NO INCOME TAX ON AGRICULTURE IN BUDGET 2009-10

KANWAL SALEEM
June 22 - 28, 2009

As per expectations, Pakistan People's Party led coalition government has not imposed the income tax on agriculture sector in the budget 2009-10.

Pakistan's agriculture sector in general and livestock sector in particular has great potential for earning precious foreign exchange. "What we need is to focus on value addition of livestock products," experts told Pakistan and Gulf Economist. The government has announced that nil custom duty regime on tractors, poultry inputs, and cattle feed would continue in future for the development of livestock sector in the country, they added.

It may be mentioned that Tetra Pak, the world's leading food processing and packaging company of Swedish origin, has signed an MoU with Engro Foods Limited to establish a Dairy Hub a dairy development project - to improve quality, quantity and market access of milk by creating an efficient value chain to enhance smallholder competitiveness.

A dairy hub consists of 20 villages located within 15 km radius, organising and developing smallholder farmers' milk production, which is then collected by the dairy that owns the dairy hub. Dairy hubs have facilities for cooling, testing equipment, agri-services and training, which create loyalty between registered smallholders to supply their milk and link them to the formal sector. The first Dairy Hub Pilot Project is to be undertaken in the surrounding areas of Kassowal, District Sahiwal.

Milk demand in the country is growing annually by 15 percent while supply has been increasing by only 3 4 percent. This supply gap is going to increase to 3.6 billion litres by 2015, resulting in adverse shortfall of milk. To meet this shortage, the collection net needs to be widened and more Milk Collection Centres are to be set up.

BUDGET 2009-10

The budget deficit is 3.4 percent. Around $ 4 billion bilateral and multilateral aid was received this year and the same amount is expected to be received in 2009-10. About two billion dollars would also come from friends of Pakistan in 2009-10 while the government is planning another loan agreement with the IMF and would use the amount for balance of payment management and also for reducing fiscal gap, if needed.

Referring to the budget 2009-10, the analysts said: "Overall Public Sector Development Program allocation for Ministry of Food and Agriculture would be increased by 29 percent from Rs.14 billion in 2008-09 to Rs. 18 billion in 2009-10.

According to them, the government has allocated Rs.10 billion for the improvement of water courses besides Rs.2.5 billion would be spent on food security and productivity enhancement. A number of projects have been planned for constructing new water reservoirs for which substantial allocations of Rs. 15 billion have been made. The government would spend Rs. 37 billion in the year 2009-10 for the development of two agriculture infrastructure development programmes including warehousing facilities. This amount would also be spent on integrated agriculture marketing and storage infrastructures including feasibility study projects.

The government has earmarked Rs. 500 million in budget 2009-10 to establish warehousing storage facilities. To promote research and development culture in agri-sector, the government has planned two state-of-the-art institutions of research for wheat and cotton apart from upgrading the existing facilities. As many as 10 modern agriculture union councils would be established for each major crop across the country. Modern technologies and hybrid seed would be introduced with the help of foreign companies like Monsanto of US and farmers would be offered BT cotton hybrids during fiscal year 2009-10, they said. People hailing from different walks of life have expressed divergent views on the budget for fiscal 2009-10. Those associated with the ruling class have appreciated different measures incorporated in the budget. They lauded allocations for IDPs, salaries increase, and increasing allocations for social sector.

According to them, budget for the year 2009-10 would open new horizons of progress and prosperity in the country, as it is a balanced and poor friendly budget. Despite financial meltdown confronting the world economies, the government has focused all areas including industry, agriculture and social sector. According to Minister for Minorities Affairs Shahbaz Bhatti the budget is "poor friendly", as it would provide relief to the downtrodden, farmers, labours, and other segments of the society. He said increase in salaries would provide immediate relief to salaried class. He applauded Rs 70 billion allocation for Benazir Income Support Programme and said, it would transform the lives of poor segment of the society

He said the budget contained several relief measures for industry as well as other sectors, and once these proposals were implemented properly, things would change for the poor and working class.

Shahbaz Bhatti hoped infrastructure development, human capital and social sector development, poverty reduction, promotion of investments and exports, and agriculture sector development were to benefit the poor. On the other hand, leaders of opposition parties have expressed reservations on various steps proposed in the budget.

The PML-N leader Ahsan Iqbal described the budget 2009-10 as jugglery of words and said nothing concrete and consolidated proposals had been mentioned in the budget. He said cosmetic and short-lived measures would do no service for overall changing the economic situation in the country.

The PML-Q leader Chaudhry Pervaiz Elahi said salary increase as announced in the annual budget was far below than the inflation rate of the country. He said inflation rate was 22 percent while the salaries had been increased by just 15 percent. It means the burden of seven percent inflation would have to be borne by the common man. He called upon the government to take immediate steps to curb inflation, as it had made the lives of the poor miserable.

Leading business leader and vice-chairman SAARC Chamber of Commerce and Industry Pakistan Chapter Iftikhar Ali Malik has congratulated the country's financial managers for presenting a positive budget for the fiscal year 2009-10. He said levying of no new tax on the industrialists and announcement of tax reforms to purge the tax machinery from wrong doings were the steps in the right direction. He said announcement of ensuring power and gas supply to the industrial sector on priority basis was a much-needed step for which industry was raising voice. Malik assured that the industrialists and business community would fully respond to the positive initiatives of the government which it had announced in the budget. "The business community is sincere, patriotic and committed to the national cause and it would go to any extent for betterment of the country, economic stability and national prosperity," he said.

According to Advisor to Prime Minister on Finance Shaukat Tarin, budget speech of Minister of State for Finance Hina Rabbani Khar reflects nine-point economic agenda of the government. Objective of the budget is to achieve nine-point agenda of which stability is a top priority as like as the government slogan is revival of the economy. Agenda include poverty reduction, agriculture and human resource development and relief to poor.