AGRICULTURE VIS-‡-VIS NEXT BUDGET
FOZIA AROOJ (email@example.com)
May 25 - 31, 2009
Agriculture is the main stay of our economy and major source of foreign exchange earning. However, it has always been sidelined and neglected by the policy makers while making allocation of resources. Consequently, the overall productivity in agriculture is low and has not increased significantly in the last decade at least. In the meantime, the cost of doing business has been rising as has the demand for agricultural products. The growth of major crops, that is cotton, wheat, and rice has averaged 2.1, 1.6 and 0.8% per annum respectively during the past seven years while the population growth has average more than 2%. The inadequate growth rate in the agricultural crops lies at the heart of persistently high food price inflation and economic meltdown in the country. In the year 2009 Pakistan failed to achieve even the revised GDP growth rate target, with GDP growth for the current fiscal year a paltry 2.37%. Subsidies and credit without massive investments in water, energy and human resources have also proved to be inadequate to grow crops at the required rate. Major policy shifts and measures are to be taken in order to support this sector and make it more productive and profitable.
Budget 2009-10 is anxiously awaited and will be announced next month. Government can take significant steps to ensure relief and motivation to farmers and boost agriculture to contribute its due share to the national economy. Following measures and policy directions can do the purpose:
1- Provision of sufficient funds to ensure the availability and efficient use of water resources through construction of dams, rehabilitation of irrigation, improved drainage system, lining of canals and water courses throughout the country. Government should announce new dams immediately. Water reservoirs are depleting rapidly and the construction of Kala Bagh dams has already been ruled out. Various feasibility studies have already engulfed around Rs. 1 billion as the capital outlay of this project. This project should not be shelved and new vistas are to be explored in this regard.
2- Agriculture sector has been obscured in terms of credit inflow and circulation. Rest of the industry receives a lion's share from the banks. Something tangible is required to be done for provision of credit to livestock farming. Live stock farming has tremendous potential to offer attractive returns to banks as well as to insurance companies. The government should also provide soft loans to the farmers for the purchase of seeds and fertilizers, so that the prices of wheat, sugar and rice can be kept at a satisfactory level.
3- Finance should be provided to facilitate the construction of cold storage chains in the country. This step would help agriculture produce retain its value and quality which in turn increases export of these products.
4- Subsidies on all fertilizers particularly DAP should continue to encourage its use. This step would certainly enhances crop yield and improve productivity. There should be absolutely complete exemption from sales tax and other duties on imported and local supply of fertilizers and pesticides, so that the farmers can get these at much cheaper prices.
5- In the budget 2008-09 there was an exemption from 10% custom duty on import of rice seeds to ensure healthy and quality production of rice in the country. This exemption should be continued and rice exports should also be duty free as our rice export market is largely being captured by India on account of lesser rates. India has slashed all duties on export of rice so as to take control on international market. India has scrapped its 200% export duty on the commodity export and cut the floor price for overseas shipments. This factor is hurting exports of Pakistan. Pakistan once had 54% share in Saudi rice market which has now declined to less than 10% because exporters are unable to export parboil rice which is in great demand in Saudi Arabia. Federal Excise Duty on premium of crop insurance policy should also be slashed. These measures shall yield higher productivity and substantial raise in the income levels of the common person.
6- Zarai Taraqiati Bank Limited (ZTBL) should be equipped with state of the art technology and made easily accessible for farmers residing in far-flung areas.
7- Storage facilities and grain handling can also be improved by delinking the duty free import of machinery and equipment from the conditionality of local manufacture. Arrangements should be made for import of bulldozers through foreign collaboration to increase and improve the cultivable area.
8- There should be a supply chain to ensure and enhance the supply of quality seed to farmers. Foreign researchers should be involved for fast track, formal release of Bt cotton varieties in Pakistan. This would help in making our farmers more competitive in production of cotton. Foreign investment in agriculture sector is to be encouraged to increase our productivity and develop cultivable areas. Large tracts of land should be made available to foreign investors to induct capital and technology in our local farming sector.
9- The support price of wheat should be set keeping in view the input cost and prevailing international prices.
10- Livestock and dairy is a major source of income and livelihood for the rural population. Pakistan is the fifth largest producer of milk. However, this potential has not been optimally leveraged. The demand is still being fulfilled by importing powdered milk worth $300 million (Rs.20 Billion) for urban areas. In order to encourage this sector following measures are suggested: livestock production and development of meat production, Veterinary services for livestock, milk collection and processing and dairy production and development program, establishment of an integrated national animal and plant health inspection services facility and up-gradation of animal health laboratories at NARC for poultry diseases.
11- In the fisheries sector such important projects like aqua culture and shrimp farming, stock assessment survey program in EEZ of Pakistan are to be stressed. Similarly a fisheries training center in Gwadar is to be undertaken for which an allocation of Rs1.1 billion was proposed in the previous budget. Previously the budget allocations have been made for this sector, however, the fish harbors always remained dirty as ever and its poor hygienic conditions attract restriction on export to the European Union. Government should lay emphasis to set up model fishermen villages for which allocations were made in the previous years. Besides, there should be a comprehensive plan to establish fish hatcheries.