Reformers recommendations

By AMANULLAH BASHAR
Jan 24 - 30, 2000

Agriculture is pivotal to overall economic development of Pakistan and has contributed about 5 per cent to GDP of the country each year. It has supported the largest industrial sector that is textile sector which in turn has contributed 67 per cent of annual exports. Today, this is the only sector which has kept the economy going on in our rural as well as urban areas and has potential for increase in exports.

These observations were made by a panel of agriculturists turned politicians assembled at Karachi Press Club under banner of the Agriculture Committee of The Reformers led by Nisar A. Memon. Prominent among those were Makhdoom Khaliquzzaman, from Hyderabad, Qurban Ali Shah from Mirpurkhas, Zafar Ali Shah Naushehro Firoze, Shabbir Ahmed Shah from Nawab Shah, Kher Mohammad Jonejo from Sanghar, Gadda Hussain Meheesar from Larkana, Ali Mir Shah Badin, Qazi Shafiq Meheesar and Nisar A. Memon, president of the Reformers.

Appreciating the recognition of the importance of agriculture in economic package presented to nation by the Chief Executive, they pointed out that the government has accepted quite a few recommendations of the Agriculture Committee of the Reformers but many important recommendations i.e Corporate Farming, Price Support Mechanism along with the institutional framework and Crop Insurance were not included in the economic package which needs to be understood and implemented for achieving the desired increased agriculture performance.

Inviting the attention of the Chief Executive Gen. Pervez Musharraf they further observed that worldwide, agriculture has been recognized as a key sector for social, economic, political and national security. As such, in USA and Europe, they have established policies to encourage and support it in the form of long term consistent policies and subsidies. Agriculture is a major consideration in even their foreign and trade policies, they emphasised.

They highlighted following issues and concerns of the agriculture sector in Pakistan:

Cotton and paddy being major crop have been severely affected due to lack of recognition of farmers expenses and returns inspite of government agency like Agricultural Price Commission's involvement in determination of costs involved.

Non-availability of adequate credit facilities for farming in proportion of GDP contribution of agriculture as against industrial sector as well as limitation on borrowing, coupled with high rate of interest have been negative factor for growth of agriculture.

Limitation on land holdings has resulted in non-application of advanced technology and mechanization, thereby, affecting the productivity and international competitiveness of our produce.

Last year, sugar cane growers did not get the proper returns due to discouraging policies of government, as such, the farmers were compelled to reduce the area under sugarcane cultivation by over 25 per cent in Punjab alone. Sugar production will therefore by 25 per cent lower this year, thus the export potential will be minimal.

It is anticipated that cotton and paddy growers will look for diversification and thus reduce cotton and paddy cultivation next year which will reduce their contribution to GDP and export.

Mismanagement of water witnessed this year due to lack of proper and timely water distribution, lack of maintenance of canals, corruption, indiscipline and lack of implementation of rules and regulations has resulted in water shortage.

Contribution of agriculture to various direct taxes i.e. agriculture income tax, agriculture wealth tax, ushar, local cess on sugarcane, rice and cotton, drainage tax, masjid tax, as well as indirect taxes i.e. central excise duty on sugar, sales tax on cotton and cotton seed etc. need to be recognized for future restructuring of taxes.

Citizens, the consumers of agricultural products are being charged higher prices thus increasing inflation. This is mainly due to lack of marketing support organization by government and failure of existing marketing mechanism and market committees.

RECOMMENDATIONS:

Government should establish adequate and effective price support mechanism for the major and minor crops supported by institutional framework. These institutions should have sufficient and substantial representation of farmers on their boards.

Ministry of Finance and State Bank of Pakistan should allocate necessary credit funds of a large size than the industrial sector due to higher contribution of agriculture sector to the GDP. The ceiling of individual loans be revised upward to accommodate increased investment requirement of crops. As in the past, interest free seasonal loans be revived for agricultural inputs.

Abundant barren state land should be developed by Government and allotted to growers of the area through cooperative or corporate or individual arrangement to boost agricultural production in the country. It is now internally recognized that subsistent holdings of twelve or sixteen acres do not produce surpluses to feed growing population. Surpluses are produced only by large farms where required inputs such as seed, fertilizer, insecticides and pesticides, modern technology and machinery etc. can be applied more pragmatically. Countries like USA which are largest exporters of grains and fibers do not have a land ceiling, whilst communist farms with ceilings had only deficit.

Success in industry and trade results in setting up of additional projects by owners to enhance industrial growth in the country, while the successful agriculturists are restrained to expand due to land ceiling, and thus depriving agricultural sector growth. Therefore land ceiling be removed which will also be in conformity with the Federal Shariat Court decision.

Government must allocate adequate funds for lining of water-canals and water courses.

All agricultural taxes be consolidated and tax slabs be rationalized comparative to incomes from other businesses. The tax collection procedures be simplified taking into consideration the realities of illiteracy, lack of infra structure and experience. Crop insurance be introduced as recommended by various studies to bring this sector in line with other business.

Marketing methodologies be studied and laws introduced.

Nisar Memon while summing up the discussion disclosed that since the Sindh is the only province in the country where the farmers are paying Usher as rest of the farmers of the three provinces of Punjab, NWFP and Balochistan are not liable to pay Ushar, the Governor Sindh has agreed to do away with the Ushar tax from Sindh also from this year.

AGRICULTURE TAXATION

He said that the agriculture sector has no objection to pay tax on agriculture provided this sector is treated at par with the industrial sector as far as the taxation regime is concerned.

He said that the taxation on agriculture income is acceptable but needs to be implemented fairly and judiciously thus the process of assessment and implementation should be such that it could be easily implemented at gross root level recognizing the geographical distances and farmers low level of literacy.

The formulation of policy for agriculture tax by the provincial governments must be done a way after due consultation and involvement of growers. The assessment and collection of taxes be continued with the provincial revenue department. The multiplicity of taxes on agriculture be eliminated, he demanded.

PRICE SUPPORT MECHANISM

It is regrettable that the present government has been unable to help the growers in the current cotton and paddy crises. Although they have intervened with Trading Corporation of Pakistan but without required results for the growers who continue to suffer the financial losses which brought untold miseries in the rural life. Whereas Agriculture Price Commission of the federal government has determined Rs700 as production cost of 40 kgs of putty the grower is getting less than Rs400. Thus incurring a loss of over Rs300 per 40kgs which amount to a total loss of over Rs9 billion to Sindh growers alone which will have catastrophic effect on future production, he warned.

In addition to cotton, paddy growers have also suffered heavy losses due to lower price and no support action by the government. Thus the cotton and rice — the two exportable commodities will have negative impact on our exports and further deteriorate Pakistan's trade balance.

The TCP has contracted 892,400 bales from Punjab and only 87,700 from Sindh which is less than 10 per cent while the production of cotton from Sindh is over 25 per cent. The actual purchase and lifting by TCP from Sindh is negligible. It is therefore imperative to establish an acceptable process of price support mechanism for growers to avoid expected crisis of low cotton and other produces next year with its consequences on the Pakistan economy.

Success in industry and trade results in setting up of additional projects by owners to enhance industrial growth in the country while the successful agriculturists are restrained to expand due to land ceilings, thus curtailing the agricultural sector's growth. Therefore land ceilings be removed so that agriculturists come forward to make further investments in environment of confidence.

WATER

All existing water accords between the provinces must be implemented in letter and spirit. Earlier system of monitoring by IRSA be revived with its original composition to monitor the equitable distribution of water. Since there has been no consensus on building Kalabagh Dam this project be abandoned once for all to bring inter-provincial harmony in the country. He however appreciated the Chief Executive's recognition for desilting and the concentrated efforts by the armed forces in collaboration with the civilians.

 

LAND

Sindh lands have been severely destroyed due to water logging and salinity as such we expect a clear pronouncement and action plan by the government along with necessary allocation of funds to maximize the reclamation of land for cultivation.

Due to water logging and salinity, large tracks have been affected as such measure like revival of subsidized availability for gypsum also surface drains be made along the main irrigation canals to pump the seepage water back to canals. In addition incomplete drainage schemes need to be funded and completed. Scrap tube wells should be repaired and regularly run since the drainage rate of Rs32 per acre is being levied from growers in scrap areas.

Replying to a remark that the Reformers has assumed the role of the spokesman of the feudals turned politicians, Nisar Memon in a prompt response said that agriculture sector is one of the important segment of the economy, however the Reformers will be coming out soon with the recommendations for revival of the industrial sector in Pakistan.

The Reformers have spent their time and efforts for the good of the agriculture sector in the hope that with the introduction of a corporate culture in the agriculture sector the country will not only be able to attract foreign investment in this sector but help it to produce export surplus plus betterment of the farm sector in Pakistan.