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Under the package a tax holiday will also be provided

July 08 - 14, 2002

The decision taken by the federal cabinet last week allowing duty-free and sales-tax free import of machinery and equipment for use in corporate agriculture farming will be welcomed as a major breakthrough in the ambitious plan for a revolution in the predominantly agricultural economy of the country. An amendment in the land reform act 1977 to do away with the clause of 100 acre maximum land ceiling is also in the offing to facilitate corporate farming.

It was early last year when Minister for Food and Agriculture had told newsmen that the Chief Executive has approved the policy of corporate agriculture farming. He said under the incentive package for the introduction of the corporate agricultural farming, it will have a status of industry and will enjoy all the facilities including the credit availability as admissible to industry... He said under the package a tax holiday for five years for the irrigated areas, 7 years for barani areas and 10 years for the cultivable areas will be provided. However, such tax exemption would be given to only those companies listed on the stock exchange.

Besides providing tax holidays, the minister said, exemption on duties on transfer of land would also be allowed for the corporate agricultural farming. The corporate agricultural companies will be required to observe the relevant sections of the workmen's compensation Act 1923, payment of wage Act 1936 and bonded labour system abolition Act (111 of 1992).

Under the present investment policy of Board of Investment (BOI) there is no upper ceiling on land holding for corporate agricultural companies so the legal cover will be provided in this regard to avoid any complications in future. The Federal Agriculture Ministry has also urged the federal government that determination of size of corporate farm may be left to the prospective investors.

For the availability of credit for the Corporate Agricultural Farming, it has proposed that investing or lending to corporate agricultural farming projects may be considered as part of the agricultural lending targets fixed by the State Bank for financial institutions. The BOI has also agreed to reduce the foreign equity from $0.5 million in the present investment policy to $0.1 million.

The state land may either be sold or leased out to the investors for 50 years and extendable for another 49 years under the corporate farming. The preference in this regard will be given to cultivable wasteland. The primary idea for the introduction of the Corporate Agricultural Farming was to organise farmers, particularly the small and medium size farmers, and to invite domestic as well as foreign investors and attract them to corporate agricultural farming.

The latest policy decision in this direction is to grant status of industry to the agriculture and introduce corporate farming in the country. A comprehensive package to attract local and foreign investment in corporate agriculture farming has been prepared, which envisages giving farming the status of industry, a five-year tax holiday exclusion of big land holdings from future land reforms and no tax at district level.

According to the proposed package, the land to be used for the purpose of Corporate Agriculture Farming will not be included in any land reforms, undertaken by the government in future. The CAFs will be taxed on the pattern of industry. Moreover, there will be no hurdles in exporting the CAF production nor there will be any tax at the district level. Electricity tariff for these corporate farms will be the same as applicable to agriculture tube-wells. Gas, water and phone facilities will be provided by the state at normal charges.

The induction of corporate companies will bring modern production technology, access to capital, direct access to domestic and foreign markets, and professional management expertise. It will also generate rewarding opportunities for the inputs industry, as the agricultural companies will act as large consumers of farm inputs. On the marketing side, agricultural companies generally undertake their primary processing and grading at farm sites and supply raw material to agro industry.

Some Chinese and Arab investors have shown keen interest to invest in corporate farming and other Agro based industries. The provinces have been informed that Pakistan and China had signed an agreement on economic and technical cooperation, which inter alia entails that the Chinese government would initiate a project of modern farming in Pakistan. Under the agreement, the Chinese government will provide capital and expertise while Pakistan would provide land and the favoured investment policy.

Last week decision of the cabinet has paved the way for the launch of the plan which was delayed due to various constraints, spread over a wide range of problems, including availability of land in suitable locations, development of infrastructure, inconsistencies of taxation and fulfilment of numerous other formalities that have long remained the dread of even enlightened enterprising investors. Needless to point out among the present government's initial multi-pronged effort to reactivate the national economy, attention was also focused on removing the ambiguities around the prospects of modernisation of the agriculture sector from a whole new direction. The explains the emergence of the concept of development of corporate farming. It will be noted that the urge, in this regard, was largely inspired by comparative studies of the successes achieved from similar pursuits in various other countries bearing marked similarities with objective conditions in Pakistan.