India per unit of land, and this ratio is 5:8 per unit of water.95 Irrigation inefficiency. Irrigation efficiency in Pakistan is only around 40 percent, largely because farmers use traditional flood irrigation on inadequately leveled fields. Water-efficient methods of irrigation, especially for field preparation, such as making furrows, laser land leveling and precision land leveling, are adopted on only a limited scale. Integrating water-conserving, low-pressurized irrigation technologies into the existing gravity flow irrigation system represents a challenge for the agricultural research and extension system. Inappropriate crop mix. The crop mix in the agricultural sector includes high-delta crops such as sugarcane in which the province has a questionable comparative advantage. On the other hand, there is scope for augmenting productivity in the livestock sector, which has the largest value-added in agriculture, by allocating water to increase the productivity of fodder crops. Unsustainable groundwater use. Groundwater development potential is more or less fully utilized and there is little room for further development on a sustainable basis. Groundwater availability depends critically on recharge from surface water sources. Fresh groundwater zones are found close to recharging rivers and canals. Saline groundwater zones typically lie towards the center of doabs, indicating that groundwater quality is also linked to the spatial distribution of surface water. In some zones, unregulated groundwater pumping has assumed the proportions of a ‘tragedy of commons’ with fast-declining water tables that are causing many shallow tube wells to dry up. This increases the cost of groundwater irrigation that especially hurts small farmers. The situation is precarious in saline groundwater zones where only a thin lens of freshwater overlies the deeper saline aquifer. This layer of freshwater is being actively mined by the growing number of skimming wells (nalka bores). Irrigation with poor-quality groundwater is causing increased soil salinity and sodicity in SGW zones. This suggests that current groundwater use patterns are environmentally unsustainable in some areas 12.11 The Way Forward Additional water storage capacity. There is an urgent need to create additional water storage capacity to make up for the loss of live storage in existing reservoirs due to silting, with a view to

95 World Bank (2005). Pakistan's Water Economy: Running Dry. See pp. 30.


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meeting growing food and fiber needs, optimally utilizing available surface water flows, allowing smooth intra- and inter-year fluctuations in flow, protecting against floods, and effectively managing water resources. Ensuring adequate maintenance funding. To ensure the physical sustainability of irrigation infrastructure, future budgetary allocations should be at levels needed to clear the backlog of deferred maintenance. The Asset Management Program being implemented by Punjab’s I&PD should be reflected in the MTDF and M&R allocations should be made according to a continuously updated yardstick reflecting market rates. Financial space should be created, among other things, by the accelerated transition of SCARP tube wells to help provide resources for irrigation system rehabilitation and modernization. Redesigning. To cope with the increased demands being placed on the irrigation system, constraints imposed by design intensities should be alleviated by remodeling/redesigning barrages, canals, and other water infrastructure Increasing productivity. The productivity of crops should be increased to ensure higher returns from water used for irrigation. Drought-resistant and salt-tolerant varieties of crops should be developed. Moreover, agricultural extension services should include water extension to encourage farmers to adopt improved irrigation practices and methods. While considerable scope exists for improving water productivity by enhancing yields of traditional crops, efforts should be made to encourage a shift to high-value, non-traditional agricultural enterprises (fruits, tunnel vegetable farming, flowers, fisheries, etc.). Given that both surface and groundwater are almost fully developed, this is perhaps the only promising avenue to ensuring sustained water productivity growth. Promoting water conservation. Water-conserving cropping patterns should be adopted. Sugarcane water requirements are very high; its area should not be expanded and should be curtailed if possible. On the other hand, there is scope for enhancing livestock productivity by increasing fodder production Irrigation efficiency. Irrigation efficiency should be viewed from a basin Perspective rather than focusing exclusively on field- or farm-level efficiency. Many water conservation technologies (drip, sprinkler systems, lining water channels, etc.) that save water by reducing percolation losses do not save much water from a basin Perspective. These systems, however, are appealing because they can ensure water adequacy at farm level, enhancing productivity by effectively using water during critical stages, and saving on some of the energy costs incurred when pumping from deep aquifers. Investment decisions regarding these systems should be based on the above-mentioned benefits rather than farm-level water savings. Water management. Equity in surface water irrigation system should be improved as a means of enhancing productivity and alleviating poverty. Leverage for achievement of equity objectives can be gained from the participatory management of irrigation system being undertaken in some parts of the system. Canal water allowance should be rationalized with a view to enhancing agricultural productivity and ensuring the sustainability of the land resource base. Because irrigation now takes place in a truly conjunctive-use environment, surface water allocation should also be geared toward recharge management. Groundwater use should be regulated in cooperation with CBOs (e.g., those being set up under the Punjab Irrigation and Drainage Authority [PIDA]) to prevent seriously unsustainable levels of abstractions. Special efforts should be made to check the uncontrolled mining of freshwater lenses overlying aquifers in SGW zones. Investment in infrastructure. Investments in drainage should be made to ensure that agricultural productivity does not decline due to water logging and salinity. However, some drainage requirements stem from excessive water use in parts of the irrigation system. Monitoring water resources. The Government of Punjab should set up a water resources monitoring program to monitor surface and groundwater quality, keep track of spatial patterns in groundwater

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abstraction, and make all the above information available on a timely basis for policy decisions. The organizational structure of water resources monitoring needs to be streamlined and awareness-raising efforts should be strengthened to disseminate water resource information to the public, create an understanding of water resource issues, and build support for water resource management options. Comprehensive water resource management plans should be prepared at doab or canal command levels. Farmers’ participation. The system of creating farmers’ organizations should be expanded to new area water boards and their capacities enhanced. Promoting environmental sustainability. In cooperation with the Environmental Protection Agency, the I&PD should make concerted efforts to check the widespread practice of discharging untreated industrial and municipal wastewater into canals and drains. Flood protection. Flood early warning systems should be created and adequate financial allocations made for regular maintenance and rehabilitation of flood protection infrastructure. Moreover, plans should be made to harness floodwater to augment surface water supplies.

Part II. WSS Services and Industrial Water Use

12.12 WSS Services Punjab’s urban population is estimated to rise to 39.83 million by 2011 and to 66.89 million by 2025. The population of major cities is projected to be 18.7 million in 2011 and 31.41 million in 2025. With the increase in population, urban water demands will also rise (Table 12.17 presents projected water demands). Compared to the estimated urban water use of 5.66 million m3/day for all 246 urban centers in Punjab, the projected urban water demand is expected to reach 10.47 million m3/day by 2011 and 19.99 million m3/day by 2025. Table 12.17: Punjab’s Urban Population and Water Demands

Population Water Demand (m3/day) Urban Area 2000 2011 2025 2000 2011 2025

All 246 urban centers 24,930,000 39,830,000 66,890,000 5,665,340 10,471,419 19,995,830 Major cities Lahore (total) 5,143,495 8,217,626 13,800,577 1,868,117 2,984,642 5,012,370 Faisalabad 1,977,246 3,158,994 5,305,174 448,835 860,510 1,685,984 Rawalpindi 1,406,214 2,246,671 3,773,031 255,368 509,994 1,027,774 Multan 1,182,441 1,889,155 3,172,622 268,414 514,606 1,008,259 Gujranwala 1,124,749 1,796,982 3,017,828 255,318 489,498 959,066 Sargodha 455,360 727,517 1,221,782 82,693 165,146 332,813 Sialkot 417,597 667,184 1,120,460 85,315 151,451 305,213 Subtotal 11,707,102 18,704,126 31,411,474 3,264,061 5,675,846 10,331,479 Other 239 urban centers

13,222,898 21,125,874 35,478,526 2,401,278 4,795,573 9,664,350

Source: Pakistan Water Sector Strategy, National Water Sector Profile, Vol. 5. October 2002, Annex 4.2.4. The MDG target for water is to halve the number of people without sustainable access to safe drinking water and basic sanitation by 2015. Two things should be noted. First, the target is expressed in terms of water supply that is “safe” from the viewpoint of human consumption. Second, the exploitation of water resources and their use must not compromise their sustainability either by depleting resources through overuse or by degrading quality because of failure to protect these resources from pollution. These requirements provide a comprehensive framework within which to plan meeting the WSS targets for the MDGs. To monitor progress toward achieving the MDGs, UNICEF established a Joint Monitoring Program. One of the initiatives of this program was the MICS an attempt to ensure that progress could be measured in a comparable way across countries. The Punjab MICS provides data for 2003/04. Additional information is found in various housing censuses, the PIHS (FY 2002) and the PSLM


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(2004/05). Together, these sources provide a fairly comprehensive assessment of trends in WSS services coverage. The broad picture that emerges from these surveys is that the number of households with access to a drinking water supply within their home has been increasing as a proportion of the population, and the number of households that are able to access water only outside their home has been steadily declining (Table 12.18). This is true of both urban and rural areas. The urban population with access to a drinking water source inside the house now stands at 96.6 percent whereas the corresponding figure for rural areas is 90.5 percent. Although the rural figure is somewhat lower, it must be noted that rural areas started from a much lower baseless than 60 percent in 1981 compared with urban areas where more than 80 percent of households had drinking water available inside the house in that year. Table 12.18: Supply of Drinking Water in Punjab by Source

Urban (percent) Rural (percent) Main Source of Drinking Water 1981 1998 2004 1981 1998 2004

Inside house 81.2 94.2 96.6 58.9 83.4 90.5 Outside house 18.8 5.8 3.4 41.1 16.6 9.5

Source: Table 1, Sector Paper: Water Supply and Sanitation. PFIS (2005). The PIHS and PSLM surveys (Table 12.19) indicate that access to tap water has increased steadily in Punjab. The percentage of population with tap water in the house increased from 20 percent in FY 2002 to 27 percent in FY 2006. However, these gains were more modest according to the MICS (Table 12.20), which showed that 21 percent of the population had access to piped water in FY 2004. Table 12.19: Main Sources of Drinking Water in Punjab

2001/02 2004/05 2005/06 Source Urban Rural Overall Urban Rural Overall Urban Rural Overall

Tap in house 54 6 20 52 17 28 50 16 27 Hand pump 16 69 54 13 50 39 11 47 35 Motor pump 30 19 22 32 27 29 37 31 33 Dug well 1 4 3 1 2 2 1 3 3 Others 0 2 1 2 4 3 1 2 1 Total 100 100 100 100 100 100 100 100 100

Source: PIHS (2001/02) and PSLM (2005/06). Figures may not add up to 100 percent due to rounding errors Table 12.20: Sources of Punjab’s Water Supply

Source Piped Water

Public Standpipe or

Tap

Hand Pump

Donkey Pump/

Turbine

Protected Dug Well

Unprotected Dug Well

Pond, River, Canal, or Stream

Other

Percent of population

21 3 42 29 1 1 1 2

Source: MICS 2003/04, Figure 10. According to MICS results, hand pumps were the single largest source of water supply (42 percent), whereas piped sources served half as many people (Table 12.20). More than a quarter of the population depended on donkey pumps/turbines.

Table 12.21: Access to Water Supply

Access Punjab Major City Other Urban Rural In household 92 93 96 90 Within 2 km 97 98 99 96

Source: MICS 2003/04, Table 17. The PSLM 2004/05 also confirms that hand pumps are the most commonly used source of water supply but provide a lower percentage (34 percent) of population relying on this source. It also shows that hand pumps are used mostly in rural areas (52 percent) compared with urban areas (15 percent). An important trend in sources of water supply is the diversification toward motor pumps. According to Table 12.19, the number of households with motor pumps increased from 14 percent in FY 1996 to 31 percent in FY 2005. During this period, the proportion of urban households with access to motor

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pumps increased from 21 percent to 34 percent while that of rural households increased from 11 to 29 percent. The rising proportion of households with motor pumps in both rural and urban areas indicates self-provision of water supply services that have traditionally been provided by public agencies. The change is partly a response to inadequacies in public provision of water supply services. This has implications for households’ willingness to share the cost of public water supply services when they have access to private water supply sources. It must be noted that self-provision is more costly than public provision but that households opt for it because of the assured supply in more or less unrestricted quantities. If public water supply services are to provide an attractive alternative to households in the future, they have to plan to reliably deliver adequate quantities for water of acceptable quality. Because the MDGs are stated in terms of access to “safe” water supply, some comment on water quality is necessary. The MICS determined that 97 percent of Punjab’s population had access to “improved water supply.”96 The proportion of households with in-house access to water was 92 percent overall but even in rural areas this proportion was 90 percent, reflecting the large number of hand pumps and increasing use of turbines and donkey pumps in rural areas. The high coverage of improved water supply as indicated by the MICS is because water from “unprotected” sources was limited to “unprotected dug wells” (1 percent), “ponds, rivers, canals, and streams” (1 percent) and possibly part of the “other” category. In reality, “protected” does not automatically guarantee that water is “safe” for human consumption. There are several ways in which water can become unsafe, including pollution from untreated wastewater from domestic and industrial sources, leaching of farm chemicals into aquifers, and the composition of water (high salinity, fluorides, arsenic, etc.). Contamination from all the sources mentioned above affects Punjab’s waters. Sanitation coverage is limited in both rural and urban areas. Even where adequate sanitation facilities are available to individual households, wastewater is disposed of without adequate treatment. Cesspits in urban and rural areas are either ill designed or improperly maintained and serviced, with the result that their contents often leak into the shallow aquifer below. In urban areas where sewerage connections are available to some households, municipalities do not have adequate wastewater treatment facilities. Urban wastewater is often allowed to discharge into rivers, drains, and sometimes even canals. In rural areas, shallow hand pumps and donkey pumps, which are the main sources of water supply for households not connected to piped schemes, are located within a few meters of cesspits. These observations suggest that, although households in Punjab might draw water from an “improved water source,” the raw water at source may be unfit for human consumption. For example, urban water utilities pump groundwater from tube wells located in and around the city. Often, groundwater resources in the vicinity of cities are contaminated by seepages from leaking sewerage pipes, cesspits, and inadequately treated domestic and industrial wastewater. While UNICEF considers water from household connections “improved,” in many areas of Punjab and Pakistan, this water does not meet WHO standards for safe drinking water.97

96 The term “improved water supply” was defined as protected water source (piped water, Public standpipe or tap,

hand pump, donkey pump/turbine or protected dug well). “Unimproved water” was considered to be from an unprotected dug well, pond, river, canal, or stream, as well as, other less common water sources such as vendor provided, truck tanker or bottled/canned. Bottled water is considered ‘unimproved’ because of limitations in potential quantity rather than quality concerns.

97 UNICEF recognized this possibility and noted, “Although 'improved drinking water sources' provides a good indicator for progress, it is not a direct measure of it. Dangerous levels of chemicals, such as the arsenic and fluoride that are increasingly found in groundwater in South and South-eastern Asia, are of growing concern, along with infectious or other toxic substances”. (See http://www.unicef.org/wes/mdgreport/monitoring1.php)


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The PFIS concludes: “The quality of water used is doubtful in the case of those with access to a piped water connection. In some instances even those drawing water through a small borehole have access to tainted or un-safe water. The actual extent of coverage by and access to safe water is, therefore, uncertain” (WATSAN: PFIS 2005). In order to reliably determine access to water supply that is safe as per MDG requirements, a comprehensive assessment needs to be undertaken. This would include testing the quality of water from each source in addition to determining its coverage. Based on such information, the uncovered population would be estimated and plans made to expand access to safe water supply. This would include estimating the cost of meeting MDG targets. In case the quality of locally available water resources does not meet drinking water standards, the cost of treatment should be included in the cost of provision. MTDF allocations for Water Supply and sanitation In Punjab, the incidence of poverty is greater in rural areas as compared to urban areas. The poor are likely to live in larger households and have inadequate access to safe drinking water and sanitation facilities. The rural-urban gap in terms of provision of safe drinking water and sanitation facilities is large. The MTDF allocations for water supply and sanitation will increase from Rs. 22,037.326 million in 2006/07 to Rs. 42,500 million in 2009/10. This would represent an increase in share of water supply and sanitation in total allocation for I&E sector from 21.7% to 27.1%. As a proportion of total MTDF allocation, the share of WSS sector would increase from 7.6% to 9.0% over the same period. Table 12.22: MTDF allocations 2007/10 for Water Supply and Sanitation (including WASAs)

(Rs. in Millions) 2006/07 2007/08 2008/09 2009/10 Irrigation Expenditure 22,037.326 30,867.919 37,090.849 42,500.000

Current. 7,644.176 9637.919 10,890.849 13,100.000 Development . 14,393.150 21,230.000 26,200.000 29,400.000

Source: Medium Term Budgetary Framework 2007/10. Table 5 (statistical Annexures) 12.13. Sanitation Services Coverage in Punjab 12.13.1 Domestic Wastewater Loads Table 12.23 presents estimates of wastewater loads. The estimated volume of urban wastewater produced in year 2000 was 4.5 million m3/day, which is projected to increase to 8.4 million m3/day by 2011 and 15.99 million m3/day by 2025. If not adequately treated, future wastewater flows could have very serious implications for public health as well as for the environment and resource base of the province. Table 12.23: Punjab Urban Wastewater Produced and Future Projections

Wastewater (m3/day) Urban Area/Center 2000 2011 2025

All 246 urban centers 4,532,272 8,377,136 15,996,664 Major Cities Total Lahore 1,494,494 2,387,713 4,009,896 Faisalabad 359,068 688,408 1,348,787 Rawalpindi 204,295 407,995 822,219 Multan 214,731 411,685 806,608 Gujranwala 204,254 391,598 767,253 Sargodha 66,155 132,117 266,251 Sialkot 68,252 121,161 244,171 Subtotal 2,611,249 4,540,677 8,265,183 Other 239 Centers 1,921,023 3,836,459 7,731,480

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Table 12.23 also shows that nearly half of this wastewater will be produced in seven major cities of Punjab. Thus, environmental management in peri-urban areas will become a major challenge in the future. On the other hand, the availability of large quantities of wastewater at a few locations also represents opportunities for reuse, provided that proper treatment is undertaken. The environmental management challenge can be met by ensuring that adequate investment is made in wastewater treatment facilities by both public and private industrial sector, and effective regulatory guidelines for wastewater reuse are developed and strictly enforced. The PIHS and PSLM data indicate that the proportion of households without toilets decreased from 58 percent in FY 1996 to 32 percent in FY 2006 (Table 12.24). However, MICS data suggest that adequate toilet facilities were not available to 42 percent of the population in FY 2004 (Figure 12.7 and Table 12.25). While results differ on the exact magnitude of the decline in population without adequate sanitation coverage, it seems reasonable to conclude that compared to the mid-1990s, a greater proportion of households have access to some form of sanitation. Table 12.24: Distribution of Households by Type of Toilet (percent)

1995/96 2001/02 2004/05 2005/06 Source Urban Rural Overall Urban Rural Overall Urban Rural Overall Urban Rural Overall

Flush 73 20 34 91 31 48 91 43 66 95 49 66 Non-flush

14* 6* 8* 2 2 2 2 7 5 1 2 2

No toilet

13 74 58 7 68 50 7 50 30 4 49 32

Source: PIHS (2001/02) and PSLM (2005/06). * Non -Flush includes communal latrine. Figure 12.7: Sanitation Facilities in Punjab

Source: MICS (2003/04).


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Table 12.25: Punjab Sanitation Coverage, Wastewater, and Solid Waste Disposal ( percent) Sanitation Facilities Punjab Major City Other Urban Rural

Adequate sanitary toilet facilities 58 98 92 43 Wastewater disposal 43 95 77 26 Solid waste 15 66 33 1

Source: MICS 2003/04, Tables 18 and 19. According to MICS data, septic tanks were the most common form of sanitation facility available to households (23 percent), followed by public sewers and pour flush toilet. Traditional pit latrines and service or bucket latrines together served 3 percent of the population, while only 1 percent households reported having ventilated improved pit latrine. A very high proportion (41 percent) of households reported having access to only ‘open spaces’, which does not satisfy the criteria of ‘privacy, dignity, cleanliness and a healthy environment’. There is need for improving access to basic sanitation services. Coverage is highly disproportionate between rural and urban areas. While the latter have nearly universal coverage (98 percent), as reported in the MICS, rural coverage is only 43 percent. The MICS (2003/04) noted that districts to the middle and southwest of Punjab (Table 12.25), particularly Dera Ghazi Khan, Layyah, Muzaffargarh, and Rajanpur had low coverage. Sewerage networks serve parts of urban areas, but facilities for treating urban domestic wastewater are woefully inadequate. Sizeable investments are required in the future to create capacity for safe conveyance, treatment, and disposal of domestic wastewater. The management of solid waste is an environmental concern with linkages to water. If not properly disposed of, leakages from solid waste can percolate down to pollute the underlying aquifers. In Punjab, only about 18 percent of solid waste is collected by municipal agencies and another 45 percent handled privately. Rapid urbanization is generating solid waste in increasing quantities, which will cause environmental degradation if suitable measures are not taken. 12.14. Issues in WSS 12.14.1. Water Supply Local water scarcity. Based on the estimates of urban domestic water projections, we can conclude that overall urban water demands represent a small proportion of total water use in Punjab. However, urban water use is far more concentrated than other uses such as irrigation, therefore local water scarcity cannot be ruled out. Quality issues. With the exception of WASA Rawalpindi, other water utilities in Punjab rely on pumping groundwater to meet urban water needs. Given the trend toward urbanization and increasing water use forecasted in urban areas, it is conceivable that some large cities might lack adequate quantities of acceptable quality groundwater to meet higher levels of water demand in the future. Self-provision and impact on willingness to pay. A growing percentage of households in urban and rural areas have access to motor pumps. Much of the rural population also has hand pumps. Both kinds of investments represent private provision of water services, which has a bearing on households’ willingness to share the cost of schemes. This has implications for designing WSS schemes as well as for how they are implemented. Inappropriate choice of technology, high costs, and poor service quality tend to lead households to rely more on self-provision and diminish their likelihood of sharing scheme costs. An additional issue in this regard is the level of community involvement in schemes implemented, especially in rural areas.98 Past experience has shown that communities were involved only at the scheme handover stage and not in the design and planning stage. This has resulted in ownership issues, which have an adverse impact on cost recovery. 98 Also see section on Institutional Aspects

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Multiple providers. There is a multiplicity of water service providers, including local Governments, NGOs, and self-provision by households through private sector vendors. In this scenario, it is important to ask what the role of the Government is, and what should be the right balance between Government service provision and regulatory functions. Another point to consider is the optimal division of labor between various Government entities such as the Public Health and Engineering Department (PHED) and TMAs in performing regulatory and implementation functions. 12.14.2. Sanitation Access to sanitation lags behind water supply coverage. The large proportion of the population, especially in rural areas, reporting no toilet facilities represents the poor. Some of them cannot afford a toilet inside their home, and so alternatives are required for these segments of the population. Treatment of urban and rural domestic wastewater is a neglected area of service provision. Urban sanitation systems simply transport wastewater away from the locality. Often, it is disposed of in surface water bodies, rivers, and nullahs. Moreover, many leaking cesspits pollute groundwater resources. The facilities for treating urban wastewater are negligible in Punjab’s cities and non-existent in rural areas. Unless water resources are protected from pollution, the quality of domestic water supply cannot be guaranteed. 12.15. Devolution of WSS Services99 There were three main players in the WSS sector prior to devolution. The PHED provided WSS services to rural and urban areas, except in five main cities where WASAs assumed these responsibilities.100 In addition, the Local Government and Rural Development Department provided hand pumps and other simple schemes in rural areas but the scope of their activities was quite limited. Effectively, 95 percent of the rural WSS schemes were provided by the PHED. The PHED was and still is a technically oriented organization with a dominant engineering tradition. Under the Social Action Program, the PHED implemented large WSS programs supported by external assistance. Its donor agencies insisted on community involvement and participation in WSS schemes, starting from planning, through design, implementation, and O&M. The PHED lacked adequate human resources in the field for community mobilization and participation. Mechanized water supply schemes were “over-designed at source, under-designed at distribution,” the materials used were of poor quality and the electrical equipment energy inefficient.101 The O&M requirements and quality of service were not acceptable to local communities, who were generally involved only after the schemes had been completed. Consequently, communities were reluctant to own the schemes and share costs. After devolution in 2001, the responsibility for provision of WSS services was entrusted to the TMAs. The district offices of the PHED were merged within the infrastructure and services offices of the TMAs. The secretariat and chief engineer’s office exist within the provincial Government. The secretariat is still responsible for posting and transfer of officers, but this creates a “dichotomy of control” because some officers are now under the TMAs. Under the present arrangement, there is a tendency to be less than fully responsive to the TMAs.102 Moreover, the TMAs have inherited the cost recovery problems of WSS schemes that were traditionally supply-driven, with only token community involvement and a consequent mismatch between benefits and costs seen from the community’s Perspective. The problems are compounded by TMAs’ meager technical and management capacities. The devolved schemes need to be more fully owned and better monitored by the TMAs.

99 This section draws upon Sector Paper: Water Supply and Sanitation. Poverty Focused Investment

Strategy. July 2005. 100 WASAs were in Lahore, Faisalabad, Gujranwala, Rawalpindi and Multan. 101 Sector Paper: Water Supply and Sanitation. Poverty Focused Investment Strategy, July 2005, pg 25. 102 Sector Paper: Water Supply and Sanitation ibid. pg 23.


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The main challenges for the WSS sector can be summarized as follows:103 • need for a strategic vision to realign inter-Governmental relations, i.e., between the PHED

and TMAs, • no legally mandated polices for the WSS sector, • absence of technical capacity for design and implementation of WSS schemes at TMA level, • the issue of sustainability of piped water supply and sanitation schemes in terms of O&M

and community participation to ensure that an appropriate WSS technological package is implemented,

• need for water quality control standards and their implementation, and • inadequate knowledge among communities about personal hygiene, home hygiene, and

village sanitation.

12.16. Recommendations 12.16.1. WSS Water resources assessment. Given the possibility of local water scarcity, especially for large cities, WASAs and public water supply utilities should undertake a comprehensive water resources assessment covering both surface and groundwater resources in the vicinity of metropolitan areas with a view to identifying sources of future water supply. Tracking the MDGs. To reliably gauge progress toward achieving the water-related MDGs, a comprehensive assessment of the proportion of population with access to safe drinking water should be made. This would serve as a benchmark for plans to meet the MDG targets and for working out the cost of such plans. Water quality mapping. Water quality maps with reference to water quality standards for drinking water should be prepared at TMA level. Similar maps should also be prepared showing which areas are vulnerable to depletion. Water treatment. Because many cities in Punjab are located in areas with significant groundwater resources that are either saline or subject to degradation by human-induced pollution, the feasibility of treating brackish water as a way of augmenting water supplies should be explored. This is an especially attractive option for Faisalabad, other cities in the Rechna Doab, and elsewhere in saline groundwater zones. An important element in improving water quality is the treatment of water before supplying it to consumers. Treatment facilities (chlorination, etc.) are, at present, limited, and the bulk of water is supplied directly to consumers from water supply tube wells. Water supply agencies should aim to treat all the water supplied by them. The Government should consider exploring the potential of public-private partnerships in wastewater treatment, which could be feasible if water tariffs are revised for treated water. Inter-sector water transfers. Given the growing municipal and industrial water needs, it may be necessary to divert surface water resource from other uses to meet these demands. This possibility is already being contemplated for Islamabad and similar arrangements are conceivable for Rawalpindi and possibly also other cities of Punjab. Inter-sector water transfers should take place under a well thought out institutional framework, avoiding ad hoc and forcible appropriation of water resources from other sectors. Ideally, rural-urban water transfers should be voluntary and involve the transaction of water rights motivated by gains from trade that would arise because of differentials between returns on water used for irrigation and willingness to pay for water in high-value urban and industrial uses. This, however, requires an institutional framework for defining water rights, making them legally transferable, and registering such transactions. While the transactions themselves would probably

103 See Asian Development Bank’s Evaluation of Devolved Social Sector Service delivery in Punjab

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be negotiated between stakeholders in both sectors—possibly including the PIDAs104 in the rural sector—a helping hand from the Government might be needed during the initial phases of institutional development. Demand and supply management. An adequate response to the spiraling water arising from urbanization will require a balanced approach involving both demand management and supply augmentation. An important component of demand management is setting water tariffs at levels that encourage conservation. This is always a difficult option for water utilities because of concerns for the welfare of the poor. No doubt, demand management should not rely on regressive pricing instruments. There are, however, several other ways of achieving the social objective of adequate access to water by poor without their having to bear an excessive economic burden. One possibility is to make the water tariff structure steeply progressive with “lifeline” water supplies available either free of cost or at a nominal charge, while the tariff rates rise sharply for higher levels of water consumption. Cost recovery. A realistic approach is needed to deal with issues of cost recovery in the face of self-provision by households. Public water supply agencies should aim to improve the reliability, adequacy, and quality of the water supplied through their schemes to be able to enjoy the economies of scale necessary to recoup full service provision costs and encourage households to share costs. Outsourcing key management functions. To improve the performance of public water utilities, the possibility of outsourcing some of the functions these agencies perform (such as billing and collection) should be explored. Appropriate technology. There is need to select an appropriate technology package for rural water supply schemes. The package should be selected keeping in view energy efficiency and the level and type of service provided. The latter two aspects can be gauged by conducting willingness-to-pay surveys. Bundling services. To ensure better sanitation coverage, it might be necessary to bundle WSS services. Water supply schemes should have mandatory sanitation components. Environmental standards. Water resources should be protected from pollution by untreated industrial and urban wastewater flows. Municipalities should invest in wastewater treatment. Moreover, the Government should regulate the disposal of industrial effluents, perhaps by adopting a “polluter pays” principle. Wastewater treatment. As cities continue to grow, large quantities of wastewater will be produced in the future. Wastewater is a resource not to be wasted, and options for reusing treated wastewater should be explored. Reuse, however, should be strictly regulated as not to pose any danger to public health. The practice in many peri-urban areas (such as Faisalabad) of irrigating vegetables with untreated industrial and domestic wastewater poses a serious hazard to human health and should be banned. 12.16.2. Devolution of WSS Service Delivery Building capacity of TMAs. Efforts should be made to build TMAs’ capacities. The capacity building process should focus on strengthening technical (design and O&M), managerial, and institutional capacities and social mobilization capabilities. Restructuring PHED. The PHED’s role needs to be redefined from the implementation of WSS schemes to performing clearly defined regulatory functions and providing technical and 104 Provincial Irrigation and Drainage Authority


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institutional support to decentralized implementing agencies at the local level. In achieving these objectives, it would help if the PHED were able to forge effective formal linkages with TMAs. The PHED and WASAs should provide technical assistance to TMAs in issues relating to design, selection of appropriate technologies, supervision of works, and financial management. The PHED should pool its human resources to form a nucleus capable of providing advisory services to TMAs on demand and at a price. The PHED is establishing a provincial resource base, including a training institute and a central design unit. It should be able to compete with consultancy services available in the private sector. Moreover, to retain high-quality technical staff, it must offer them performance-based incentives financed in part through fees charged to TMAs for technical support and training. Community mobilization. Because cost recovery depends crucially on involving communities at all stages of WSS schemes, building TMA capacities for community mobilization is essential. How this can be best accomplished is an important policy choice. One option is to provide assistance through the PHED to enhance TMA capacity for community mobilization. In fact, the PHED proposes to use assistance under the PDSSP to pilot the formation of village councils and water user committees in villages where it is executing WSS schemes. While this initiative needs to go ahead, there are also other civil society entities that have considerable experience and proven expertise in this field. Civil society organizations and the private sector should be encouraged to participate in the process of strengthening TMA institutional and social mobilization capacities. Assessing willingness to pay. To ensure that WSS schemes are demand-driven and do not face cost recovery issues, willingness to pay for a range of WSS services needs to be assessed before deciding which technical package to offer communities. This should be done through contingent valuation studies professionally administered by private sector consultancy firms, public sector research organizations, and academic institutions. 12.17. Industrial Water Use Total industrial water use in the country is estimated at between 1.2 to 1.5 MAF (1.45 to 1.8 BCM). A significant portion of this is used by industries in Punjab. Industrial water use currently forms only a small proportion of total water use. Because industries tend to be concentrated in clusters, local water scarcity can constrain the growth of industry in some locations. The more serious problem is that untreated industrial wastewater flows pollute aquifers and surface water bodies. As a general practice, industries do not treat the wastewater they produce. A few industrial units have treatment plants but most discharge their effluents into rivers, nullahs, drains, and even canals. Based on the Directorate of Land Reclamation Atlas of water pollution, a snapshot of pollution in the main districts of Punjab due to untreated discharges of industrial effluents is presented below.105 Faisalabad district discharged some 436 cusecs of effluent into the surface drainage system from a total of 279 industrial units. Only one industrial plant-a ghee mill-had proper treatment facilities. The effluent contained metals, detergents, petroleum, acids, alkalies, and several other organic and inorganic toxins. These industrial wastes pollute land and water resources and pose serious health hazards to humans and animals. Among humans, these harmful pollutants can cause diseases of the liver and kidneys, and adversely affect the reproductive and nervous systems. Moreover, heavy metals could enter the food chain with an adverse impact. In Sialkot district, the Atlas documented the presence of 55 industrial units, many of which were tanneries. Together, these units disposed of 51 cusecs of effluent into the surface drainage 105 Based on findings of the Government of Punjab (2004). An Atlas: Water sector industrial and municipal

pollution in Punjab. Directorate of Land Reclamation, Irrigation and Power Department, Lahore.

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system. The main recipient water channels include the drain along the Pucca Sialkot-Wazirabad road, and the BRB link canal. In addition to organic and inorganic toxins, the tanneries also discharged heavy metal chromium, which causes nephritis and gastrointestinal problems, as well as impairing the nervous system; it is also linked to the incidence of cancer. Lahore is the industrial hub of Punjab, with a total of 191 surveyed industrial units, including textiles, chemical, food processing, pulp, paper processing, poultry, dairy, plastic, paint, pesticide, leather, tanneries, and pharmaceuticals. The cluster of industries in Lahore district discharges 168 cusecs of industrial wastewater into various drains and rivers, including the Charrar, Hudiara, Pandoki, Buchar Khand, Jamman, Julkey, Lahore Branch (canal), Raiwind, Nehlan, and Burhanspura drains. The main types of pollutants from various point sources include: pesticides from formulation/packing factories, zinc-cyanide from electroplating in pipe sources, acidic water from acid manufacturing chemical plants, chromium from tanneries, detergents from chemical labs, gasoline from pipe leaks, alkaline bases from paint manufacturing units, and chicken manure from poultry farms. Kasur district reportedly had 19 industrial units collectively discharging 14.6 cusecs of effluent into the drainage system. Most of these industries were textile and chemical units. The waterways and canals polluted include the Raiwind main drain, BS link canal, Ibrahimabad drain, and Khankemore drain. Surprisingly, the survey did not document a number of tanneries, which are one of the major point sources of pollution in Kasur and have been the subject of much public comment of late. However, the report does note that chromium was a major pollutant from the tanneries. The Atlas also mentions that there was evidence that linked the incidences of illness and death to water reservoirs polluted with methyl mercury from different industries. The 62 industrial units surveyed in Gujranwala district released approximately 48 cusecs of untreated effluent into the surface water system. The effluent is released into the Rasul Nagar drainage system, Goandke drain, and Koth nullah. A significant proportion of industrial wastewater in the district also finds its way into the canal irrigation system. The polluted canals include Qadirabad-Balloki, Kila Mian Singh minor, Kamoki distributary, Attawa minor, and Ladhewala sub minor. The pollution of the irrigation system increases the likelihood that metals such as chromium, mercury, nickel, copper, and cadmium, when discharged into canal water, will eventually find their way into the human food chain through their concentrations in food crops and fodders. 12.17.1. Recommendations The above snapshot of water use and wastewater disposal practices in the industrial heartland of Punjab clearly indicates the need for a comprehensive approach to wastewater management. The following measures should be adopted: • The provincial Government needs to create adequate monitoring capacity, including a

state-of-the-art water-testing laboratory. • All rivers, canals, surface water drains, and aquifers should be monitored for

urban/industrial pollution. Wastewater disposal limits should be set for waterways. • For heavily polluted rivers, a phased program of pollution control should be devised that

seeks to progressively decrease the release of untreated industrial and urban effluents into these water sources.

• Industries should be provided advisory services to help them identify the wastewater treatment options available, depending on the nature of processes in use.

• Individual industries should be monitored regularly and the principle of “polluter pays” adopted to deal with industrial units who fail to comply with the agreed standards for effluent discharge.

• To help achieve efficiency in water pollution control, a system of pollution permits could be developed for specific areas to allow industries that tend to pollute more to buy


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pollution permits from industries that do not, thereby keeping the total effluent discharge at target levels.

• An awareness campaign should be launched to provide information to all stakeholders on pollution levels, health hazards, and ecosystem degradation. The campaign should include an advocacy component to help build support for pollution control measures.

12.18. Conclusion This chapter covers issues in the water sector, both with reference to irrigation needs and drinking water and sanitation needs in rural and urban areas. Punjab, like the rest of Pakistan, is a water-scarce area, and water conservation and management is crucial to ensure continued, adequate water supplies. A water conservation strategy for the province will require the use of innovative technology as well as institutional reforms to achieve the desired results, but the Government of Punjab has already taken some important steps in this direction and plans to do far more.

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13 Public Sector Resource Management106 The Government of Punjab has accelerated its public spending on social services and physical infrastructure to bridge the service delivery gaps created by deficiency of resources in the past, and to meet the funding requirements of the ambitious Punjab Vision 2020. As a result, public expenditure has increased in per capita terms and as a percentage of GPP, and allocations for social sectors and physical infrastructure have risen as a percentage of total expenditure. The Government recognizes that if social sector expenditures are to be maintained at desired levels, the necessary reforms will have to be instituted to promote prudent financial management practices. In this regard, the Vision 2020 aims to reform public financial management by (i) adopting and disseminating output-based performance budgeting, (ii) developing financial management competence in different provincial departments and district Governments, (iii) introducing administrative and financial devolution and creating an enabling environment for improved service delivery, and (iv) strengthening accountability through effective financial reporting and monitoring. An essential element of this vision is the strengthening of administrative, financial, and monitoring capacities across the board. In addition, the Government of Punjab is committed to the promotion of public-private partnerships in service delivery, and is working to effect such arrangements and tap into additional financial and non-financial resources. This chapter looks at fiscal issues covered in the first PER and describes how fiscal and financial management has progressed in the last two years. Unless stated otherwise, data used in this chapter is from the last three White Papers issued by the Finance Department, Government of Punjab. 13.1 Recent Developments Punjab’s public sector reform program has to be assessed in the context of ongoing national and provincial level fiscal and financial reforms. Key developments in this regard are as follows. 13.1.1 National Finance Commission (NFC) Award 2006 Announced in 2006, the new NFC Award has substantially increased federal transfers to the provinces. The new NFC Award has increased the provinces’ share of transfers from the federal divisible pool of taxes by 28 percent for FY 2007 and beyond. The provinces’ share in the divisible pool is to be increased gradually from 41.50 percent in FY 2007 to 46.25 percent in FY 2011 and beyond. The Government of Punjab will thus receive Rs. 192 billion in FY 2007—an increase of Rs. 53 billion or 33 percent more in its share of federal transfers (taxes, straight transfers, and grants-in-aid107) compared to FY 2006 (Box 13.1).

106 Information and data utilized in the preparation of this chapter was provided by Mr. Omar Masud,

Additional Secretary, Finance (Budget) whose cooperation and support is gratefully acknowledged. 107 The amount of total federal grants-in-aid has been raised to Rs27.75 billion—this amount is to be shared

among all the provinces in the ratio 11, 21, 35, and 33 percent for Punjab, Sindh, NWFP, and Balochistan, respectively.

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Box 13.1: NFC Award 2006—Distribution of Revenue and Grants-in-Aid (Amendment) Order 2006

1. Distribution of revenues. The provincial Governments will be assigned in each FY a share equal to the percentage of net proceeds of the following taxes and duties levied and collected by the federal Government in that year: • taxes on income, • wealth tax, • capital value tax, • taxes on sales and purchases, • sales tax on services (CE mode). • export duties on cotton, • customs duties, • federal excise duties excluding excise duty on gas changed at well-head, and • any other tax that might be levied by the federal Government. 2. Percentage share of provinces. Article 3 (2) of the NFC Award 2006 states that the percentage share of each province from the net proceeds of taxes and duties in each year will be as follows: 41.50 percent in FY 2007, 42.50 percent in FY 2008, 43.75 percent in FY 2009, 45.00 percent in FY 2010, and 46.25 percent in FY 2011 and onward. 3. Allocation of shares to the provincial Governments. Of the sum assigned to the provincial Governments under Article 3 of the NFC Award 2006, an amount equal to the net proceeds of one sixth of sales tax will be distributed among the provinces in the following ratio: Punjab, 50 percent; Sindh, 34.85 percent; NWFP, 9.93 percent; and Balochistan, 5.22 percent. Article 4 also prescribes that the provincial Governments will further transfer these entire amounts to the district Governments and cantonment boards without retaining any part thereof. 4. Distribution of balance. The balance will be distributed among the provinces on the basis of their respective populations in the following percentages specified: Punjab, 57.36 percent; Sindh, 23.71 percent; NWFP, 13.82 percent; and Balochistan, 5.11 percent. 5. Grants-in-aid to the provinces. Article 7 of the NFC Award 2006 stipulates that a fixed sum of Rs. 27.75 billion from the Federal Consolidated Fund will be disbursed to the provinces as grants-in-aid each year in the following ratio: Punjab, 11.00 percent; Sindh, 21.00 percent; NWFP, 35.00 percent; and Balochistan, 33.00 percent. 6. Other royalties. Royalties from crude oil and development surcharges on natural gas will be transferred to the provinces on the basis of well-head production after deducting a 2 percent collection charge. Royalties from and excise duty on natural gas will also be transferred to the provinces in accordance with article 161(1) of the Constitution after deducting a 2 percent collection charge. Similarly, general sales tax (GST) on services (provincial) will also be transferred to the provinces after deducting a 2 percent collection charge. Source: Based on Explanatory Memorandum on Federal Receipts, 2006–2007, Government of Pakistan, Finance Division, Islamabad.

13.1.2 Implementation of Subprogram II of the Punjab Resource Management Program (PRMP) On successful completion of the first subprogram in June 2005, the second subprogram of the PRMP (Box 13.2) was approved in December 2005. This subprogram has a total outlay of $200 million and focuses on governance issues in fiscal and financial management and improved public service delivery. In effect, it aims to (i) provide “fiscal space” for sustainable development and improved monitoring mechanisms to ensure that allocation and utilization of funds is effective and transparent, (ii) adjust and strengthen institutional arrangements to increase the pro-poor impact of public expenditure and improve service delivery, and (iii) create a conducive environment for private sector development, growth, and income generation.


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Box 13.2: Punjab Resource Management Program The Government of Punjab has embarked on a comprehensive program of fiscal and financial management reform supported by ADB under the aegis of the PRMP. A cluster of loans amounting to $500 million was approved on 4 December 2003. The program is divided into three subprograms, the key components of which are as follows. 1. Strengthening provincial finances and management by (i) rationalizing tax structures (agricultural income tax [AIT], urban immovable property tax [UIPT], stamp duty, professional tax, etc.) to increase provincial tax revenues with a broader and more equitable tax base; (ii) restructuring non-tax revenues such as abiana and user charges on municipal or urban services; and (iii) improving revenue administration with functional reorganization, automated tax assessment and collection, and improved responsiveness to tax payers. 2. Rationalizing provincial expenditures by (i) swapping high-cost debt with low-cost loans, (ii) capitalizing pensions and General Provident (GP) Funds to reduce contingent liabilities, and (iii) increasing allocations for operation and maintenance (O&M) and non-salary expenditures. 3. Strategic programming of investments for poverty reduction through (i) a medium-term poverty-focused investment strategy, (ii) expenditure tracking for more poverty-focused investments, and (iii) effective systems and procedures to operationalize provincial goals and priorities. 4. Improving effectiveness, predictability, and accountability in financial management through (i) transparent and user-friendly budgets within an MTBF, (ii) transparent and efficient procurement of goods and services, (iii) transparent and formula-based systems of inter-Government financial flows through the new Provincial Finance Commission (PFC) Award, (iv) revision of budget and planning manuals, including those for district Governments, and (v) provision of reliable and publicly accessible fiscal accounts on a monthly basis. 5. Strengthening Government administration and human resource development by (ii) reforming, restructuring, and enhancing the capacity of provincial agencies responsible for policy, planning, and fiscal and financial management; (ii) changing management processes to enhance departmental efficiency and civil service reforms; (iii) conducting a census of civil servants; and (iv) implementing appropriate human resource policies. 6. Promoting private sector development by (i) improving the security of property rights through management systems and the registration of land and other assets, (ii) restructuring public regulatory and administrative agencies, (iii) providing effective support mechanisms to facilitate investment and public-private partnerships, and (iv) reducing direct public sector involvement in economic/commercial operations. The first subprogram of the PRMP concluded with the release of its second tranche on 27 June 2005. All outstanding loan covenants were fully complied with by the Government of Punjab before the loan effectiveness of the second subprogram, and its outlay ($200 million) was approved on 14 December 2005. The subprogram’s first tranche ($100 million) was released in July 2006 on successful compliance with policy actions. The Government is working to fulfill the conditions for release of the second tranche. Overall, PRMP implementation is to be completed by 30 June 2008.

13.1.3 Institution of Medium Term Planning Frameworks The Government of Punjab has been formulating its budget under a medium term budgetary framework (MTBF), or a three year rolling budgetary program, since FY 2006. The initiation of budget preparation under the MTBF process is one of the key elements of the Government’s strategy to bring provincial financial management at par with international best practices, and to achieve the financial management objectives articulated in the Vision 2020. These objectives include moving towards output based performance budgeting; capacity building of provincial government departments and district governments for better financial management; creating an enabling environment for better service delivery and strengthening accountability through more effective financial reporting and monitoring. While the Framework enables the Government to place its development program in a medium term context, it is not rigid, and allows actual expenditure to be adjusted according to annual needs and resource availability. The MTBF for the next three fiscal years (FY 2008 to FY 2010) broadly concentrates on the macroeconomic framework in which the Government of Punjab is operating, and defines its macroeconomic priorities. The document than sets out the fiscal framework, including revenue and expenditure projections, elements of the Government’s debt management strategy and funding commitments from foreign governments. Lastly, the MTBF defines priorities within the health and education sectors and matches the resource envelope with specific programs and projects. The discussion in the following sub-sections relies extensively on information from the latest MTBF.


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A necessary complement of the MTBF process is the preparation of a Medium Term Development Framework (MTDF), which defines the development program to be financed in the medium term, given the resource envelope estimated in the MTBF. As in the case of the MTBF, FY 2008 will be the second year of implementation of the MTDF. The MTDF has been instrumental in improving the planning process at the departmental level, and has encouraged departments to clearly identify physical infrastructure and monetary targets, such that funding of ongoing schemes remains a priority, and realistic completion schedules are prepared for new projects. The first year of implementation of the MTDF was very successful in that most provincial government departments met their targets. 13.2 Expenditure Trends108 Annual data shows that total expenditure as a percentage of GPP has increased from 6.83 percent in FY 2005 to 8.36 percent in FY 2007 – an increase of almost two percentage points in just three years. Current expenditure accounts for the bulk of the total (amounting to 67.8 percent of total expenditure in FY 2007), but as a percentage of GPP, current expenditure has remained relatively stable increasing from 5.16 percent in FY 2005 to 5.67 percent in FY 2007. Development expenditure, in contrast, has increased from 1.68 percent of GPP in FY 2005 to almost 2.7 percent in FY 2007. The increase in development spending has been made possible by the economic revival of the last five years, which has resulted in appreciable increases in both federal and provincial revenues. Figure 13.1 illustrates the expenditure trends over the last three years. Figure 13.1: Expenditure Trends

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%

2004-05RE 2005-06RE 2006-07RE

Years

Total Expenditure/GPP(current market prices)

CurrentExpenditure/GPP(current market prices)

DevelopmentExpenditure/GPP(current market prices)

Source: Government of Punjab, Finance Department, White Papers. RE refers to Revised Estimates. 13.2.1 Current Expenditure Table 13.1 gives the breakdown of the shares of different categories in total current expenditure for the last three years, including budget estimates for FY 2008. The Government of Punjab, recognizing the value of non-development (or current expenditure) for optimizing the returns from its investments has been expanding the expenditure in this category. Current Revenue Expenditure constitutes on average about 71 percent of total current expenditure. It comprises general public services (which includes transfers to the local governments) and expenditure on public order and safety comprising

108 The Government of Punjab adopted the new Chart of Accounts in FY2006, and subsequent budget

documents have been prepared according to the revised classifications. As such, this chapter focuses on the post FY2005 period, that being the first year for which data is available on the new format. The selection of the time period is also appropriate given that PER I was published in 2005, and covers fiscal and financial reform till FY2004


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over half of current revenue expenditure; leaving close to 10 percent of total current expenditure for the administration of province level health and education facilities. The total level of social sector expenditures is higher since the category of general public services also includes sub-provincial expenditure on social services109. While the shares of different expenditure categories under current revenue expenditure have remained roughly constant over the last four years, the shares of categories of current capital expenditure, which include principal repayment of domestic and foreign debt, and expenditure on equity investment in mega projects give an interesting account of the provincial government’s obligations. The share of debt management in current capital expenditure fell from 5.74 percent of current expenditure in FY 2005 to 2.20 percent in FY 2007 The Government of Punjab retired Rs. 17.4 billion of its high interest bearing cash development loans (CDLs) obtained from the Federal Government over this period. This premature retirement has been effected by utilizing relatively low interest bearing budgetary support instruments from the Asian Development Bank and the World Bank, and is expected to have a significant effect on the fiscal space available for development operations in the medium term. Table 13.1: Shares of Different Current Expenditure Categories in Total Current Expenditure

(percent) Heads of Expenditure 2004/05RE 2005/06RE 2006/07RE 2007/08BE Current Revenue Expenditure 70.58 73.04 69.64 72.46 General Public Services1 47.00 48.42 42.88 44.57 Public Order and Safety Affairs 10.58 11.23 11.19 10.33 Economic Affairs 6.70 6.80 6.13 6.90 Environment Protection 0.01 0.01 0.01 0.01 Housing and Community Amenities 0.30 0.49 0.28 0.74 Health 2.85 2.81 2.80 2.14 Recreational, Culture and Religion 0.35 0.34 0.36 0.19 Education Affairs and Services 2.38 2.34 5.49 7.07 Social Protection 0.40 0.60 0.49 0.51 Current Capital Expenditure 29.42 26.96 30.36 27.54 Debt Management - Repayment of Principal 5.74 5.10 2.20 3.77 Transfers (Inter-governmental) 0.00 0.00 2.87 0.00 Loans and Advances 2.03 1.09 0.35 3.91 State Trading in Medical Stores 0.01 0.01 0.00 0.00 Total Account No. 1 7.77 6.19 5.42 7.68 Public Debt Account No. II 21.65 20.76 24.94 19.86 Total Current Expenditure 100.00 100.00 100.00 100.00

Source: Government of Punjab, Finance Department, White Papers 1/ General Public Services comprise of 1) Executive and Legislative Organs, Financial and Fiscal Affairs, 2) Transfers to Local Government, 3) General Services and 4) General Public Services not elsewhere defined. Transfers comprise the largest share followed by Executive and Legislative Organs, Financial and Fiscal Affairs. According to the 2006-07 (RE) the respective shares of these in General Public Services were 21.4%, 77.8%, 0.8% and 0.01% respectively. 13.2.2 Development Expenditure Table 13.2 gives the breakdown of development expenditure across sectors, as allocated in the Annual Development Programs (ADPs). The data given is for the period FY 2006 onwards as earlier classifications are not directly comparable.

109 However, given the aggregate nature of the data available it is difficult to quantify how much is spent

additionally at the sub-provincial level on these services


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Table 13.2: Development Expenditure Allocations (Rs. Million) Heads of Expenditure 2005/06 2006/07 2007/08 Social Sectors 20973 28165 44377.45 Infrastructure Development 22800 26893.15 32354 Production Sectors 2674 3375 7053 Services Sectors 750 2350 4181 Others 1848 4216.85 5034.55 Special Programs/Misc.* 13955 35000 57000 Total Development Expenditure Allocations 63000 100000 150000

Source: Government of Punjab, Finance Department, White Papers. * This category is termed as Special Programs after FY 06, but is reported as Miscellaneous in earlier White Papers. While the social sectors and infrastructure development predictably take up the bulk of the provincial government’s development resources, special programs including expenditure on key infrastructure (such as the Lahore Rapid Mass Transit System (LRMTS), the Lahore Ring Road (LRR) and the Sialkot-Lahore Motorway) are beginning to assume increasing importance in the provincial ADP. To some extent, this trend is explained by the changing mandate of the provincial government towards providing an enabling environment for private sector development by upgrading the infrastructure and facilities in order to reduce the cost of doing business in the Province. 13.2.3 Debt Liabilities of the Provincial Government Debt servicing has, in the past, consumed a significant portion of the province’s fiscal resources. The Constitution restricts the provincial Governments to borrowing only from or with the consent of the Federal Government. As a result, the Government of Punjab rapidly accumulated public debt during the 1970s and 1980s because of substantial borrowing in the form of high interest bearing CDLs from the Federal Government. The consequent expenditure on debt servicing severely limited the size of the net revenues available to the province for provision of other state services. Since FY 2005, however, the province has retired Rs. 17.4 billion worth of expensive cash development loans, which has brought significant changes in the debt profile of the Government of Punjab. Table 13.3 shows the debt servicing profile of the Province since FY 2005. Table 13.3: Debt Servicing Costs (Rs. Million)

Year Interest on Foreign Debt

Interest on Domestic Debt

Repayment of Principal on Foreign Debt

Repayment of Principal

on Domestic Debt

Total Debt Servicing

FY 2005 654.925 11,725.278 1,940.737 9,146.402 23,467.342 FY 2006 655.119 9,270.314 2,067.276 9,145.896 21,138.605 FY 2007 836.940 7,678.825 2,515.999 3,850.691 14,882.455 FY 08BE 663.362 7,720.485 2,468.95 10,188.574 21,041.371

Source: Government of Punjab, Finance Department, White Papers (includes pre-mature retirement of loans). Loans are, however, not the only debt liability of the provincial government. The GP Fund, for example, is a contributory retirement scheme, to which employees contribute through mandatory monthly deductions from their salaries, while the Government contributes in the form of interest on employees’ accumulated balances at a pre-announced rate. Two issues are of concern here. First, the stock of the GP Fund (a deferred liability) has grown into a sizable provincial liability on account of high interest rates (10.50 percent at present, but were much higher during the last decade). Second, the GP Fund has turned into a payment liability from FY 2006 onward rather than a source of fiscal finance. Presently, payments exceed receipts in the GP Fund, and this situation will become accentuated in coming years (Table 13.4). The Government has decided to convert the GP Fund liability into an off-budget item by investing the fund in securities likely to yield returns at a rate that will offset liabilities in the medium term.


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Table 13.4: Growth of General Provident Fund Liability Fund Year Opening Balance Receipts Payments Closing Balance

FY 2004 15.466 4.715 3.699 16.482 FY 2005 16.482 4.673 3.716 17.439 FY 2006 17.439 3.197 4.472 16.164 FY 2007 16.164 2.633 4.917 13.879 FY 2008 13.879 2.168 5.406 10.641 FY 2009 10.641 1.785 5.945 6.481 FY 2010 6.481 1.470 6.536 1.415

Source: Finance Department, Government of Punjab. Note: Receipts for years 2006/07 and beyond are projected at an ACGR of -17.66 percent, which is the ACGR for the period 2003/04 to 2005/06. Similarly, payments are projected at an ACGR of 9.95 percent, which is the ACGR for the first three years given in the table. The provincial Government employee’s pension payments have also snowballed over time. So far, Government pensions are paid out of the provincial budget. They are non-contributory and based solely on defined benefits. The Government had been paying pension liabilities without making provisions for them in the form of a pension fund. Moreover, the present pension scheme allows for upfront undiscounted commutation of a large portion of accrued pension, making it difficult to finance it from the budget. Pension payments have been increasing at a rate of over 12.1 percent per annum during the last 13 years. Payments on this count now constitute a significant share of the recurrent budget. Pension payments in FY 2007 were Rs.11 billion or about 5.7 percent of the recurrent budget. Since a large number of Government employees are expected to become eligible for pensions in the next 10 to 15 years, pension payments are likely to swell further and become a large burden in the future. Consequently, the Government of Punjab has recently established the Punjab Pension Fund a body corporate responsible for making investments from a Reserve Fund in accordance with the Punjab Pension Fund Act 2007 promulgated on 29 March 2007. The Reserve Fund is a pool for investment created in the Public Account of the province. The Punjab Pension Fund will be managed by qualified and experienced professionals. The objective is to make the pension liability an off-budget item by investing funds large enough to generate an income equal to the annual pension liability. Similar, arrangement is also being proposed for the G.P. Fund. It is hoped that the government will capitalized these funds to Rs. 100 billion by 2016. The Government of Punjab also recognizes that it has implicit contingent liabilities arising from the risk of public sector organizations not being able to meet debt liabilities. A detailed assessment of the financial liabilities of public sector entities is set to be undertaken as part of the reforms initiated through the PRMP. 13.3 Trends in Revenue Mobilization As in the case of other provincial governments in Pakistan, the Government of Punjab has traditionally been heavily dependent on federal transfers, both from the divisible pool of taxes and straight transfers, which constitute mainly royalties on natural resources. In addition, the Federal Government also provides grants to provincial governments for implementation of vertical development programs. In total, federal transfers accounted for almost 76 percent of total revenue receipts in FY 2007, down marginally from close to 80 percent in FY 2005. In terms of total receipts (which include revenue as well as capital receipts), federal transfers constituted 56 percent of the total in FY 2007. The Government of Punjab has concentrated on mobilizing its own revenues over the last decade. These efforts have focused on introducing agricultural income tax (AIT), rationalizing provincial taxes (including many taxes with insignificant tax yields), improving tax compliance by changing the rate structure of urban immovable property tax (UIPT), stamp duties, and tax administration. More recently, the Government has started computerizing land records and has appointed an additional member to the Board of Revenue to deal with all matters pertaining to collection and assessment of AIT in full income mode. To facilitate taxpayers and better enforce tax payment, the ETD has been


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restructured on functional lines, its staff rationalized and trained, tax procedures improved, and tax records computerized. In recent years, foreign borrowing has become an increasingly important source of financing for Punjab’s development program. While the bulk of foreign debt is concessional, the grant component of external assistance has declined substantially over the years. In the past, foreign borrowing occurred in the project financing mode. However, in recent years this trend has been replaced by foreign borrowing in the form of budgetary support. A substantial part of foreign borrowing is now used to retire the relatively costly domestic debt. Currently, notable aid operations include the PRMP and Punjab Devolved Social Services Program (PDSSP) (with ADB), and Education Sector Adjustment Credit (ESAC) (with the World Bank). Trends in provincial revenue receipts over the last four years are given in Table 13.5. Table 13.5: Provincial Revenue Receipts (Rs. Million)

2004/05RE 2005/06RE 2006/07RE 2007/08BE Federal Divisible Pool Taxes 119250.962 140307.073 184679 226934.715 Income Tax 36471.754 43572.807 57286.7 88911.441 Land Customs 21824.046 27790.92 36670.6 35665.014 Sales Tax 52077.324 57764.244 74597.9 81239.476 Federal Excise 8729.688 10361.722 14697.6 19613.442 Capital Value Tax 148.15 817.38 1426.2 1505.342 Straight Transfers 3689.004 6310.002 6584.75 6141.193 Federal Grants 22282.221 34512.992 18347.883 25934.703 Total Federal Transfers 145222.187 181130.067 209611.633 259010.611 Provincial Tax Revenue 20778.707 26719.77 31456.211 37315.597 Agriculture Income Tax 735 1312 1493 1761.74 Property Tax 1700 3788 5200 6136 Land Revenue 3136.317 3674.571 4110.079 4849.897 Tax on Professions, Trades and Callings 266 300 310 370 Sales Tax on Services (Provincial) 1630.171 2147.328 2514.6 3161.97 Provincial Excise 790.874 888.68 1030.536 1216.03 Stamp Duties 6728.387 7762.518 8502.966 10033.502 Motor Vehicle Tax 3362 4210 5365.28 6331.03 Sales of Opium 12.1 10 12.1 14.28 Other 2417.858 2626.673 2917.65 3441.148 Total Non Tax Revenue 15826.083 17291.421 35183.888 59845.623 Income from Property and Enterprise 3282.596 327.275 4761.577 29017.483 Receipts from Civil Administration and other Functions 3232.444 3670.854 4098.733 4275.7 Miscellaneous Receipts 9311.043 13293.292 15472.039 17479.19 Extraordinary Receipts 10851.539 9073.25 Total Provincial Own Revenue 36604.79 44011.191 66640.099 97161.22 Total General Revenue Receipts 181826.977 225141.258 276251.732 356171.831

Source: Government of Punjab, Finance Department, White Papers. * The system of classification of revenue and expenditure was revised in the White Paper of FY 06, and complete data for FY 05 is not available on the new format. As the table shows, provincial tax revenue has increased by 23.0 percent per annum over the period in question. Stamp duties, land revenue and motor vehicle tax (MVT) were the main sources of revenue, but indirect taxes in general and property tax receipts in particular have shown appreciable increases in the recent past – property tax receipts have grown by 75 percent per annum over the last three years. Non-tax receipts rose by 49 percent per annum, largely from state trading, privatization of state assets, interest, and abiana. To the extent that most non-tax revenues consist of extraordinary, one-time receipts, revenue from these sources is not expected to continue to grow at this rate in the future.


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13.4 Initiatives for Improved Resource Management 13.4.1 Focus on Social Sectors In line with the present development policy of improving citizens’ access to basic services, the Government has made larger allocations for education, health, WSS, women’s development, and road networks. The Punjab Education Sector Reform Program (PESRP) has provided additional resources for missing facilities in schools, upgrading schools, free textbooks and stipends for girl students, teacher’s training, and establishment of school councils. Health sector reforms have emphasized the strengthening of primary healthcare with a specific focus on rural areas and urban slums to address the healthcare needs of the poor, especially females. Given that a large majority of the population still lacks access to clean water, allocations to the WSS sector have focused on increasing access to potable water. A large part of such resources are channeled through local Governments. 13.4.2 Public-Private Partnerships As already mentioned, Government policy has attempted to encourage economic growth through public-private partnerships in a number of sectors. Examples of these include: • Punjab and Faisalabad Industrial Estate Development and Management Companies (PIEDMC

& FIEDMC); • Punjab Education and Health Foundations (PEF & PHF); • Punjab Agriculture Marketing Company (PAMCO); • Punjab Social Security Health Management Company (PSSHMC); • Software Technology Park; • Establishment of campuses of Austrian, German and Swedish Technical Universities; • Zyed Centre; Fairmont Hotel; Lake City; • Lahore – Sheikhupura – Faisalabad (BOT) Road. Increasing public-private partnerships forms an essential pillar of the Government of Punjab’s MTBF 2007/2010. 13.4.3 Institutional Reform Capacity constraints in the public sector have traditionally been and continue to be acute. The Government of Punjab has implemented several governance reforms to strengthen its strategic and implementation capacity. These reforms include restructuring the Planning and Development Department (P&DD), Finance Department, Services and General Administration Department (S&GAD) and other strategic line departments, and establishing World Trade Organization (WTO) cells in the P&DD. The distribution of work in the Finance Department has been reallocated on a sectoral basis to improve its efficiency and effectiveness. Numerous training and refresher courses/workshops have been arranged to motivate and improve the capacity of Government of Punjab officers and staff. Administrative secretaries have been made personally responsible for effective utilization of budgets. The Government of Punjab has also announced a policy for transparency of expenditure of provincial and local Governments through its website on a quarterly/monthly basis. It has also approved a procurement reform strategy under which a procurement reform authority is to be established. The Government has already launched a public procurement website, initially for the Health Department and S&GAD, to ensure transparency in procurement. It now proposes to devise and implement an expenditure tracking system for provincial and local Governments to track their development budgets. In recent years, the Government of Punjab has created several new departments and given autonomy to a large number of hospitals and teaching institutions. Autonomous bodies are monitored by their


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concerned departments.110 A comprehensive review of their operations on a quarterly, six-monthly, or annual basis would greatly improve the availability of comprehensive information on the government’s financial operations. There is a particular need for fiscal discipline to be strengthened at the local Government level. Over-commitment is a common practice. Local Governments’ fiscal accounts need to be completed as per stipulated timelines. A key reason for the inadequate local Government fiscal operations is the limited availability of planning and finance staff in the tiers of local Government. The Government of Punjab is trying to overcome this weakness by recruiting and training the appropriate staff. Civil accounts have recently been made available on the Government’s website. Public access to information and legislative oversight needs to be further strengthened. Legislative scrutiny can be strengthened by providing greater professional support to legislators, and increasing the time allowed for debate. Reducing the time elapsed for Audit reports by the auditor general and increasing the availability of public information on Government procurement and related notices, awards, and complaints would greatly strengthen this process. 13.4.4 The Medium Term Budgetary Framework (MTBF) 2007/10111 The recently completed MTBF 2007/10 presents the Government of Punjab’s assessment of the fiscal outlook over the medium term. It states that in the MTBF period Punjab would continue to be dependent on federal transfers and will maintain the ratio of federal transfers to provisional own receipts of 80:20. The previous MTBF had targeted a ratio of 75:25 but after the Presidential amendment of 2006 in the NFC Award 1997 the provincial share in the Federal Divisible Pool Taxes is expected to increase on a year to year basis. For provincial own resources Punjab will maintain the same tax collection growth rate as adopted by the Federal Government so as to not compromise its tax efforts. The Provincial resource mobilization strategy would be thoroughly reviewed and revamped across all taxes and levies for broadening the base and removal of procedural and collection inefficiencies. The expenditure management strategy under the MTBF 2007/10 revolves around the following principles: i) Re-priotization of expenditures ii) Moving some budgetary expenditures out of the budget and into a public-private sector

partnership framework where future mega infrastructure projects would be financed through viable PPP agreements.

iii) Real capitalization of Pension and GP Funds to save on the future Pension and GP Fund liabilities under a properly designed funding strategy.

On the expenditure side the Punjab Government would enter a period of consolidation as far as the development expenditures are concerned and would try to sustain its development interventions of the past five years. The average growth rate in development expenditures would be only 10% over the MTBF period and would compare favorably with a growth rate of 8.8% in current expenditures, thereby ensuring the sustainability of investments made. The General Revenue Receipts are expected to grow by 9.6% during the same period. Development expenditures during the MTBF period also include investments in special infrastructure projects which according to the Medium Term Development Framework (MTDF) are outside the core development program of the province. Viewed from this perspective it is heartening to note that the Government of Punjab shall be able to sustain all its current expenditures as well as a large portion of the core development program from its General Revenue Receipts. This should inspire confidence

110 Some SOEs are financed from the budget while others get only partial financing. 111 This section, in particular, is reproduced directly from the Government of Punjab (2007) Medium term

Budgetary Framework 2007-10


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that interventions in the core development program will be sustained over the MTBF period. Renewed efforts would be made to evolve a Public Private Partnerships framework for financing of mega infrastructure projects so as to decrease the burden of this financing on the annual budget.

The Provincial tax receipts are projected to grow at approximately the same rate as the Federal Divisible Pool taxes i.e. 16.3% annually. At the federal level the ratio of federal taxes to the GDP has fallen to 9.7% of the GDP in 2006/07 despite high growth in the economy. In the MTBF period the Federal Government intends to improve this ratio and will need to target an annual growth rate of 16.4% in tax collection112. Details of the financing of expenditures during the period 2007/10 are presented in Table 13.6 below

The first year of the MTBF shows a higher figure for non tax receipts of the province as compared to the following two years. This is primarily on account of one time receipts in shape of hydel profit arrears (Rs.12 billion), maturity of investment (Rs.9 billion) and arrears of abiana (Irrigation user fee – Rs.3 billion). Non tax receipts classified as ‘Others’ are also reported on the higher side. Because of these receipts a some what distorted picture may be presented of the provincial resource mobilization efforts in the above table.

The one time receipt items of 2007/08 are not available during the future years of the MTBF. The overall impact on non tax receipts is therefore negative in the aggregate but if we were to look at individual items comprising non tax receipts the true tax efforts of the Provincial Government is evident. The portion of non tax receipts that comprise of user charges is expected to grow at the rate of 15% annually over the MTBF period.

During the MTBF period strenuous efforts will be made to expedite privatization of provincial assets to cover the shortfall on account of absence of one time receipts. In this regard disinvestment of financial assets of the Government of Punjab in which it has a majority share holding and sale of government land would be critical. This would substantially add to the non tax receipts of the province.

Despite the above resource generation efforts the province would still require budgetary financing of Rs. 55 and Rs. 42 billion during the next two years of the MTBF largely through borrowing in the Capital Account. Out of this Rs.14 and Rs.16 billion respectively will go towards capitalization of the Punjab Pension and General Provident Investment Funds. However, the Government of Punjab is mindful of the national macroeconomic priorities of the Federal Government and the necessity to contain the national deficit, therefore, the volume of budgetary financing both in absolute terms and as a proportion of the provincial GDP is going to reduce by the last year of the MTBF.

Financing from the Net Public Account will be reduced as the Public Account comprises all accounts which are usually fiduciary in nature and are operated under law. Public Account financing in the first year of the MTBF is greater because of deposits on account of land acquisition for future public private partnerships and infrastructure project to be undertaken during the MTBF period. Once disbursements are made from the Public Account in this respect the financing through the Net Public Account would be considerably less.

:

112 This corresponds well with the average growth rate in federal tax collection experienced since 2002-03.


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Table 13.6: Financing of Expenditures of Government of Punjab MTBF 2007/10 (Rs. in billion) Description 2007/08 2008/09 2009/10 Growth

Rate (%)

1 Federal Resource Transfers 250.511 285.176 338.351 16.2 Divisible Pool Transfers 226.935 269.679 321.765 19.1 Straight Transfers 6.141 6.571 7.031 7.0 Subventions 3.385 3.926 4.554 16.0 Other Federal Grants 14.050 5.000 5.000 -40.3

2 Provincial Resource 105.661 81.012 89.694 -7.9 Provincial Tax Revenues 37.316 43.342 50.481 16.3 Non-Tax Revenues 68.346 37.671 39.214 -24.3

3 TOTAL REVENUE RECEIPTS (1+2) 356.172 366.189 428.045 9.6 4 CURRENT EXPENDITURES 243.487 265.120 289.523 9.0 5 Current Expenditure Net of Capitalization 251.047 273.523 6 Gross Development Expenditure 166.834 156.964 181.348 7 Adjustment* (16.834) 8 NET DEVELOPMENT 150.000 156.964 181.348 10.0 9 TOTAL EXPENDITURES (4+8) 393.487 422.083 470.871 9.4 10 Total Expenditures Net of Capitalization (5+6) 408.011 454.871 11 Financing Requirement (9-3) (37.315) (55.895) (42.826) 12 Financing Requirement without Capitalization of Pension Fund (37.315) (41.822) (26.826) 13 Financing Items 37.315 55.895 42.826

Net Capital Acount 14.598 46.966 32.672 Net Public Account 14.774 0.588 0.638 Net Public Account 14.774 0.588 0.638 Foreign Assistance 7.944 8.341 9.515 Financing Requirement as a % of Provincial GDP (Market

Price)** 0.64% 0.84% 0.57%

Source: Government of Punjab Medium Term Budgetary framework 2007/10 The adjustment is on account of the following:

Rs. 13.147 billion is Current Capital Expenditure, which has already been netted of in the Net Capital Account below. Rs. 1.890 billion are Population Welfare expenditure being separately financed through the Federal Government funds. Rs. 0.6 billion are expenditures generated through own receipts of government housing schemes. Rs. 0.3 billion is the Suspense Account. Rs. 0.9 is Others.

** GDP at market price is expected to grow at 14% p.a. over 2006/07 level on annual basis 13.4.5 Meeting the MTBF 2007/10 Targets The Government of Punjab will continue its efforts to increase the management efficiency of public expenditure regardless of alternative scenarios of resource mobilization. The MTBF ensures more effective use of resources and priorities in the medium term, while PIFRA-related reforms, involvement of stakeholders, and tighter transparency and accountability provisions could help increase the effectiveness of public expenditure. The Government of Punjab will continue to harness private sector resources effectively through public-private partnership. Continued emphasis on debt management. The Government will continue to vigorously pursue its debt management strategy, focusing more on prevalent debt management and forecasts including forex and interest rate risk. Manage liabilities. The capitalization of the GP Fund and pensions into formal, contributory, professionally managed funds will be enhanced and carefully managed. The Government of Punjab has set out a horizon over which budgetary allocations will fund existing pension/GP Fund liabilities. A census of provincial Government employees is also scheduled to begin immediately. The early establishment and professional management of a self-sustaining provident fund will relieve the Government from the high-cost liability of providing welfare to retiring employees. Improve expenditure efficiency. The Government of Punjab will try to improve expenditure efficiency in allocation and implementation. Preparing and implementing an MTBF will contribute significantly to improving expenditure efficiency through improved medium-term planning, greater


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transparency of fiscal resources available to different departments and sectors, better allocation of fiscal resources in line with Government priorities, and an improved mix of wage and non-wage and development and O&M expenditures. As a first step, efforts will be aimed at building capacity. Despite commendable progress on this front, there are still some gaps to be addressed. The key requirements for this are to translate a department’s mission into tangible targets along with cost implications that set inter-sectoral priorities and ensure implementation and accountability. Align policies and outcomes. The departments need to align policies and priorities to program outcomes. Detailed cost projections need also be prepared. The Government has already undertaken a number of important studies,113 which can provide a basis for the departments to crystallize these plans. The Government wants to move from incremental budgeting to “actual-cost” basis of programs and projects. Institutionalizing the MTBF process. The Government aims to eventually undertake all expenditures under an MTBF exercise. This should include local Government expenditures, which are substantial. This is a complicated exercise and requires more pro-active involvement on the part of the PFC. The MTBF should also include an assessment of financing the budgets in the medium term, a forecast of ordinary revenue flows, and the contemplated revenues measures to generate the required additional resources or alternative finances to match planned expenditures.114 This exercise will do away with the unwarranted bifurcation of the provincial budget into development and recurrent components. It will also help department officials think in terms of aggregate expenditure allocations for results rather than focusing on development and recurrent budgets separately, and contribute to making consolidated sectoral budgets. Make budgets more comprehensive. Government budgets should be comprehensive and expressly recognize all liabilities and assets. This includes a full recognition of contingent liabilities of all departments, local Governments, SOEs, and pension and GP funds. It requires in-depth analysis of Government liabilities and assets, and commitments and contingencies at all levels. The institutions of local Government and the PFC will be strengthened along with a focus on human resource development at all tiers of the provincial Government. Improve financial reporting systems. The Government of Punjab will continue to improve financial accounting and reporting in the province. PIFRA can be helpful in implementing the MTBF in departments and district Governments. It plans to maintain an automated database of all provincial and local Government transactions in one server. Local Government accounts need to be collated and analyzed to draw lessons and make public expenditures more effective.115 The Government of Punjab may subject all expenditures to expert review to improve their effectiveness. Comprehensive coverage of all off-budget and contingent provincial liabilities is also needed. Promote transparency. The Government of Punjab will enhance transparency and continue to post its fiscal operations on its website to facilitate public access. To ensure sound provincial finances and improve the quality of provincial fiscal management, the Government of Punjab may consider promulgating/enacting a Punjab Fiscal Responsibility Law on a pattern similar to that of the federal Government. Budget documents should provide a complete picture of fiscal operations. Professional support for budgetary analysis and adequate time for debate and deliberation will be extended to the legislators. Public and parliamentary oversight helps improve effectiveness, ensures fiscal discipline, and creates increased fiscal space for the high-priority expenditure of the province in the medium term. The Government aims to expedite the establishment of the proposed Procurement Regulatory Authority and make the procurement data of all departments accessible on its website. 113 For example “Punjab Economic Report 2005, “Enhancing Capacity for Resource Management and

Poverty Reduction in Punjab: Effective Poverty Focused Development Planning”, etc. 114 The Punjab’s ETD refers to this as a Medium Term Taxation Framework. 115 The available figures on District ADPs in Punjab with P&DD indicate substantial underutilization (47

percent) in FY2005. A fuller audit of local Government budgets would ensure a better compliance of budgetary priorities.


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The measures outlined above have the potential to significantly augment provincial revenues, curtail the Government’s current expenditure by reducing debt service, improve the effectiveness of public services, and ensure fiscal discipline. These measures can provide the much needed fiscal space for expanding coverage of state services in social sectors and infrastructure development, in addition to providing high-priority O&M for accelerated development in the province. 13.5 Conclusion To achieve its ambitious development goals in terms of poverty reduction and accelerated growth, the Government of Punjab needs to mobilize significantly higher resources for non-inflationary financing of its development program. Over the last five years, it has succeeded in raising the required financial resources. This has been possible for a number of reasons. A favorable foreign aid regime since 2001 has helped raise foreign resources for accelerated growth. The spike in overall economic growth has also resulted in higher mobilization of domestic resources since the tax structure is fairly buoyant with respect to GDP growth. The NFC Award has provided a substantial raise in federal transfers to all provinces, including Punjab. However, the Government of Punjab has to adequately confront the challenge of sustaining growth and revenue in line with previous trends. The Government of Punjab has bright prospects of mobilizing the required fiscal resources. A judicious mix of increased federal transfers, mobilization of own resources by the province, and the foreign funding available to the province through the federal Government, will generate resources to address the past neglect of social services delivery, and to mount a larger development program. The Government has made a good start and taken a number of measures to strengthen its fiscal position. A further deepening of reforms is required to establish provincial finances on a firmer footing and to create the additional fiscal space. Fortunately, the province is ideally situated to undertake this deepening and expansion of fiscal and financial management reform. However, there are looming risks that could inhibit the generation of a larger fiscal space due to a slowdown in overall economic growth. There is thus need to evolve a fiscal strategy that is capable of generating additional fiscal resources in case the growth in revenues slows down.

Appendixes

Appendix 1 Social Safety Nets Safety nets play an important role in protecting the poorest and most vulnerable by helping them cope with shocks. Keeping this in view, the Government of Punjab has included the targeting of the vulnerable as one of the pillars of the Provincial Poverty Reduction Strategy Paper. Punjab’s Vision 2020 also aims to address the needs of the poorest of the poor in a more direct manner. In this regard, the efforts revolve around reducing income poverty through the provision of micro-credit, targeted interventions through monthly stipends and undertaking schemes of permanent rehabilitation of individuals and families from Zakat and Bait-ul-Maal funds and through the Chief Minister’s Sasta Ration Scheme. These schemes are supplemented by the work of the Social Welfare Department. 1.1 Zakat Transfers Zakat transfers are the principal form of cash transfers for the poor in Punjab. Currently there are 756 thousand Mustahiqeen in Punjab. MICS (2003/04) data indicate that nearly 3.8 percent of Punjab households are Zakat recipients. This proportion is higher in urban areas (other than major cities) as compared with rural areas. The amount of average Zakat funds is higher in major cities. The overall average amount received is Rs. 1,369 per month per household. An amount of Rs. 12.7 billion has been disbursed to 1.6 million beneficiaries from the Zakat fund between July, 2002 and March, 2005. 1.2 Bait-ul-Maal Bait-ul-Maal is a major safety net program of the Federal Government, which was established in 1992 to provide monetary assistance to poor households not covered by Zakat. Funds are disbursed to deserving students and welfare societies for the purchase of medical equipment and marriage of poor girls. The Food Support Program (FSP) is a major component of the Bait-ul-Maal program that was launched in August 2000 with an annual budget of Rs 2.5 billion. This program includes a food subsidy for the poor. Food Support Program Steering Committees have been constituted at the federal, provincial, regional and district levels for implementation and monitoring of the Program. Beneficiaries are identified and approved by the District Food Support Steering Committee. By the end of FY 2005 an amount of Rs. 2,703 million had been disbursed to 1,113,601 beneficiaries. Out of the total beneficiaries of this program, 50 percent belong to Punjab and 50 percent of the total amount has also been disbursed in Punjab. On average an amount of Rs. 2,427 per beneficiary was disbursed under this scheme. 1.3 Chief Minister’s Sasta Ration Package The Government of Punjab has launched the “Chief Minister’s Sasta Ration Package” under which one million deserving families will be identified and registered. District-wise number of families will depend on the population of the respective district. Each family will get four bags (10kg) of Atta every month at the subsidized rate of Rs. 28 per kg less than the market rate. In addition, two kg each of Dal Masoor, Dal Chana and sugar will also be provided at the subsidized rate of Rs. 10 per kg less than the market rate. The package will be available year round and upfront funds have been placed at the disposal of the District Governments for the purchase of the required quantities of these items. The total amount of subsidy involved is Rs. 2.172 billion. 1.4 Access to Physical Assets Some important schemes undertaken by the Government of Punjab also involve providing access to physical assets to the poor. These include:

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Land to Landless Tenants: In the first phase of the scheme launched in 18 districts, about 78,025 acres of state land is being allotted to 6,242 landless tenants and small land owners at the nominal price of Rs. 200 per acre payable in easy installments. Shelter to Shelterless Tenants: Under this scheme, 1.890 million five marla plots have been earmarked for distribution to the rural shelterless in a phased program. Details are presented below:

1). Regularization of Katchi Abadis a). Total Enlisted pre-1985 Katchi Abadis 1100 b). Deleted Katchi Abadis for not fulfilling the criteria 275 c). Balance Katchi Abadis 825 d). Transferred/Regularized Katchi Abadis 741 89 percent e). Non-transferred Katchi Abadis 84 11 percent

2). Grant of Proprietary Rights in Katchi Abadis

a). Total No. of Dwelling Units (825 Katchi Abadis) 209,863 b). Proprietary rights granted 82,769(40 percent) c). Balance Proprietary Rights 127,094(60 percent)

1.5 Khushal Pakistan Program Under the Khushal Pakistan Program-I, funds amounting to Rs. 7,362.37 million were released between FY 2003 to FY 2005. Of these funds, 51 percent were released to Punjab. Under the Khushal Pakistan Program (KPP-I), 2,513 development schemes were approved for Punjab during FY 2005. The break-down of these schemes is: village electrification (1,419), roads (847), sanitation (97), water supply (30), education (25) and health (15). These development schemes are designed to generate temporary employment. It has been estimated that during FY 2005, KPP-I generated about 0.9 million (person-days) of temporary jobs in the country, of which 47 percent were in Punjab. Since 2002, nearly 2.9 million jobs have been created under the KPP that has benefited 40.5 million people; of these 42 percent of the employment generated and 44 percent of the beneficiaries were in Punjab. 1.6 Micro Finance Programs In recent years microfinance is increasingly being used as a tool for poverty alleviation that empowers individuals by providing opportunities for sustainable livelihood. The microfinance sector is in the initial stages of development. Three different types of institutions are involved in the service delivery of credit to the needy. These include: specialized Micro Finance Institutions (MFIs) including commercial banks, Rural Support Programs (RSPs) and NGO Micro Finance Institutions. The Pakistan Microfinance Network (PMN) is the representative body of MFIs in Pakistan that includes formal sector financial institutions, NGOs and RSPs. According to the PMN, nearly 5.6 million individuals in Pakistan are in need of credit services. However, the outreach of present services fulfils the needs of only 1 percent. In order to enhance the access of the poorer households and communities to socio-economic services and hence their empowerment, the Government of Pakistan set up the Pakistan Poverty Alleviation Fund (PPAF) in February 1997. PPAF funds for income generation activities and improved community physical infrastructure are disbursed through its three main units 1) Credit and Enterprise Development Unit, 2) Community Physical Infrastructure Unit and 3) Human and Institutional Development Unit. PPAF aims to reach the poor and disadvantaged communities in both rural and urban areas through the NGOs and the Community Based Organizations (CBOs). In Punjab Kashf, NRSP, PRSP, Asasah, Bunyad Literacy Community Council (BLCC), Development Action for Mobilization and Emancipation (DAMEN), Human Development Foundation (HDF), and SOS Childrens’ Village are the partner organizations of PPAF.


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1.7 Social Welfare Department of Punjab The Social Welfare Department of Punjab caters to the welfare of the needy, destitute, indigent, disabled, socially and economically oppressed individuals. It also organizes communities into effective self-sustaining units of development. Over the years, the network of functionaries and services under the Social Welfare sector has expanded. These institutions cover almost all types and ages of the population, from infants to the aged. The main thrust of the Social Welfare Department is to establish model institutions directly. It also motivates the private sector to establish welfare institutions in their communities, through public-private partnership. In order to shift the emphasis to self-employment, this sector is also financing a scheme of the Punjab Vocational Training Council for the establishment of 420 Vocational Training Institutes with collaborative financing from the Ministry of Religious Affairs, Government of Pakistan. The Social Welfare Department of the Punjab has also been charged with the implementation of several schemes aimed at the destitute and the needy with a special focus on addressing gender disparities. These include: 1). Gender Reform Action Plan (GRAP). Details of this Program are given in chapter 9 on Gender. 2). Establishment of Rescue Homes for Women (Darul Aman) in all Districts in Punjab. 3). Construction of Home for Needy and Destitute Girls (Kashana) at Sargodha. 4). Establishment of Socio-Economic and Rehabilitation Centre for Women Prisoners in 20 Jails in

Punjab. 5). Construction of Homes for Women at Bahawalpur and Sargodha and Additional Accommodation

at Gujranwala, Faisalabad and Rawalpindi. 6). Construction of buildings for District Industrial Homes (Sanatzar) at Lahore, Gujranwala,

Faisalabad and Okara. 7). Establishment of Abandoned Babies Home at Lahore and Multan. 8). Establishment of Drug Rehabilitation Center and 9). Establishment of 1000 Non-Formal Basic Literacy Centres for Rural Women in Punjab. Box 1: Child Protection and Welfare Bureau: A Milestone in the Efforts to Eradicate Child Exploitation

Source: Asghar (2006)

According to an estimate, there are more than 4,000 beggars and 10,000 street children in Lahore. Nearly 6,000 children were exposed to the danger of sexual exploitation living with female sex workers. In addition there are many addicted, disabled, runaway or lost children. Many children are smuggled for camel racing. Keeping in view the vulnerability of those children who are involved in various illegal activities, the Government of Punjab upon the initiative of Chief Minister Chaudhry Pervaiz Elahi, decided to establish the Child Protection and Welfare Bureau (CPWB) for the rescue, care, welfare, rehabilitation and reintegration of these unfortunate children in 2004. Under this bureau, Child Protection Units, Child Protection Institutions, and a Child Protection Court have been established. The Bureau also provides out-reach services, and Open Reception Centers, Mobile Reception Center, and a Child Help Line (1121) have been set up in this regard. In addition, health services are provided to the drug addicted and special children. Mass Awareness for public has been created through banners, leaflets, flyers and other media campaigns. Micro-Financing for the Families of Rescued Children and support to Juvenile Offenders is provided through the Bureau. The Government of Punjab has offered the services of the Bureau for arranging long term institutional stay of the children rendered homeless in the October 2005 earthquake. During one year, a significant impact has been made. The number of street and beggar children in Lahore has been significantly reduced. Awareness about this issue and about child rights has been created. A sound institutional set up with a potential for growth has been established. The long standing issue of children used in camel races in the UAE has been resolved and the repatriation of 325 children and their reintegration/rehabilitation with their families has been accomplished. CPWB intends to start a family support program for the provision of financial assistance and/or interest free micro-credit financing to destitute and neglected children's families. Initially a pilot project has been started in Lahore, on a very limited scale and it can be expanded to all districts. Child Protection Institutions and Units in 4 other major districts (Multan, Rawalpindi, Faisalabad & Sialkot) have been approved and shall be established very soon. Similar institutions will be established in all other districts of the Punjab.

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Appendix 2 The Agriculture Research Infrastructure in Punjab A number of research establishments, under the control of various federal and provincial agencies, located in Punjab are conducting research relevant to agriculture. Of the federally controlled units the significant research institutions are National Agricultural Research Centre at Islamabad, Central Cotton Research Institute at Multan, Nuclear Institute for Agriculture and Biology (NIAB) at Faisalabad and Centre for Applied Molecular Biology located at the campus of University of Punjab, Lahore. The primary responsibility for agricultural research and development in the province lies with the Department of Agriculture. This department, under the charge of its Secretary, has five Directorates General viz: (i) Research (ii) Extension and Adaptive Research (iii) Field (dealing with agricultural Engineering related activities) (iv) On-Farm Water Management and (v.) Pest Warning and Quality Control. The Ayub Agricultural Research Institute (AARI), Faisalabad, under the charge of Director General (Research), is a multi-commodity, multi-disciplinary research institute with the primary responsibility for generating agricultural production technologies for the province. AARI is a large organization consisting of 22 institutes and 9 independent sections, employing over 900 professionals and close to 4000 support staff .It reports directly to the Director General (Research). A Directorate of Adaptive Research operates under the administrative control of Director General (Extension and Adaptive Research). It comprises of 8 adaptive research farms and 9 stations scattered all over the province. The Directorate is responsible for regional adaptation of developed technologies through upward linkages with research (which are by and large weak) and downward linkages with extension and the farming community. An Agricultural Mechanization Research Institute (AMRI), located at Multan functions under the control of the Director General (Field). It is mandated for fabricating farm machines and conducting research on operational issues related to farm mechanization. A training institute under the supervision of Director General (On-Farm Water Management) conducts staff training on issues related to on-farm water management. A Planning and Evaluation Cell, and two other supporting Directorates i.e. Crop Reporting and Agriculture Information also fall under the administrative jurisdiction of the Secretary Agriculture, Punjab. University of Agriculture (Faisalabad), University of Arid Agriculture (Rawalpindi), Punjab Agriculture Research Board and Punjab Seed Corporation are the four agriculture related autonomous institutions attached to the Department of Agriculture, Punjab. For conducting research in Livestock, Forestry and Fisheries sectors there are 22 research and training institutes and experimental stations-cum-farms operating under the administrative control of relevant departments of the provincial government. 2.1 Delivery Systems and Their Impacts The Government of Punjab has been pro-active in establishing and/or improving delivery systems for supply of inputs, marketing of output and research and extension and institutional strengthening for compliance with the various covenants of World Trade Organization. Ayub Agricultural Research Institute, Faisalabad: Ayub Agricultural Research Institute was established in 1972. It has played a pivotal role in boosting research efforts to cater to the burgeoning population and the industrial needs. The main objectives of the institute are to improve the agricultural productivity, by providing better genetic crop varieties and preserving/processing agricultural products, improved technologies, control of diseases and insects/pests and evolving message for a farmer’s advisory service. In line with the institute’s objectives, efforts were made to increase the yield potential of crops, which have made remarkable progress.


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Apart from this, the said institute had other salient achievements. To begin with, they initiated biotechnology techniques, such as the standardized tissue culture technology for plants, standardized protocol for pilot scale production for disease free and rejuvenated seeds, developing and testing of thousands of somaclone and crops suitable for export and approval of one high yielding rust resistant wheat genotype for cultivation. Moreover, for achieving soil fertility/chemistry, site specific fertilizer recommendation, best time and method of fertilizers application, limitations assigned to nutrients, standardized test methodologies to assess the water quality of tube wells was worked upon. Further, for increased plant protection, pesticides were regularly tested in pesticides laboratories and standardized for use in Punjab. IPM technology was prepared, incorporated and effective crop management was standardized. In addition to this, regarding entomology, pests were studied to evolve effective pest control strategies and screening of varieties was done. Furthermore, in the field of pathology, effective control of crop diseases was devised, seed samples were analyzed and treated and research was done on lower fungi. Concerning, plant virology, work was done on potato production. Post Harvest technology was also introduced, leading to the development of storage technologies, testing of grading techniques and other studies carried out and techniques developed. Also, foods and vegetable preservations were studied to develop drink formulae for crops, dehydrators and other technologies. A training session for ladies was also carried out with reference to the food technologies. Besides this, agronomical techniques were also worked upon, along with better technology and management skills for the production of improved crops at reduced costs. Due to the above stated efforts, by the end of 2005, the provincial seed council approved 13 varieties of crops and several strains of different crops are expected to be approved in the next financial year, tissue cultures sugarcane plants and seeds were produced and distributed, virus free potato seeds were approved and supplied, pesticide samples were analyzed and dispatched, soil and water samples were researched upon and effective training and crop management was carried on. Pest Scouting/Survey of Field Crops, Vegetables and Orchards: The Directorate General of Pest Warning and Quality Control of Pesticides Punjab, since its origination, has been extensively working on measures to minimize health hazards and increase per acre yield. The functions of the Directorate General comprise of; weekly monitoring of pest development, training of Extension Staff, farmers and pesticide dealers concerning pest control, conducting research trials for screening against common pests, conducting studies for determining pest attacks, creating awareness, discouraging scheduled sprays and focus on pest scouting and quality control of pesticides. Regarding the qualitative achievements, Directorate General has focused on the development of early warning system for farmers, awareness amongst the farmers regarding the Integrated Pest Management (IPM) techniques, stoppage of scheduled sprays and reduced number of sprays, keeping in view the economic injury level of pests, anti adulteration campaigns for pesticides, checking of infrastructure of pesticide firms for registration/renewal purposes and trainings concerning the pests. With reference to the progress of the body/institution in question, cotton, rice, wheat, potato and gram have acquired better performance than was targeted. However, sugarcane, maize, sunflowers, groundnut, oilseeds, vegetables and orchards have achieved a lower performance level than was targeted for them. On the other hand, the research activities conducted, all achieved exactly the same level of performance as was targeted. Where as the training and refresher courses and the quality control of pesticides performed better then the stated targets. However, the publicity of the program at hand, proved to be slightly below the mentioned targets. The Department of Agriculture and Water Management: Farm water management being of crucial importance in Pakistan where crop water requirements are estimated to be 121.2 MAF while historic water availability is approximately 54.4 MAF, the department of agriculture has taken important initiatives to improve water management. The need for initiatives is further emphasized by

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the fact that drought spells have been experienced in recent years and over-exploitation of ground water due to this has been detrimental to quality of the water. The initiatives taken in response to these factors include National Program for Improvement of Watercourses in Pakistan. Funded by the PSDP, the Punjab component of the program aims to improve 28000 canals and to develop 2000 barani irrigation schemes. Other activities include organizing and registering 30,000 Water User Associations and training 1,935 technical staff. The program is underway with organization of 9,424 Water User Associations and survey and design of 7, 056 watercourses completed in FY 2006. The government of Punjab with its own resources has also initiated “Strengthening of LASER Land Leveling Services” which is providing 2500 Laser units to farmers and service providers at subsidized rates during 3 years, FY 2007 to FY 2009. The program will minimize water losses and improve productivity. The project aims to level 1.58 million acres of land and train 2500 farmers/service providers. Main pipeline initiatives have been taken where water is to be saved in the conveyance system. The Government of Punjab plans to promote efficient irrigation systems using drip and sprinkler systems on 100,000 acres during 5 years starting FY 2007. Drip irrigation systems will be installed on 80,000 acres and sprinkler systems on 20,000 acres. This will involve capacity building of 12000 farmers in operation, maintenance and management of the new system. A further 50 OFWM/agriculture staff in designing, operation, troubleshooting and supervision/management. The Department of Agriculture Marketing Wing: The Marketing Wing aims to increase profitability of farmers through modern marketing infrastructure, competitive marketing environment and entrepreneurial capacity building. With only 45 grains and fruit and vegetable markets in the province that are also not properly regulated, the marketing wing has taken numerous measures to improve the marketing system. It has enacted laws to revamp the legal system for it to be more farmer-friendly and compatible with international trade requirements. Department of Agriculture Field (Engineering) Wing: This Wing is responsible for undertaking activities for the overall objective of sustainable agricultural development. It aims to help attain self-sufficiency in food production and to generate export surpluses. The field wing also initiates development schemes as part of the Annual Development Program (ADP). To achieve horizontal expansion of land resources the field wing is maintaining a fleet of 350 bulldozers to develop culturable waste land, to improve already cultivated land and to reclaim eroded and gullied land. The fleet is also used to build mini dams, water storage tanks and fish ponds, to de-silt canals and to rehabilitate canal breach and flood affected areas. These bulldozers are also provided to farmers on subsidized rates. The Field Wing also maintains 20 power drilling rigs, 181 hand boring plants, 20 power winches to exploit ground water, 10 electric resistivity meters with 2 geo-loggers for exploration of ground water resources and 6 air compressors to maintain tube wells. Services of well drilling machinery are provided to farmers at subsidized rates. Soil and water conservation services are provided in the barani and hill torrent areas of the Punjab. Some of the works being under taken include construction of mini dams/water storage tanks, construction of water outlet structures and retaining walls, land reclamation through gully plugging, stream bank training, and moisture conservation practices such as terrace farming and deep ploughing. The Field Wing through Agricultural Mechanization Research Institute, Multan provides new prototypes for adaptation and industrial extension services to the local machinery manufacturers for production of standardized and quality equipment. A strong liaison is maintained with the manufacturers and machinery developed includes field wheat straw chopper blower, air boom sprayer, rotary disc mower, spade cultivator and mist blower.


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Department of Agriculture, WTO Cell: The WTO established in 1995 governs trade between member countries by setting global rules of trade to ensure smooth, predictable and free trade. The establishment of the WTO thus has significant implications for the developing countries. The Chief Minister of Punjab had approved the establishment of WTO cells in various departments of the Government of Punjab. WTO cells were created in various government departments with the objective of preparing the public and private sectors for the challenges and opportunities arising from the WTO. The WTO cell of the Department of Agriculture aims to create awareness among growers, traders, exporters and agriculturalists through seminars, workshops and training about trade requirements and their implications such as those of the Agreement on Agriculture (AoA), Agreement on Sanitary and Phyto-sanitary Measures (SPS), Agreement on Technical Barriers to Trade (TBT) and Agreement on Trade Related Intellectual Property rights (TRIPS) which are directly related to agriculture. The AoA stipulates that members must increase market access through the reduction of import duties on agricultural goods, domestic support must be decreased through reduction in trade distorting production subsidies and export subsidies must be eliminated. The SPS agreement aims to protect humans, animals, plants and countries from additives, contaminants, toxins etc in foodstuffs, from plant- or animal-carried diseases and from damage cause by pests. The TBT stipulates product standards for all products and the TRIPS agreement obliges members to protect inventors of micro-biological processes, micro-organisms and plant varieties. Other requirements and management systems include the GAPS (Good Agricultural practices), which gives recommendations on how to improve quality and safety of produce, and the HACCP system which is a useful tool to control hazards that may occur in food. The WTO cell of the agricultural department aims to prepare stakeholders for all these so that agriculture in Punjab is not adversely affected. The cell’s functions and responsibilities include examining and overseeing the WTO’s requirements and to suggest measures for improvement, capacity building of officers of the department and disseminating information to stakeholders, addressing sanitary and Phyto-sanitary issues in agriculture trade in the province, preparing data bank of exportable agricultural goods and establishing linkages between Provincial government’s institutions and federal institutions dealing in WTO functions. The WTO cell’s activities in 2005/06 included seminars and workshops with over 100 participants in each, including eminent scholars and experts on WTO. A training workshop for directors was organized. 23 directors from different wings of the agriculture department participated. Six publications were printed and distributed among participants of the various seminars and workshops. These were: Introductory Booklet on WTO, 10 Benefits of WTO Trading System, 10 Common Misunderstandings of WTO, Hazard Analysis and Critical Control Point, Europe Gap (Good Agricultural Practices). The WTO cell has established close linkages with other departments and institutes by arranging seminars and workshops in collaboration with them. The WTO cell collaborated with Agriculture Marketing Department, Planning and Developing Department, Rice Research Institute of Kala Shah Kaku, Action Aid Pakistan, EU-trade-related technical Assistance (TRTA) program and Government Engineering Academy, Lahore. The WTO cell also participated in the constitution and proceedings of Provincial task forces established for facilitation of exports of rice, mango and citrus fruits to China Iran and other countries. A website is being established to link local markets, international markets and trade institutes. The website will collect, collate, forecast and disseminate information regarding prices, supplies and demands. www.punjabagement.info has been launched connecting 30 markets and a toll free number 0800 51111 has been installed to provide easy access to information. The fruit and vegetable development project will provide training in grading, packing, storing and processing as well as establish graders in 4 districts. The project will also promote off-season production through tunnel technology and prepare feasibilities for small processing units on farms. TORs have been finalized for grading, packing and cold storage projects in Multan.

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Other initiatives include setting up marketing and storage infrastructure including cold chain system by the Punjab Agri Marketing Company (PAMCO). Punjab Institute of Agricultural marketing is being established in Lahore at a cost of Rs. 64 million. Outsourcing of solid waste management has been done in 5 markets. Weigh bridges will be installed at 10 markets. Outsourcing of collection of market fee is in progress at 6 markets. Construction of Kissan Ghar in Sugar Mills has been completed in 3 mills and is in progress in 2 others. Department of Agriculture (Extension Wing): To address the water shortage issue farmers were persuaded to sow crops requiring lesser irrigation water and frequent meetings were held with the Irrigation department so that proper quantity of water may be made available in the needy areas. To encourage self sufficiency in wheat on a sustainable basis, village level farmer training programs were held in villages (22,007 villages in 2004/05 and 914,985 in FY 2006). Farmers were educated about the latest cotton production technology through village level training programs spread over 6 phases throughout the season. During the training programs printed literature was distributed among the farmers. Technology was reinforced through print and electronic media. The rice production achieved in FY 2006 was 3.2 million tonnes, the highest ever. As more than 80 percent of the rice area was covered under fine basmati varieties, there were better chances for export of good quality rice. An agriculture helpline was established in the department during 2002. It is a toll free telephone facility. An agricultural website has been established too so that farmers may consult the agriculture department with queries about production technology of all major crops, data on pesticide sampling, activities of various wings of agricultural departments, metrological data and data on area, production and average yield of all major crops. An internship program for students of the undergraduate degree program from University of Agriculture, Faisalabad has been put in place to strengthen linkages between extension and educational institutions. Agriculture extension wing is responsible under Agriculture Pesticide Ordinance, 1971 to ensure the availability of quality pesticides. Pesticide inspectors conduct intelligence based sampling of pesticide from pesticide warehouses, pesticide dealer stores and shops throughout the province. The Agriculture Extension Wing is making hectic efforts to promote balanced use of fertilizer with the aim to narrow the N:P ratio. Farmers were trained to make efficient use of weedicides in village-level farmer training programs. Over the last couple of years, weedicides use on the wheat crop has shown an increase of 6.23 percent. In addition to the village level farmer training program, the crop production technology was also reinforced through wide use of electronic and print media. Punjab Seed Corporation: Punjab Seed Corporation (PSC) as a semi-autonomous body of Punjab Government was established under PSC Act 1976 for systematic seed Production, Procurement, Processing and Marketing of major and minor crops seed on scientific lines. Punjab Seed Corporation is committed to supplying sufficient quantity of high quality seeds of major and minor crops, at an affordable price to the farmers’ community, and promotes the seed industry in order to enhance national per acre agricultural yield. The corporation strives for continuous improvement in the quality of its products by increasing the efficiency and motivation of its manpower for the utmost satisfaction of its consumers. The PSC has successfully completed various projects of seed production/seed processing and annually supplies about 85,000 M.tonnes of seed of wheat, cotton, paddy, maize, pulses, oil seed, potato, fodders and winter/summer vegetables seeds. The PSC not only meets the certified seed requirements of Punjab but also supplies seeds to other three provinces. Since the inception of PSC procurement, production and distribution of various crop seeds increased from 1000M.tonnes to 85000M tonnes in 25 years. PSC is a farmer friendly organization. It has raised awareness regarding use of certified seed among farmers’ community, and played a significant role to increase per acre yield of the country. It is


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providing high quality seeds to the farmers on affordable rates of all approved varieties even of minor crop seeds. It supplies seeds to all farmers including those in far flung areas of Barani and Thal zone. PSC has played a major role in developing agriculture research. It provides neutral space and required resources for purification and testing of new strain’s potential at its Seed Foundation Cell as well as at farms of registered growers to obtain scientific field results required for the approval of new varieties PSC also plays the role of a facilitator to the private sector. It provides basic seeds to the growers of private seed companies for further multiplication. It also provides the technical know-how regarding seed production and seed processing technology to the private sector through its model farms and seed processing plants. It has achieved certification under ISO 9001-2000 to meet future challenges of the WTO regime and to improve the seed quality at international standards. PSC also exports the surplus quantity of different crop seeds to neighboring countries through FAO and World Bank aided NGOs. For the last 18 years, the PSC has maintained financial sustainability by generating its own resources without any subsidies or grants from the government. It has been operating at profit, and an average of Rs.6.5 million per annum is being paid as income tax on turnover, whereas sales tax on cotton lint bales amounts to Rs.23 to Rs. 30 million per annum and Rs.4 to 5 million as sales tax on procurement of packing material.

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Appendix 3 Livestock Development Initiatives 3.1 Strengthening of Livestock Services Project (SLSP) This is a European co-funded project worth Rs. 1992.66 million (Rs. 405.39 million from the Government of Pakistan and Rs. 1587.27 million from an EU Grant) spreading over 6 years (FY 2004 to FY 2010) implemented by the Ministry of Food, Agriculture, and Livestock, Government of Pakistan through the Provincial Livestock and Dairy Development Departments of Punjab, Sindh, NWFP, Balochistan, AJK and Northern areas. The objective of the project is to assist the Government of Pakistan to realize the potential of the livestock sector by augmenting farmer's livelihood through better provision of livestock services. The project has the following special objectives: • Eradication of rinderpest disease from the country. • Control of foot and mouth disease through successful progressive strategies. • Strengthening of epidemiological units and making them functional for proper diagnosis,

monitoring and surveillance of animal diseases. • Enhancing efficiency and effectiveness of animal health and production services. • Improving animal production through enhanced availability of animal nutrition, foodstuff/fodder,

breeding & extension services. • Establishing proper marketing systems to meet the local and export requirements. • Establishing reliable livestock management information systems at federal, provincial and district

levels. • Enhancing the Federal and Provincial Government capabilities to address policy issues of

livestock sector. • Updating and harmonizing livestock legislation at federal and provincial levels. The existing livestock services are weak. There is a shortage of equipment and job training facilities and this has resulted in low job motivation by functionaries in the livestock department. By attending to these issues, this project will contribute towards improving the effectiveness of the individual staff members through local and foreign training and thus improve their knowledge/skills to tackle the issues being faced by the livestock sector. Training will not remain restricted to the simple transfer of know-how and/or technologies, but will lead to furthering of professional responsibility and dedication in order to regain the confidence of farmers and their motivation to participate in the project. The inputs of the project consist of a series of components (review of present legislation and regulatory frame work, training of stake holders, establishment of epidemiological units, public awareness campaign, studies and surveys, techniques of vaccine production, in disciplinary livestock research and regional- and sub regional cooperation). The private sector will be encouraged to increase the production capacity of vaccines. The quality control of vaccine will be ensured through legislation and effective role of the public sector. 3.2 Achievements of the Livestock Department, Government of Punjab The Livestock Department has been quite active during the previous year. Its list of activities includes: • 500 Motorcycles have been provided to the service provider/development agent. • 400 Community Animal Health Extension workers have been trained. • 300 women livestock extension workers have been trained in poultry production for the

development of backyard poultry. • 126 on-job officers have been given training from Lahore University of Management Sciences,

National Institute of Public Administration & Management and Personnel Development Department.


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• Establishment of diagnostic laboratories of WTO. standards; • Improvement of milk marketing through distribution of milk cooling tanks and establishment of

milk processing plants along with marketing network; • Provision of health coverage to sick animals at the doorsteps of the farmers through mobile

veterinary dispensaries; • Poverty alleviation and empowerment of rural women through provision of poultry and small

animal units to increase the income of the households; • Availability of credit facilities on reduced mark-up through financial institutions for livestock /

dairy / poultry and fish farming; and • Up-dating the legal and regulatory frameworks dealing with livestock and livestock produce. In addition, the Livestock Department has the following achievements to its credit: Support Services for Livestock Farmers: The Department has launched the scheme titled “Support Services for Livestock Farmers” which has completed its first phase. This is a mega project with a total cost of Rs. 2124.3 million, which covers 18 districts of Punjab. In this scheme, 68 Civil Veterinary Hospitals will be upgraded, 69 mobile veterinary dispensaries will be provided and 848 civil veterinary dispensaries will be established. In addition 4182 gazetted and non-gazetted jobs will be created. Establishment of Milk Processing Plants in Districts Layyah and Sialkot: The project has been started in collaboration with Idara e Kissan, Punjab Rural Support Program and Pakistan Dairy Development Corporation. In this scheme, milk plants will be established in both districts at a total cost of Rs. 1152.815 million. This project will be implemented in 10 districts of Punjab. A total of 1000 milk collection centers, 100 milk chilling sub-centers, 14 milk centers, 40 veterinary centers, 4 mini semen production units, 4 feed mills and 2 milk plants will be established under the project. Punjab Milk Enterprises Development Project: Under this project, 440 milk cooling tanks worth Rs. 192 million will be distributed to individuals and cooperative societies for the uplift of small livestock farmers. Buffalo Research Institute, Bhunikey Distt. Kasur: The scheme has been launched at a cost of Rs. 401.175 million to conserve the local breeds of buffalo and to conduct research on them. Research Center for Conservation of Sahiwal Cattle at Jhang: The scheme is in progress and aims to conserve the local breeds. The total cost of the scheme is Rs. 87.815 million. Camel Breeding and Research Station at Rakh Mahni District, Bhakkar: The total cost of the scheme is Rs. 169.746 million and it aims to conserve and conduct research on local camel breeds. Development of Cholistani Breeds of Livestock through Provision of Better Animal Services: The scheme is in progress, and has a total cost of Rs. 150 million. Disease Diagnostic Labs: These labs have been established in 10 districts of Punjab at a total cost of Rs. 103.623 million. The next phase of the project will be launched in FY 2008, and the same facility will be provided in the remaining districts. Free Vaccination under Chief Minister’s Program: The total cost of the scheme is Rs. 116.225 million and it aims to provide free vaccinations to livestock. Financial Incentives: About Rs. 4 billion have been distributed as loans for the development of livestock through the Bank of Punjab, the Punjab Provincial Cooperative Bank, the Small Industries Department and the National Rural Support Program under the Self Support Program of the Chief Minister.

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Appendix 4 Technical Education and Vocational Training Authority (TEVTA) The main objective of establishing the Technical Education and Vocational Training Authority (TEVTA) was to bring technical and vocational training in line with labor market requirements and improve the quality of education through innovative reforms. In 1999, the Government of Punjab was entrusted to take control of 402 institutes of technical training. The physical infrastructure of these institutions was in a bad state, there was a high ratio of dropouts, teachers were de-motivated and un-trained and were teaching an outdated curriculum, which was of no relevance to industry. For every five students, one person was finding employment. TEVTA focuses more on skills in demand in the market, rather than encouraging students to just get degrees. Currently TEVTA is offering five types of trainings: • Technical Education (DAE, HND, B.Tech). • Vocational Training (one year and two years). • Commerce Education (D.Com, B.Com, M.Com). • Short courses in different trades (3 Months to 6 Months). • Apprenticeship Training program.

TEVTA has entered in collaboration with OPEC to establish a state of the art polytechnic institute in the province with a funding of $5 million. The People’s Republic of China has agreed to provide grant-in-aid / Assistance under Economic and Technical Assistance Program for the development of Light Engineering & Cutlery Tools /Facilities at Gujranwala & Wazirabad. Similarly another international linkage has been developed with the Government of the Netherlands through M/S INGRID of Netherlands for up-gradation of facilities in printing & graphic arts with PAPGAI. There are a large number of Deeni Madaris with thousands of students in the province. This huge populace has never been dealt with by any organization to equip them with latest technical skills. TEVTA has therefore, conceived a plan to train this huge reservoir and has established GTTC at Jamia Islamia Kamoki, G.T. Road Gujranwala as a pilot project with traders of electrical wiring, technicians and HVACR technicians, and plans to establish 30 more GTTIs at various Deeni Madaris throughout the province. TEVTA has specifically focused on the requirements of industry and committed itself to provide a skilled workforce accordingly. TEVTA has developed strong ties with Toyota Indus Motors under the Technical Education Program to give specific training to students of DAE in automobiles. TEVTA has also launched short courses for construction industry in collaboration with All Pakistan Contractors Association (APCA) after the development of required curricula and training materials for the construction industry. Another significant tie has been established with APTMA to start DAE in spinning, weaving, knitting, dyeing and finishing technologies. TEVTA chalked out an aggressive, forward looking and demand driven program for training 100,000 skilled workers during the next one year in Punjab, which has been launched w.e.f July, 2006. TEVTA has also started courses in collaboration with the Child Protection Welfare Bureau for the training of destitute children. TEVTA has initiated the process of reactivation, BMR and revamping of its 16 services and industrial centers. TEVTA has devised a comprehensive system based on DACUM model for revision and up-gradation of curricula as per need of industry. Besides development of 73 new courses the curricula of the commerce stream has been revised and implemented, whereas a major portion of the vocational stream is under revision and will be implemented from the next session. TEVTA has developed new


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curricula for the Higher National Diploma (2-Year duration) in 5 technologies as per needs of the industry. The Authority has introduced appropriate ginning technology with the help of Pakistan Cotton Ginners Association (PCGA), and has entered in collaboration with SMEDA for establishment of a materials testing lab. TEVTA has developed linkages with Honda Pakistan for short courses of repair and maintenance for motorcycles, and the company assisted TEVTA by renovating the equipment of the workshop and upgrading the laboratory. TEVTA and Shell Pakistan have started collaboration for courses in entrepreneurial skills for boys and girls. TEVTA has revamped the whole Apprenticeship Training Scheme with a focus to facilitate the industry through induction of apprentices. The number of apprentices has increased from 1,300 to 5,000 during the last three years. Efforts are being made to improve this strength by introduction of more trainers. To evolve a dynamic and efficient training system and focus on quality, TEVTA established a linkage with the Chamber of Commerce and a TEVTA helpdesk has been established at the Lahore Chamber. Major milestones to achieve in the near future are devising a system for regular revision of curricula, intensive training of the faculty, establishing more international linkages of academia and training methodologies with a view to promote the placement ratio of TEVTA pass-outs. TEVTA is exerting its full potential for the promotion of technical education and vocational training in accordance with the importance / priority the present government is attaching to the sector of technical education and training. The Government of Punjab has doubled the allocation of development funds from Rs. 500 million in FY 2006 to Rs. 955 million in FY 2007, which will facilitate the introduction / completion of hi-tech mega projects. Besides that, the Authority is planning to enhance / move through non-development funds for this purpose as well by establishing a mobile network of technical / vocational training institutes at the tehsil and town levels throughout the province. All these efforts are aimed to target at least 25 percent annual enhancement in enrolment.

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Appendix 5 Health Sector Reform Achievements The HSRP has covered several health sector core areas. Initially, the reforms program focused on providing the missing infrastructure facilities in RHCs and BHUs. Additional funds were given to distract governments to increase the availability of medicines and other supplies. Innovative means were adopted to ensure the presence of healthcare providers (doctors & paramedics), including greater community involvement. Successful models of public private partnership have been implemented (for example, the Rahim Yar Khan experiment and Emergency and Ambulatory Service boxed below) and mainstreaming of the private sector health facilities with defined standards is planned. Presently the main platform of the HSRP is the Punjab Devolved Social Services Program, which has made available over $170 million worth of resources for the up-gradation of health facilities, improving governance, hiring specialized skills and doing research studies. Improvement of secondary and tertiary care is an integral part of the reforms program. The hospitals in main cities have been given autonomy under a board arrangement. Pro-poor services have been provided in the tertiary health care institutions. The infrastructure has been improved and additional facilities provided in DHQ/ THQ hospitals. Besides, addition of new specialties in the district and tehsil hospitals is planned. Emergency Medical Services (EMS) are being strengthened. Initially the program covered revamping of emergency departments in 14 tertiary and teaching hospitals. Reportedly, emergency services are available in these hospitals free of cost 24 hours a day. The program is presently strengthening the emergency departments in DHQ & THQ Hospitals. Emergency staff is dedicated for the specifically created posts for this purpose and are paid 50 percent additional basic pay. Guidelines have been issued to the institutions for mandatory training (ATLS and BLS) of staff, adoption of standard operating procedures (SOPs), and up-gradation of equipment/services. The program also covers strengthening of preventive and curative services. The primary health care system is being improved through quality focused facility expansion within the public sector, ensuring availability of essential staff, especially female, through performance based payments, availability of essential drugs, senior citizens package and efficient referral system, strengthening of routine services like immunization and MCH services, involving tertiary and secondary level facilities in delivery of PHC in their periphery and involving the private sector. Specific programs in this area include strengthening EPI through GAVI, vaccination of children under one year for Hepatitis B, polio eradication campaigns to eliminate polio, immunization activities for reduction of maternal and neonatal tetanus, enhanced HIV/AIDS control program, malaria control through Roll Back Malaria Strategy, and TB control through DOTS Strategy. Several program initiatives are being implemented in the area of mother and child health with the support of donors. The main programs are Women’s Health Project in 8 districts (ADB/UNICEF), Reproductive Health Project in 10 districts (ADB), Mothers and Newborn Health Initiative (DFID/USAID), Punjab Safe Motherhood Initiative (UNICEF), Optimal Birth Spacing Initiative (USAID), System Oriented Health Investment (CIDA) and Operational Research by the Population Council. Besides greater remuneration, the Health Department is considering new measures in the area of human resource development. The Department is appraising the option of replacing / augmenting medics at the BHUs with a cadre of specially trained paramedics. The Department plans to launch some new cadres, including community midwives (Skilled Birth Attendants), and plans to increase the number of nurses and specialized nurses.


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To sum, all these reforms have the right direction, but as already noted in the Asian Development Bank Evaluation of the Devolved Social Sector Service Delivery in Punjab, their success crucially hinges on ensuring the following policy measures: • Matching management staff/skills and resources with the health program services. • Ensuring availability of staff, staff mix and staff skills in line with the emerging burden of

disease. • Ensuring availability of 24 hours emergency services at tehsil hospitals. • Reviewing the experience of hospital autonomy, adjusting as appropriate and extending this

concept to district hospitals. • Evolving and ensuring the minimum essential package of health services for all. • Expanding health services through NGOs/CBOs. • Harnessing and supporting public-private partnerships under a more comprehensive policy. • Developing SOPs and protocols relating to the health service delivery. Improving monitoring and evaluation and creating capacity

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Appendix 6 Gender Mainstreaming Project (2004/07) The basis of the three-year Gender Mainstreaming Project is the Gender Mainstreaming Framework developed after detailed consultations with the stakeholders and finalized with the Planning and Development Division and Provincial Planning & Development Departments. The project is funded by UNDP, NORAD, CIDA and SDC with in kind contribution of the Government of Pakistan and the provincial governments. The goal of the Gender Mainstreaming Project is to build the capacity of government officials to mainstream gender in the (i) formulation, (ii) implementation and (iii) monitoring and evaluation of government policies, plans, programs and projects in all areas of development. The project attempts to achieve six clear cut objectives; sensitization, training, gender disaggregated databases, knowledge based networking and advocacy for institutionalization of gender mainstreaming responsibility and accountability. The core implementation of this project is in the Planning and Development Division and provincial departments, who are mandated with the development policy planning and project appraisal. The sensitization aspect has been geared towards senior policy makers whilst the training component is focused towards that level of government officials who are dealing more directly in a hands-on manner with policy and development issues i.e. appraisal and preparation of PC proformas, database management and website construction training. The following departments at the provincial and district level are being targeted for sensitization and training:

Provincial Government

1). Education Department. 2). Health Department. 3). Home Department. 4). Labor and Manpower Department. 5). Planning and Development Department. 6). Population Welfare Department. 7). Environment Department. 8). Services and General Administration Department. 9). Social Welfare, Women Development and Bait-ul-Mal Department. 10). Housing, Urban Development, and Public Health Engineering Department. 11). National Institutes of Public Administration.

District Government

1). District Coordination. 2). Community Development. 3). Education. 4). Finance and Planning. 5). Health. 6). Industries. 7). Works and Services.


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The following personnel have been identified for the sensitization and training aspect of the Punjab component:

Number of personnel

Training Punjab (n=35 districts)

S1 15 secretaries

S2 18 additional secretaries / chief planning officers (Departments) + 35 nazims and DCOs + Sr. Chief P&D & CE, JCE.] 90

S3 50 Parliamentarians S4 Sr. Chief P&D, 10 from Bureau of Statistics + 08 PERI 29 T1 15 deputy secretaries / senior planning officers + 3x7n EDOs and DOs + [P&D 11] 740 T2 18 sections officers / planning officers + 2 assistant directors NIPA + 3x7n DDOs + [P&D 30]

764 C1 Same as T1 15 deputy secretaries / senior planning officers + 3x7n EDOs and DOs + [P&D 11]

740 C2 Same as T2 18 sections officers / planning officers + 2 assistant directors NIPA + 3x7n DDOs +

[P&D 30] 764 C3 Selected Officers 5

TOTAL 3197

6.1 Project Management Plan

# Objectives Strategy Output 1 Gender sensitization

of senior and mid-level Planning and Development (P&D) officials at the, Provincial and district levels

Sensitization Sr. Govt. Mgrs Professional Civil Servants Data Mgrs S1 = ½-day Gender sensitization training Program for senior government managers; S2 = 1-day Gender sensitization training Program for professional civil servants

Senior and mid level Planning and Development (P and D) officials gender sensitized at the federal, Provincial and district level

2 Develop capacity for gender analysis, planning and monitoring and evaluation

Training Planning officers at P&DD Officers of the Planning Cells of various Department T1 = 2-day Gender Analysis training Program for senior-mid level supervisory staff; T2 = 5 day Gender analysis training Program for officers who deal with the basic level of project proposal/Program

Capacity built of senior & mid level officers to conduct gender analysis, planning, M & E Strengthened monitoring and management capacities

3 Develop User-friendly toolkit of materials on gender mainstreaming

Material Development Planning officers at P&DD Officers of the Planning Cells of various Department

User-friendly toolkit of materials on gender mainstreaming developed

4 Establish gender disaggregated database using information and communication technology (ICT) skills and

Sensitization & Training Data Managers and Users S4 = 1-day Sensitization training Program for data managers

Gender disaggregated database established

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# Objectives Strategy Output competencies C2 2-day computer skills training Program for officers

who deal with the basic level of project proposal/Program

5 Establish knowledge-based networking, e-forums, and a community of gender mainstreaming practitioners

Sensitization & Training Gender practitioners C1 = 2-day computer skills training Program for senior-mid level supervisory staff C3 = Website construction training Program for selected Provincial officers

Knowledge base networking promoted

6 Develop institutional mechanisms and procedures for systematic gender mainstreaming and accountability in government

Sensitization S3 = 1-day Advocacy/sensitization training Program for legislators

Advocacy for legislation to institutionalize mechanisms & procedures for systematic gender mainstreaming responsibility and accountability conducted

6.2 Strategy Senior officers of the government, for example secretaries and additional-secretaries, are responsible for providing advice and input to the policymaking process. Sometimes these officers are the ones responsible for making policy decisions. However, partly because of the formal structure of government along vertical sector-wise lines, with weak inter-sector / inter-ministerial coordination, and sometimes also because of a lack of recognition of some of the underlying issues, these decisions are taken within the departmental ambit and in isolation from other stakeholders / factors. This is particularly so in the case of important crosscutting issues like gender and environment, where no single formal machinery of government can address the issues on its own. The sensitization aspect has been geared towards senior policy- decision-makers at very senior positions, whilst the training component towards that level of government, which is dealing more directly in a hands-on manner with policy and development issues. Sensitization also covers the data managers in order to make them more aware of the need for gender-disaggregated data, and thus create a demand for it. The hardware requirements have been approximately assessed so that the project can provide for the essential equipment that is required to create and / or modify databases that will house the data. Knowledge-based networking in terms of connectivity and creation of discussion forums and groups will involve exercising an innovative approach in order to produce results. In order to support the two objectives of gender disaggregated databases and knowledge-based networking, computer-related and web construction trainings have also been included. To create awareness of the need for formal institutionalized systems of allocation of responsibility and channels of accountability for gender mainstreaming, sensitization of legislators has been identified as a tool. Whereas it becomes important to have the senior-most tier of professional public servants appropriately sensitized to the issues, the skills required for gender mainstreaming need to exist at the operational level of desk officers preparing the options, senior officers need to be able to ensure the inclusion of gender perspectives in plans and policies and to explain and account for them. Consequently, there arises a need from this to have these officers sensitized to gender and the need for gender mainstreaming, recognize and acknowledge these needs, and pursue policies in their spheres of influence which constructively address these issues. There is a need therefore for gender sensitization.


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While at the higher tiers of government sensitization to gender issues / gender perspectives / need for gender mainstreaming may be introduced through short duration workshops, etc., there is a different need at the lower level where policy / program / project documents are put together. At this level actual hands-on skills are needed so that theory can be put to practice and it can be ensured that documentation that is circulated for consideration before approval contains the analysis and implementation strategies which gender mainstreaming requires. The purpose of gender analysis is to understand development problems, programs and project interventions in terms of their implications for men and women, and the relationship between them. Gender analysis recognizes that women and men play different roles in society and therefore often have different needs. In order to carry out gender analysis, therefore, very specific skills are required. These skills are required (i) by those personnel responsible for preparing the original proposals, and furthermore are required by (ii) those that are going to appraise these proposals. In order to have suitable capacity of this nature, training programs are required. Policy formulation, as well as development of policy options as alternatives or correctives to existing policy, requires data. The quality of final decisions and the resultant outputs and outcomes thereof are dependent on, amongst other things (such as the quality of implementation), the quality and the detail of the data available. In order to mainstream gender in policies and programs the prerequisite is gender-disaggregated data. Therefore existing databases will need modification by utilizing existing information as well as by modifying the surveys from which the databases are derived. Along with this, new databases on the principles of desegregation will need to be created. These exercises will require not only formal skills in Information and Computer Technology (ICT), but also advocacy in order to generate the demand and recognition of the need for such disaggregated information. As opposed to one type of information, data, knowledge and knowledge-sharing will be important building blocks of gender mainstreaming attempts. Sharing practices, identifying best practices, consultations, debates, will create a community of gender mainstreaming practice that may possibly reach a critical stage at some future date. Knowledge management therefore becomes another important building block of attempts to achieve a successful gender perspective in policies and programs. The establishment of formal government machinery to mainstream gender only goes part way in addressing the issue. The limitations continue to exist when women’s development becomes another line ministry in the formal government structure. The cross-cutting nature of work, where other line ministries are equally responsible if gender issues are to be addressed successfully, needs focused responsibility and accountability. Furthermore, strong coordination mechanisms between sector- responsible line departments need to be integrated into the responsibility and accountability structure for gender mainstreaming. Hence, legislation, derived from existing successful examples of such work, needs to be advocated, debated and enacted.

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Appendix 7 The Land Records System There are three interrelated aspects of the land records system i.e. preparation, maintenance and updating of basic land records. The administrative machinery comprises of a Board of Revenue at each of the provincial headquarters, Directorate of Land Records and the field staff at district and sub-district level. The Central Survey and Settlement Organizations and the Directorates of land Records are a small setup with the main mandate of conducting training and providing technical advice to field officials and providing support to the Board of Revenue. The field-level land management officials under the administrative control of the District Coordination Officer (DCO) are responsible for both maintenance and continuous updating of land records. The Board of Revenue is responsible for policy matters. It is also the ultimate forum for the final appeal of all land disputes. The Board also organizes full-scale settlement operations for the periodic updating of land records. The basic land records at the field level are: 1- The record of rights/periodical record (along with the pedigree table of the owners), 2- The Register of Mutations 3- The Register of Crop Inspections (Register Girdawari) 4- The Cadastral Map (Shajra Kishtwar).

The most important document in the record of rights/periodical records is the Register Haqdaran Zamin which contains information on: • Persons who are landowners, tenants, or who are entitled to receive any of the rent, profits or

produce of the estate or to occupy land; • Nature and extent of the interests of those persons, and the conditions and liabilities attached

thereto; and • Rent, rates, cesses or other payments due from and to each of those persons and to the

government.

The Register Haqdaran Zamin is appended a ‘genealogical tree’ of all the owners, and below the name of each owner is an index to his holdings. This Register is prepared in duplicate; the office copy remains with the Patwari and the original is consigned to the District Record Room within a fortnight after Rabi Girdawari ends. For obtaining a copy of the record of rights, members of the public have to pay an official fee per khata, and the time required is one day to a week. It is issued by the Patwari without any reference to higher authorities. The difficulty, however, is that the Patwari is not easily accessible and often demands a bribe for giving a copy to owners of land.

7.1 Register of Mutations Mutations means alteration of any entry in the revenue records with the object of bringing it up-to-date. Mutation work is one of the most important branches of land management. The presumption of truth is attached to the record of rights under the 1967 West Pakistan land revenue Act. All changes in ownership, by sale, mortgage, gift, inheritance, etc., recorded upto the 30th of June of the year are incorporated in the register titled Haqdaran Zamin. 7.2 Register of Crop Inspection (Register Girdawari) After a field to field survey, each field is serially registered along with its area, the crop sown on it, the name of the tenant and the rent paid by him to the owner of land. This information is then incorporated in the Register Haqdaran Zamin. Entries in the Register of Crop Inspection are used for revenue assessment and for obtaining background information for deciding disputes between the


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owners and the tenants. The statistics generated in the process are important sources of data on land utilization. Unfortunately, this information is not collated at TMA or higher levels and is used only for the assessment of land tax. 7.3 The Cadastral Map The Cadastral Map contains information from the topographical survey done by the Survey Department and the cadastral or field survey carried out by the Patwaris at the time of settlement. The limits of the ‘estates’ and of the fields are measured and written down in the map. Each field is given a serial number and its area is reported in the field book. The Record of Rights is updated every 4 years when all the mutations are consolidated in the new Record of Rights. The Settlement Operations update records afresh as new measurements are carried out. The litigation and disputes over land are frequent. Most disputes arise due to defective records and due to possession of land over and above the entitlement in joint holdings, wrong orders given by the revenue officials in mutations proceedings, and the errors committed by the Patwaris in the record of rights while incorporating changes from mutations. 7.4 Land Mutation According to section 42 of the Punjab Land Revenue Act, 1967, any person acquiring by inheritance, purchase, mortgage, gift, or otherwise, any right in an estate as a landowner or a tenant for a fixed term exceeding one year, shall, within three months from the date of such acquisition, report his acquisition of right to the Patwari of the estate, who shall: Record such a report in the Roznamcha (diary) to be maintained in the prescribed manner. Furnish a copy of the report so recorded, free of cost, to the person making the report. Send a copy of the report, within a week of its receipt, to the Town Committee or the Union Council within which the estate is situated. The mutations are sanctioned after conducting on-the-spot enquiry within a revenue estate before the presence of the parties. However, field enquiry and presence of the parties are not required when the mutations are sanctioned in compliance with the decree of the civil court. In ordinary circumstances there cannot be any distortion or forgery. Despite many safeguards, the Patwari, in collusion with vested interests, uses forged documents and false evidence and deprives genuine land owners. There are instances where frauds have been committed by the functionary in connivance with mischief-mongers who defraud the genuine parties/landowners using forged documents on landholdings and false evidence.

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Appendix 8 Punjab Irrigation Sector Reforms In the irrigation sector, the government’s reforms focus on institutional and policy reforms as well as investments for rehabilitation and improvement of the irrigation system. The reforms program is built around four pillars: Pillar-I deals with institutional and policy reforms for improving the management and maintenance of the irrigation system with a view to ensure its long-term physical and financial sustainability. Pillar-II aims at Water Management Reforms that emphasize the critical importance of water entitlements, measurements, and transparency to make intra-provincial water allocations and distribution more transparent. This component also aims at regulating exploitations and use of groundwater. Pillar-III targets Irrigation Service Delivery Reforms for improving quality, efficiency and accountability of irrigation services through greater farmer participation, institutional reforms and the use of contractual arrangements among water supply agencies and users. Pillar IV deals with on-farm agricultural water management reforms for improving farmers’ incomes through the introduction of changes in farmers’ organizations (FOs) and Water Users Associations (WUAs), irrigation infrastructure, agronomic practices, irrigation technologies, and institutional and incentive structures for sustainable, efficient and demand responsive water delivery system. The detailed description of actions envisaged under each pillar is presented below. 8.1 Pillar I: Ensuring Integrity and Sustainability of Punjab’s Irrigation System The objectives are to (i) prepare and implement a policy framework for an asset management plan; (ii) establish a cost-sharing policy that makes financing of O&M explicit in terms of public sector and users’ contributions; (iii) ensure adequate budgetary allocations for maintenance and repairs, (iv) divest to the private sector a number of activities currently carried out by public sector; (v) establish efficient institutional arrangements for asset management; and reinforce accountability in the sector. Inventory and cost of irrigation and drainage assets in the province has been prepared. A 5-10 year Asset Management Plan (AMP) including rehabilitation and M&R plans, institutional arrangements and financing plans will be prepared under DPL2. The AMP will be fully funded and reflected in the MTBF. Moreover, the M&R yardsticks will be revised to reflect the market rates and will be updated annually to take into account inflation and physical requirements of each zone. The M&R budget has already been increased from Rs 1.231 billion in FY 2005 to Rs 2.0 billion in 06. Future allocations will be based on revised yardsticks for M&R and will reflect progress of reforms, particularly irrigation management transfer (IMT) to farmer organizations and public TW transition. A Performance Evaluation System for M&R is being defined and will be implemented by Government of Punjab. For barrage rehabilitation, a Project Management Unit (PMU) will be established that will evolve into Barrage Management Organization by the time DPL3 gets underway. Following an assessment of public tube wells in both saline and freshwater zones, a transition plan will be prepared for transitioning public tube wells. Under DPL2 half of the freshwater tube wells will be transitioned and processes of transitioning 2700 saline groundwater tube wells will start. Except for


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public tube wells needed for saline drainage, all remaining tube wells will be transitioned under DPL3. Divestiture program for Workshops will be prepared and divestiture completed by DPL3. To increase transparency of the system of awarding contracts, procurement notices and notices of contracts awarded will be posted on IPD website, a Procurement Unit will be established to assist and advise on procurement of goods, services, works and contract management. Moreover, Departmental Accounts Committee meeting fortnightly would resolve 20 percent of the backlog of advance audit observations by next year and an additional 25 percent the following year, bringing cumulative clearance of backlog to 45 percent during DPL3. An important element of policy reforms is IMT that involves establishing Provincial Irrigation and Drainage Authority (PIDA), Area Water Boards (AWB) at canal command level, and Farmers’ Organizations (FO) at Distributary/ Minor level. The FO’s capacities will be built so that they are able to assume operational management and maintenance responsibilities at Distributary/minor level. The FOs will be allowed to retain Abiana and their capacity will be strengthened to help improve Abiana collection. FO business plans will be prepared and implemented. A strategy will also be prepared for improving Abiana collection of canals where FOs do not exist. Finally, a policy for O&M cost-sharing will be prepared and submitted to Government for approval that makes the O&M financing plan explicit about requirements for public sector financing. 8.2 Pillar II: Making Water Allocation and Distribution More Transparent The objective of pillar-II is to (i) emphasize the nexus of water entitlements, measurements and transparency; (ii) build on the existing platform of water entitlements; and (iii) promote sustainable groundwater management. Towards the achievement of transparency in water entitlements and realizing improvements measurement, IPD has developed an Irrigation Management Information System (IMIS). It has started posting Water Accounts of all 24 main Punjab canals on its website. This information, which is updated on daily basis, is publicized through other means as well. To increase accuracy of data collected, IPD will install flow gauges for monitoring canals. It envisages that during DPL2, installation and calibration of monitoring devices will be completed at least on LCC East system where Farmers Organizations are already active. To improve delivery of irrigation services, the staff responsible for service delivery will be equipped with transport and communication devices. A surface water quality monitoring plan will be prepared and implemented, and information of pollution sources and surface water quality will be disseminated locally and posted on IPD website. For sustainable groundwater management, the strategy for managing groundwater will be revisited and an action plan devised. Efforts will be made for mapping groundwater resources and monitoring trends, starting with depth and quality monitoring in critical areas (with falling water tables and saline intrusion). Feasible interventions will be identified. Implementation of the strategy will commence during DPL3 period. A regulatory framework for groundwater will be prepared with user participation and will be implemented through their cooperation. This framework will address issues of economic incentives, perverse and virtuous subsidies, efficient use of water and introduction of modern irrigation technologies. These measures will help control over abstraction of groundwater in critical areas. For LCC East Circle, FOs will publicize distributary water accounts. Criteria will be devised and made public for allocating additional water that becomes available under the Water Accord, and for sharing shortages among canal commands. Under DPL3, efforts will be made for promotion of water markets where such opportunities exist.

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With respect to involvement of FOs in water allocation and distribution, the target is to make available on IPD website the distributary level water accounts for all canals where reforms would have commenced and to update those accounts on a ten daily basis. Towards this end, an oversight committee for website will be established that would include FO’s representatives, NGOs, scholars, other users and IPD officials. This would ensure that information on the website is responsive to users’ needs, accessible, user-friendly, clear and accurate. Management of irrigation channels below the outlet (Mogha) has been traditionally the responsibility of farmers who have an elaborate system of turns, called Warabandi, for distribution of water in the tertiary channels among individual farmers. Under the DPL initiatives, Warabandi will be published in the LCC East Canal Command area in villages, FO and WUA offices. Under DPL3, this system will be expanded and Warabandi schedules for additional distributaries canals where IMT agreements would be signed would be published and disseminated to all users and campaign implemented through the media. A decision support model for water distribution and scheduling will be developed and implemented. The model will be evaluated in terms of improvements in efficiency, accountability and transparency. 8.3 Pillar III: Improving Irrigation Service Delivery The pillar-III objectives are: (i) transparent and efficient system of irrigation service delivery in accordance with water entitlements; (ii) facilitating the entry of new players in the system to help professionalize and make irrigation services more efficient; (iii) devolving responsibility for O&M and abiana (water charges) collection to water users (Farmers’ organization – FOs); (iv) promoting contractual arrangements that clearly specify the rights and obligations of bulk water suppliers and users; (v) benchmarking for all irrigation services. Irrigation Management Transfer Agreements (IMTAs) have been signed with all 83 FOs in LCC AWBs. Social mobilization efforts are on going in LCC command. Approval is being sought for deploying additional social mobilization teams. Institutional analysis of IPD will be carried out to identify a set of sequenced reform actions for cost centers (in conjunction with Pillar-1). A preliminary analysis has already been conducted by IPD. This would help formulate an IPD modernization plan. A Reform Unit, covering key functions of strategic planning and M&E, will be established and made fully functional. The unit will regularly produce M&E reports on an annual basis. Moreover, a communication strategy will be formulated for disseminating information to all stakeholders and for generating support for key reforms. One LCC Area Water Board (AWB) has already been formed in the LCC West area. A program for building AWB capacity has been initiated. Two more AWBs will be made fully operational during each of DPL2 & DPL3. Social mobilization capacity will be enhanced to extend the IMT process to other canal commands. During DPL2, target is to establish 100 new FOs in new AWBs, sign irrigation management transfer agreements with them, and build their capacities. Another 100 FOs will also be established under DPL3 and similar capacity building processes will be initiated. A system of monitoring, benchmarking and reporting will be instituted and workshops on benchmarking will be held. In line with the transparency objective, water discharge measurements on the main, branch and distributary canals will be carried out on daily basis initially in LCC East canal command and will be expanded gradually to cover new AWBs and FOs. Annual status reports will be disseminated. IPD staff and FO will take the measurements at distributary head jointly. Discharges at outlet/mogha in LCC East will be monitored periodically by PIDA/AWB and the system will be extended to other AWBs.


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An interdepartmental steering committee comprising the Chairman P&D, Secretaries of Finance, IPD, Agriculture, and Environment, as well as MD PIDA will be established to monitor progress and provide strategic guidance. The skills within IPD will be strengthened to make it more multidisciplinary and gender balanced. High caliber professionals will be recruited and training program will be prepared. The technical capacities of IPD staff will be enhanced. 8.3.1 Institutional Analysis The IPD has undertaken an institutional analysis to identify ways for enhancing performance. The analysis included reviewing the functions of the department and resources (both human and financial) at its disposal for carrying out its functions. The following measures were recommended, some of which are already in the process of being implemented.1 1. Participatory irrigation management is a key element of irrigation reforms. Farmers’ Organizations

will be established and their capacities will be built to enable them to undertake operational management and maintenance at distributary/minor level. Efforts are underway to create Farmers organizations, Khal Punchayats, and Nehri Punchayats on pilot basis in LCC East command.

2. Improving transparency of water allocation/distribution is an important priority. To improve transparency, IPD has developed a website and a relational database with unique keys for individual canals and distributaries. This database can be quarried for static and live data on individual channels. The database management system will be linked to a web server and provide current discharge status of channels and their daily or weekly trends.

3. Canal and Drainage Act was formulated more than 100 years ago and needs major rethinking to reflect current conditions. IPD has taken up a revision of the canal and drainage act. Draft has been submitted to Provincial Assembly and is under revision process for legislation.

4. Abiana collection system needs to be streamlined to improve collection. Flat rate abiana has been introduced in Punjab from Kharif-2003, which curtailed the discretionary role of assessment staff. Small and medium farmers have particularly welcomed this measure.

5. Water rates for non-agricultural uses of canal water need to be reviewed. Rates for urban and industrial uses are being rationalized, which is expected to help narrow the gap between O&M and cost recovery.

6. Technical capabilities for water infrastructure rehabilitation and modernization should be strengthened. In this connection, a Project management unit has been established in Irrigation Department for rehabilitation, modernization and construction of Barrages. The unit has been staffed with Engineers and experts hired from the market at competitive remuneration packages. The maintenance of barrages will be ultimately de-linked from maintenance of canals; the government would maintain the latter as public goods.

7. In future there would be increased need for planning, research, design activities because of several projects for remodeling/reconstruction of canals and drainage infrastructure. Strengthening technical capabilities for planning, research and design would be essential. The Department is considering proposals for establishing Research, design and Planning Cells within, which would function along corporate lines without imposing financial burden on the Departmental budget.

8. There is need for reorganizing Workshops by involving the private sector. 9. Groundwater merits greater attention in view of the trends towards over-abstraction and degradation

of quality due to saline water intrusion. Groundwater Management Cell is proposed to be created in PIDA to involve community-based organizations in management of the resource.

10. Feasibility study should be carried out for balancing reservoirs for storing surplus water during flood season to help reduce shortages in canal commands. These would be in accordance with the 1991 Water accord.

11. Greater emphasis should be placed on human resources development and on acquiring the needed expertise from the market. To strengthen the HRD process a Human Resources Development Cell may be created within the department.

12. The organizational culture of the Department needs to be more oriented towards achieving greater levels of participation, and delegation of authority to lower echelons, creation of efficient decision-making mechanisms, strengthening of revenue and engineering establishments.

Source: Punjab Irrigation Sector Reform Program, (Annex: 2) Irrigation and Power Dept, Government of Punjab, March 2006.

Moreover an Environmental Management Unit (EMU) will be established with mandate to build awareness and capacity for environmental and social risk management in FOs, AWBs and IPD.

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Guidelines will be prepared to raise awareness of environmental risks identification and control, and placed on the website. A program will be prepared and implemented for creating capacity within FOs, AWBs and IPD for application of environmental and social risk management guidelines. 8.4 Pillar IV: Encouraging New Technology to Increase Productivity The objectives are to (i) promote new technologies that enhance agricultural productivity and water use efficiency by supporting private-public partnerships; and (ii) encourage private sector agri-business. This component envisages increased water productivity, employment and farm incomes as well as enhancing field application efficiency. To ensure that these outcomes are realized, a strategy will be formulated for introducing improved technologies for irrigated agriculture (land leveling, zero tillage, bed and furrow, crop diversification etc) through private-public partnerships and appropriate incentives, including virtuous subsidies and matching grants. To start implementation on pilot basis and in partnership with private sector service providers, the initial emphasis will be on laser land leveling services. The scope of activities will be later expanded to include pressurized irrigation systems. Pillar IV also includes implementation of a program aimed at minimizing conveyance losses in tertiary watercourses mainly through watercourse improvement. Finally, a program will be prepared for improving linkages between agribusiness and farmers.

Economy & Finance

Punjab Economic Report 2007