Water Management Key to Success
By AMANULLAH BASHAR
Feb 03 - 09, 2003
Earth is so kind, that just tickle her with a hoe and she laughs with a harvest. However, despite having vast and rich lands supported by honest and strong hands, the agriculture in Pakistan is still far away from the desired results.
Though the agriculture has reached the level where it meeting the domestic food requirement to a great extent, however, the enormous potential the agriculture sector has in Pakistan is not reflected in the overall agriculture production. The lacking areas are the judicious and effective management of the available water resources and a consensus among the land barons to use agriculture to build up the national economy instead of serving the political interests.
Instead of developing harmony between the rural and urban life, the personal and political considerations are said to be the arresting forces behind the stagnant growth both in the agriculture as well as the large scale manufacturing sectors in Pakistan. Politically motivated bureaucracy is yet another factor which allegedly arrests the growth through ineffective follow up of the good decisions taken by the government.
However, the responsibility for poor growth rate in agriculture sector is generally shifted to the shortage of water in the country which seems close to the facts to a large extent, yet it is not the only reason for stagnant or declining growth rate in the agriculture sector. There is something more than what it meets to the eyes. The role of the big bugs in this sector should also be taken into account while reviewing the performance of the agriculture sector in Pakistan.
Besides the available cultivatable lands, Pakistan has yet to bring an area of 10.1 million acres of virgin land under plough, however, it needs plenty of water which is one of the major impediments in the way of agriculture growth in Pakistan.
At present only 11 per cent of the total water resources were being stored in Pakistan, as no new water reservoirs had been constructed after Tarbela, while countries like China had built 6000 water reservoirs during this period. Since the per capita water availability is continued to drop, situation calls for a national consensus for developing small or big dams all over the country to meet the formidable challenges of water shortage.
We would have to look into the performance of major crops and the active forces behind them. Take the example of cotton which is the mainstay of our economy. Despite contradictory reports about the size of crop, it is said that the total yield is sure to cross the mark of 11 million bales this year. However, reports about shortfall in the crop are also being released by the vested interest. They are talking about the shortfall in the crop just to make more money of their holdings. On the other hand, it is unfortunate that despite the approved policy to offer premium on production of quality cotton, free from contamination, the promised premium is not being paid to the growers and ginners. In the sub-sector, we have a bumper kinno crop this year but we failed to perform well on the export front due to controversy created about wooden crates and card cartons. Who is responsible for creating this controversy? Why a price dispute between the millers and the sugarcane growers is generally erupts before crushing season. Whose interests are being served with the creation of these disputes? Are the questions to ponder upon for the economic managers?
The government is however taking corrective as well as supportive measures to enhance agriculture production in the country. In this respect, an amount of Rs300 million has been recently released aiming at crop maximization program. The funds are to be disbursed to the farming community through the Zari Taraqiati Bank to enable the farmers to timely meet input needs, and ensure enhanced agricultural production.
In fact, the crop maximization program is the part of Agriculture Development Plan 2010 which is being carried out in collaboration with the Food and Agriculture Organization (FAO) of the United Nations. The Ministry of Food and Agriculture had also launched the food security program as pilot to the crop maximization program in five villages across the country which proved a success. According to reports, as a result of this support program the production of wheat in these villages increased 45-50 mounds in these areas. Encouraged with the results, the government has now decided to extend the food security program in 109 villages of the country in the second phase of the program. This program is believed to achieve not only self-sufficiency in the food but also help developing a strong export surplus in the agriculture sector.
The Asian Development Bank has also agreed with the government policy of facilitating the agriculture sector with subsidy in certain sectors of the agriculture sector. Besides continuation of the subsidy, the ADB has approved a Technical Assistance worth $7 million for the development of agribusiness sector in Pakistan, including formulation of strategies and specific development projects by the private sector. The technical assistance grant is envisaged in two phases. The first involves a detailed assessment of agribusiness sector potential and constraints. The assessment will also review the sub-sectors in agriculture besides water resource management with regard to efficiency of use of available water in the country.
The agriculture was hit by acute water shortages for the third successive year and as a result, the crop sub-sector recorded a 0.1 per cent decline even on the low base of financial year 2001. The weak performance of the major crops, in particular, is a matter of grave concern, said the State Bank of Pakistan (SBP) in its annual report. It is worth noting that the growth figure could have been even worse, if not supported by the unexpectedly good sugarcane crop that mitigated much of the impact of declines in other key crops.
In fact, the negative growth of the crops sub-sector partially cannibalized the contribution of the livestock sub-sector, which recorded a 3.4 per cent rise in financial 2002. As a result, the agriculture sector recorded a growth of 1.4 per cent against the 2.6 per cent negative growth in 2001. Thus even this weak recovery of the agriculture in financial 2002 owes almost entirely to the livestock sub-sector.
The performance of agriculture during financial year 2002 was disappointing. The sector posted a weak recovery, growing only by 1.4, even on the low base due to the 2.6 percent decline in the previous 2001. Water shortage proved to be the key culprit, with aggregate availability of surface water at canal heads declining further to 73.1 million acre feet against 81.1 million acre feet during 2001.
The agriculture has lost much of the momentum from the annual average growth of 4.3 per cent during the 1999s.
In real terms, the financial year 2002 value addition of Rs166.3 billion has fallen even below the Rs168.5 billion contributed by agriculture in 2000, pulling down the sectors share to 24 per cent in 2002 from almost 26 per cent in 2000.
The decline in the output, coupled with other negatives such as a declining trend in farm output prices, increasing input costs, and lack of protection from volatility in market prices eroded farm incomes, leaving the rural populace precariously placed.
This is clearly visible in the falling rural per capita real cash value that after showing an improvement in 2000 deteriorated by 4.4 per cent and 0.4 per cent in 2001 and 2002 respectively. Real capital formation in agriculture by public sector was at Rs845 million during 2002 compared to 196 million last year.
The timing of the decline in farm incomes is particularly unfortunate, since a coincide surge in the prices of key farm inputs such as fertilizers and light diesel used by tractors and tube-wells added to the cost of production.
Faced with limited choices, farmers opted to cut down production expenses by curtailing the usage of fertilizer during 2002. It may be noted that the urea off-take was 7.3 per cent lower than in the financial 2001.
The financial managers, it seems to have taken notice of the lack of interest of the farmers to available bank credit for their farm developments which may ultimately affect the overall growth of the agriculture products. The minister for food and agriculture Sardar Yar Muhammad Rind has said that interest rate on agriculture loans will be cut to the minimum. In order to facilitate the farmers, a scheme of agricultural credit cards is also active consideration of the government.
Also, farmers seem to have deferred their expenses on development works such as purchase of tractors, installation of tube-wells, development of land and watercourses etc. In fact, they even showed less interest in undertaking developmental activities through bank borrowings. During financial year 2002 farmers availed 13.9 per cent less development credit compared to the previous year.
In years of better growth, capital formation in agriculture remains high, and vice versa. This is evident from the significant relationship that exists between the annual growth in agriculture and the real expenditures on capital formation by private sector in agriculture.
Except for the year 1999, when farmers were given incentives for purchasing tractors and installing tubewells, the relationship holds strongly, in 2002, farmers clearly could not make the necessary investment due to the shock of the large negative growth during 2001.
After signing the Indus Basin Treaty with India in 1960, Pakistan holds the right to use the water of three rivers, the Indus, Jhelum and Chenab. Their average annual flow was at 142 million acre feet (MAF) at the time the treaty was signed.
However, the water flow has gradually declined. The canal head water supply, which was on average 105.6 million acre-feet in 1990s, fell to 73.1 MAF in 2001-002, reducing water availability for Pakistan crops. Poor rains have compounded this problem in the last two years.
In Rabi season of financial year 2002 water supply was 50.0 percent lower than the average availability in 2001 the gap was 41.0 per cent. The total flow in main rivers at 91.2 MAF in 2002 was significantly short of 131.7 MAF (the average annual flow during the past 24 years).
As a result, financial year 2002 canal-head water availability was reduced by almost one-fourth compared to the average for the past ten years. The adverse affect of this grave water shortage was alleviated through minimizing the water flow-losses from canal-head to farm gate and increasing water extraction through tube wells.
Consequently, water channel losses were reduced to less than 5.0 per cent in 2001, for the first time in the past ten years, the area irrigated by canal tube wells installed in canal command areas exceeded the area irrigated by canals. The share of tube well in total irrigation is also rising; it increased from 15.3 per cent in 1991 to 17.9 pr cent in 2001.
Installation of tubewells continued both in private and public sectors. During the past ten years, higher annual average growth at 6.2 per cent has been observed in private tubewells compared to the 4.0 per cent increase in public sector tubewells. By the end of 2001, tube wells totaled 545.6 thousand, with private tubewells taking a 95.9 per cent share. Consistent with number of tubewells, the ratio of tube well irrigation to total irrigation is also rising.
The high ratio of tube well irrigation suggests that tube wells may have helped significantly in avoiding a steep fall in the total area under cultivation, given that during the past two years this was the only alternate water sources that significantly compensated for canal water shortages. In fact, the shortfall in canal-irrigated area at 11 thousand hectares in 2001 was more than offset by an increase of 24 thousand hectares by tub wells. In 2002 again, the area under tube well irrigation increased by another 24 thousand hectare, but could not fully offset the decline of 58 thousand hectares in area under canal-irrigation.
The construction of small dams and water reservoirs by both the private and public sectors is essential to maintain underground water to the minimum level necessary for the functioning of tube wells.
In each effort to reduce the fiscal deficit, the immediate cut is placed on the size of the annual development plan, squeezing the already marginal allocation of funds for rural development and the agriculture sector. The existing situation is thus the continuation of a trend that started after the first five-year plan.
Despite two years of negative growth major crops maintained their customary largest share, contributing more than 40 per cent of the value addition. However, the decline in major crops not only overshadowed the progress of other sub-sectors of the agriculture, but also pushed down overall GDP growth.
During financial 2002 efforts were made to increase the production of major crops by ensuring the timely availability of fertilizers, pesticides and higher disbursement of credit. However, the shortfall in canal-head water proved counterproductive to all these efforts and as a result both, the area under cultivation and yields declined for most major crops.
Among the four most import crops with a 90.7 per cent share in major crops, declines were recorded in the production of rice, cotton and wheat production of sugarcane, on the other hand increased by 10.2 per cent supported by an increase in the area under cultivation and higher per hectare yield.
With a worsening of the water shortage in later half of Kharif and the entire season of Rabi, the area under rice and wheat dropped and this loss was compounded by yield declines.
Another factor contributing towards a decline in the yield of rice was the substitution of high yield but lower quality rice with the low yield higher quality rice. For wheat, the decline in yield was mostly related to insufficient rains in the barani and hilly areas.
The decline in yield of cotton crop despite a rise in area under cultivation resulted in a smaller crop size last year. An attack of bollworm in some of the cotton growing districts of Punjab and late sowing in Sindh, due to water shortages, were among the main factors contributing to the fall in the yield during last year.
There has been significant relationship between water availability and the area under cultivation of important crops except for the last two years when the area declined less proportionately than the shortage of irrigation water.
This happened on account of better water management by the authorities and greater resort to tubewell irrigation.
Further, if taken by end-use classification, area under food grains i.e. wheat, rice, bajra, jowar, maize and barley, it declined by 3.6 per cent followed by a 5.5 per cent decline in production. By contrast, the area under sugarcane and cotton increased by 4.1 per cent and 6.5 per cent respectively, mainly on account timely rains in early kharif and substitution of area from rice to cotton at some places.
It is interesting to note that the share of major crops in agriculture has fallen from 50.4 per cent in 1992 to 40.1 percent in 2002, but it still sets the overall trend in agri-sector growth.
The less thirsty minor crops, in contrast to the major crops, succeeded in posting one per cent growth in 2002. compared to a marginal increase of 0.1 per cent in 2001. With a 17 per cent share in value addition, minor crops, after major crops and livestock, occupy the third place.
With the highest share in minor crops, the fruits sub-sector is an important contributor to exports. During 2002 total fruit exports amounted to $83.1 million compared to $78.7 million 2001.
Among other key minor crops, the production of onion and chilies declined during 2002. Marketing weaknesses and fall in prices were the main factors behind the respective declines. In particular, transport and marketing bottlenecks resulted in significant onion production losses during 2001 and 2002. This discouraged growers, particularly in Balochistan. The setback to the production of chilies was on account of a sharp fall in prices during 2001 when the average retail price declined by 21.7 per cent.
The increase in production of oilseeds by 1.6 per cent during 2002 could not bring any improvement in the domestic share of total availability of edible oil. At present, the domestic production of oilseeds provides around 29 per cent of the total domestic requirement.
Agriculture credit has traditionally been used for purchasing inputs, and to finance developmental activities such as purchase of tractors, installation of tubewells, development of land etc. the ratio of agriculture credit to agricultural GDP, which was at 4.9 per cent during 1990s, has improved to 6.3 percent. With the recent improvement in credit delivery e.g. the policy of revolving credit, de-zoning of the commercial banks' territory etc; it has become easier for the farmers to manage their loan portfolio more effectively.
Simultaneously, with the removal of the cap on mark-up rates and expansion in the scope of agricultural credit, it has become attractive for the commercial banks to lend to the agriculture sector, either directly or by using the branch network and expertise of Agricultural Development Bank of Pakistan.
As a result of improved agricultural credit policies, a robust growth of 17.1 per cent was witnessed in the disbursement of credit during 2002 with a record amount of Rs52.4 billion. The encouraging feature was the rising share of commercial banks in the overall disbursement to agriculture. Since the implementation of the changes in credit policy introduced in 2001, the share of commercial banks has risen sharply.
Province-wise distribution of credit reflects that Punjab with the largest area under crops takes the highest amount of credit, followed by Sindh, NWFP and Balochistan.
The situation becomes different when per hectare availability of credit is taken into account. Interestingly, Sindh takes the lead with an average disbursement of Rs3,978 per cent hectare, next comes Punjab with Rs2,890, followed by NWFP Rs1458/hectare and Balochistan Rs937/hectare. This wide variation is mainly attributable to the financial position of the farmers in the respective province and variation in land holdings, repayment position and track record, interest of farmers towards institutional credit and concentration of agricultural activities.
A comparison of provincial credit demand computed on the basis of a methodology developed by the State Bank of Pakistan and the information provided by each of the respective provincial departments, shows that the share of Sindh in total credit demand is higher relative to its share in total cropped area.
The functional distribution of credit showed that during 2002 around 83.0 per cent of the total credit was disbursed for production purposes, while the remaining was given for development purposes. The lower off-take in development credit, as pointed out earlier, was the outcome of a decline in farm incomes during 2002, which compelled the farmers to defer their capital expenditures.
As far as recovery of the loans was concerned, consistent with the concerted recovery drive launched by banks, the recovery of agri-loans saw an improvement of 11.7 per cent during 2002. In fact, the amount recovered at Rs53.3 billion, was even higher than the overall disbursement made during the year. This was the second successive year that recoveries remained greater than disbursement.
Besides the available cultivatable lands, Pakistan has yet to bring an area of 10.1 million acres of virgin land under plough. Recent experiments of cotton cultivation in the province of Balochistan have proved a great success. Everybody knows that huge barren lands are lying unutilized in that province. These highly fertile and rich lands can give a tremendous boom to the export surplus of the agriculture products which have a great demand all over the world provided these virgin lands are brought under cultivation. However, to carry out the plan to bring these lands under cultivation requires plenty of water which is one of the major impediments in the way of agriculture growth in Pakistan. In this respect, besides utilizing the traditional water resources, there is another way out i.e. use of desalinated water alongside the coastal belt of Balochistan for agriculture purposes, as it has been successfully opted in the Middle East. If carried out, the plan could convert the dry lands of Balchistan into lush green farms. That will be the sight for the soaring eyes of the poverty ridden people of that part of the country.