STILL THE BACKBONE OF PAKISTAN
By SHABBIR H. KAZMI
Sep 26 - Oct 02, 2005
Pakistan has an agrarian economy. Despite a massive growth of the manufacturing sector, agriculture remains the driving engine of economy. Two of the sub-sectors of large-scale manufacturing, i.e. textiles and sugar, are agro-based. Agriculture contributes nearly 25% to the total GDP, employs the largest percentage of workforce and remains the major source of income for the rural population. One of the serious threats faced is the pressure on the government for the withdrawal of subsidies on agriculture. The other major problems are declining availability of water, lack of modern farming techniques and fragmentation of landholding. All these factors have a direct bearing on yield, which is also very low compared to other countries in the region.
The major crops being cultivated in the country can be divided into two categories 1) food and 2) cash crops. The food crops category includes wheat, rice and oil seeds. The cash crops are cotton and sugarcane. For decades the country had remained net importer of wheat, mainly due to wheat being supplied to Pakistan under PL-480 scheme of the US and also because of low support price. Lately, the country has not only achieved self-sufficiency in wheat but has also been producing exportable surplus. Some of the critics say that the country still produces wheat quantity, which is below domestic consumption. They are of the view that a substantial quantity of wheat is smuggled out through porous borders. If the country is able to stop this, the production is more than the local consumption.
Some of the analysts are also of the view that 5 to 10 percent of the total quantity of wheat produced is destroyed due to inadequate and inefficient storage facilities. Though there has been an increase in production, the country has not been able to build modern storage facilities. Usually wheat is stored in the open and in case of rains a substantial quantity is destroyed. The available grain storage facilities are also inefficient and due to improper fumigation a significant quantity is also rendered unsuitable for human consumption. Another factor adding to losses is improper packing and logistics.
Rice production in the country is many times the domestic requirement and is also a major source of foreign exchange earnings. It also faces situation similar to wheat. Pakistani Basmati enjoys great liking around the globe but it was never marketed properly in the international markets. For decades only Rice Export Corporation of Pakistan was allowed to export rice. With the permission to the private sector to export rice both the quantity and unit price realization have improved. However, it will not be wrong to say that despite the best efforts of the Rice Exporters Association of Pakistan (REAP) the real potential has not been exploited as yet.
Cotton is the largest foreign exchange earner for the country. In the past bulk of the proceeds was realized from export of raw cotton. However, with the passage of time share of value added products has grown substantially. Cotton produced in the country is a little inferior due to its shorter staple size but the real issues are contamination and damage of fibre during ginning. The country produced a bumper crop of 15 million bales last year, a record production. However, this year there will be lower production. Many analysts are of the view that the country can conveniently achieve production of 20 million bales from the existing area under cotton cultivation by cultivating high yielding varieties and through better crop management.
Sugarcane is the second largest cash crop. Sugar mills utilize about 90% of the total quantity of sugarcane produced in the country. With the establishment of new mills, with higher crushing capacities, the sugarcane quantity produced in the country has become highly inadequate. The level of inadequacy can be gauged from the fact that the average capacity utilization of sugar industry is around 50%, which is also a reason for higher cost of production. Pakistan is among the top 10 sugarcane producing countries but also suffers from poor yield. The average yield is nearly half of the yield achieved in India. Sugar industry can earn substantial foreign exchange if capacity utilization is improved. However, capacity utilization cannot be optimized without improving yield.
It is ironic that cultivable land in the country is shrinking with the passage of time. Two factors are said to be responsible for this 1) expansion of cities and 2) water logging and salinity. The growing population in suburbs and nearby smaller towns are becoming part of metropolises. Land is being acquired for building houses as well as industrial units. This may be an issue but the real cause of concern is water logging and salinity, due to water seepage from canals and watercourses, which is fast eroding the most fertile areas.
Though, efforts are being made to bring down the level of sub-soil water but its disposal is even a bigger problem. Most of the time the saline water pumped out from affected areas is dumped into canals, which also pollutes the fresh water. One of the worst examples of this process is Manchar Lake. Few decades back it was among the few largest fresh water lakes of the world, but now it has turned into a reservoir of highly polluted water. The water from LBDO and RBDO is also discharged into River Indus, which is also rendering its water unsuitable for human consumption and irrigation.
Despite having one of the finest irrigation system built decades ago, the country suffers from inadequate availability of water. The reason being that Pakistan failed to build water reservoirs. The last major dam was built more than three decades ago. The storage capacity has been reducing with the passage of time and the result is that during heavy rains most of the rivers, canals and water channels overflow and surrounding areas suffer from flood-like situation, which also cause severe damage to standing crops. The Kalabagh dam is under consideration for nearly five decades but consensus could not be developed about its site.
It is often said that this country needs another land reforms because a very small percentage of landlords own the largest percentage of land. It is true only because the country failed to implement the land reforms of sixties. However, it is also a fact that over the years landholding has further fragmented. Therefore, there is a need to consolidate smaller landholdings to form economic units. The worst outcome of fragmentation is poor yield. In many countries cooperative farming is quite popular but people are scared of the word cooperative because it often leads to frauds and misappropriations by a few. Now a new term has been coined corporate farming but it is yet to make its mark,
Another serious issue is absentee landlords. These landowners give their holdings to landless farmers on some fixed terms. However, most of the time farmers hardly get any significant return despite their hard work. These owners mostly keep the land to cover up their undocumented income, for avoiding tax. Many efforts to bring agriculture income under tax net have failed only because these people are the biggest opponents of taxing agriculture income. In fact tax is linked with 'produce index unit' and not the size of the land. Therefore, the tax liability of small landholders will be nominal contrary to the propaganda of feudal lords.
Agriculture is exposed to natural calamities around the world. However, various hedging methods, including crop insurance, are commonly used to minimize the losses to farmers. Though, financial institutions disburse billions of rupees annually, as agriculture loans, the concept of crop insurance has not become a common practice. The blame for the absence of crop insurance goes to the government mainly because most of the financial institutions were under state control in the past and in case of any calamity they were also the biggest losers. If the concept of crop insurance is introduced not only risk of farmers will be hedged but financial institutions would also be the biggest beneficiary.
It is evident that brining more area under cultivation is very difficult. Therefore, the next best option is to improve yield. This would result in higher production and lower cost of produce. It is also a fact that after water the next important input is nutrient. Pakistani land is deficient in nutrient and the deficiency could be overcome through use of composite fertilizer or balanced dose of different types of fertilizer i.e. urea DAP and NPK. At one time government was subsidizing the cost of fertilizer by providing gas (feedstock) at discounted price. However, this incentive is being withdrawn by increasing feedstock tariff. While the demand for urea is mostly met through local production, the country remains largely dependent on imported DAP. Prices of DAP are often too high and does not allow its desired use. The improper dosage of different types of fertilizers prove more fatal than lower dosage and adversely affect the yield as well as soil.
Pest attacks also affect yield mainly because of use of adulterated and substandard pesticides. Availability of quality pesticides at affordable prices is a serious issue. Despite some efforts being made by the government adulterated and substandard pesticides reach the market. It is also noticed that often the farmers use low quality pesticides knowingly because they cannot afford to buy superior quality due to its high price.
In order to encourage the farmers the government has been fixing support prices of various crops. Till nineties the government used to fix support price of cotton. Discontinuation of this practice may have caused a temporary setback to the textile industry. However, over the years textile industry has learnt to pay a price determined by the market forces. As against this the government still fixes the support price of sugarcane. Sugar industry has been demanding discontinuation of practice of fixing support price of sugarcane, but the farmers are resisting its demand. According to an analyst, "The government has bid farewell to fixing support price of cotton because people influencing the government policy were the cotton growers. However, policy of fixing sugarcane support price cannot be discontinued because they are also the large sugarcane growers".
The farmers have always been the victim of middleman. This middleman is not only the buyer of produce but also the funds provider to the farmers. It is only a recent phenomenon that banks are aggressively extending agriculture credit. The quantum of funds may look fabulous but smaller farmers are still not able to benefit from it. On top of this the interest rate on agriculture loans is still very high compared to the rate being charged on the credit extended to industrial sector. It is also on record that in the past many financial institutions preferred to pay penalty rather than extending agriculture loans. It is also true that agriculture loans still constitute a very small percentage of the total loans.
The focus of government has been sifting from agriculture to manufacturing or vice versa over the years. Some of the analysts are of the view that manufacturing sector is the driving engine of Pakistan's economy. However, others are of the view that agriculture is the backbone of Pakistan's economy. Two of the major sectors - textiles and sugar - are dependent on agriculture. On top of this self-sufficiency in food cannot be achieved without assigning top priority to agriculture.
Agriculture cannot flourish without adequate supply of water and its efficient use. Therefore, there is an urgent need to built dams, revamping irrigation system and avoiding seepage of water. In the absence of adequate storage facilities a lot of water is wasted as well as floods destroy standing crops. The sooner the government starts building new reservoirs the better it will be for the country. Politicians must stop from indulging senseless debate about dams to attain political mileage. For achieving self-sufficiency in food and alleviating poverty more attention should be accorded to the agriculture sector.