BROADENING BALOCHISTAN REVENUE BASE

SYED FAZL-E-HAIDER
July 21 - 27, 2008

Last month, the new coalition government of Balochistan presented its first annual tax-free budget of Rs 71.19 billion for the fiscal year 2008-09 with an overall deficit of Rs 8.8 billion. Prime Minister Syed Yousuf Raza Gilani has promised to provide Rs3 billion special grant from his discretionary fund. With this grant, according to the official sources, the budget deficit would come down to Rs5.80 billion, which would be met by enhancing province's own resources. What plan or strategy the present government has made to enhance its revenue generation, which is presently stands at a paltry sum of not more than Rs.2.5 billion?

The province has currently a narrow revenue base and the provincial government is trying to seek a complete write-off of its Rs19 billion overdraft with the State Bank or its conversion into a soft loan. It has already assured the central bank of widening its revenue base and observing the fiscal discipline.

Though rich in natural resources, Balochistan is a cash-starved province. It has a fragile fiscal base. It has to run its financial affairs through grants and subventions, it receives from the centre. It is heavily dependent on federal government for meeting its financial needs and obligations. Nature has bestowed the province with so many natural resources and its favorable climate and various plateau of land further enhanced its importance by producing dates, cherries, apricot, pomegranate, grapes and apples. The distinctive climatic conditions in the province provide diversity and a great variety for fruit production. What is direly needed is to devise a comprehensive strategy to develop some key sectors of provincial economy including Farming, Livestock and Mining.

FARMING

Agriculture is the main constituent of provincial economy. The sector needs to be organized on modern and scientific lines with a view to optimize the productivity of soils. Balochistan government should offer its state farms to private sector for corporate farming. There are more than 35 agricultural research and extension services farms in the province. The modalities of the corporate farming need to be worked out. Corporate farming encompasses not only the farm itself, but also the entire chain of agriculture-related business, including seed supply, agri-chemicals, food processing, machinery, storage, transport, distribution, marketing, advertising, and retail sales. It is aimed at vertically integrating all food production.

What can make corporate farming a success in Balochistan is the availability of vast areas of cultivable waste land, its strong potential for expansion of agriculture base, low transportation cost and developed routes to Middle East, Iran, Afghanistan and CARs.

Investments can be made in the following areas: reclamation of barren, desert and hilly land for agriculture purpose, farming of crops, fruits, vegetables, and flowers, development of irrigation facilities, water management, production of quality seeds, agri-produce storage facilities, marketing and export of agri-produce, farming processing and preservation of seafood, livestock farming and breeding, sheep and goat farming, dairy farming, and the grading, processing, packaging, preservation of fruits, vegetables and flowers. The provincial government must work out criteria for selecting private parties so that interested parties could approach the government. It may offer an incentive package to private parties for corporate farming in the province.

LIVESTOCK

Livestock is an important sector of rural economy contributing about 40 percent to the provincial GDP. According to the census of 2006, the province maintains 2.253581 million cattle, 12.804217 million sheep, 11.784711 million goats, 0.319854 million buffaloes, 0.379528 million camels, 0.059973 million horses, 0.006256 million mules, 0.471942 million donkeys and 5.911304 million poultry. Livestock contributes Rs. 20 billion with share of meat 40%, milk 35%, eggs 13%, skin, hides & wool 10% and others 2%. The province annually produces 28000 tons of beef and 204000 tons of mutton.

Livestock development is linked with poverty alleviation in the province, as its 70 percent population is directly or indirectly involved in livestock rearing activities. The province is rich in livestock resources contributing about 40 per cent of Pakistan's total livestock population.

Milk contributes 35 percent of the total earning from livestock. The milk marketing channels are not organized on scientific lines in Balochistan. As per statistics of 2006 livestock census, the province maintains 2.25 million of cattle, 12.80 million of sheep, 11.78 million of goats and 0.319 million of buffaloes. A well orchestrated strategy needs to be formulated to effectively transform the dairy sector in the province. It should include all aspects of dairy development, which means improving milk collection network, increasing the quantity of available cows, buffaloes, sheep and goats and enhancing milk processing and marketing. The provincial government should fix an annual target of milk production each year and should make concerted efforts to achieve it.

The budgetary allocation for the livestock sector needs to be enhanced significantly. Present provincial government must announce a new livestock policy involving the private sector for promotion of the organized cattle farming activities in the province.

The government should create an environment through announcement of attractive incentives for seeking foreign investment in livestock sector particularly dairy farming, as it would bring latest technology, modern methods of animal husbandry. An Investment Promotion Cell (IPC) may be established to bring the foreign capital for efficiently tapping the potential areas of dairy farming in the province. The government should provide land and facilities for setting up goat milk cheese processing units in order to motivate the private sector.

MINING

Balochistan is endowed with a large number of metallic and non-metallic minerals. Unfortunately, mineral sector contributes nominally to the provincial GDP. Provincial government should focus on the development of mineral sector for attracting international investment particularly in metallic minerals and coal related energy projects in the province. The province is currently the biggest coal producer in the country yielding more than 2 million tons a year.

According to the official sources, the provincial income from mining activities has increased from Rs100 million to Rs500 million during last financial year. The province's near term growth potential exists with commercial exploitation of Saindak copper and gold deposits and the possible future exploitation of Reko Diq copper deposits in Chagai and Duddar zinc-lead deposit in Lasbela district. Balochistan's strategic copper and gold assets have attracted interests of foreign investors who have purchased stakes in copper projects during the last five-year period. The Chagai district is expected to become a hub for the metallic mineral mining industry in the next five years.