Dec 13 - 19, 20

Despite a significant contribution of agriculture sector of 21 percent in the national gross domestic product, its share in the total advances by banks is as low as 4.9 percent. This clearly shows that banks are reluctant to adopt agriculture financing as a profitable business segment and continue to engage in financing large-scale manufacturing and other sectors. It is interesting to note that the apex regulator of banks and development finance institutions in Pakistan is confident of the commercial viability of financing agriculture sector, which can become the stimulant for economic growth if given due importance.

Agriculture sector provides inputs to a large number of industries and is a source of livelihood for majority of the population. The sector accounts for 45 percent of the entire workforce in the country. It still largely depends on conventional means to grow crops. Similarly, other subsectors of agriculture like animal husbandry, fish farming and forestry also popularise traditional modes of agriculture production. The result is underutilisation of production capacity of the agriculture. Money remains one the major hurdles in the way of modernising agriculture with banks finding presently it nonviable to extend finances for the growing of crops, livestock farming, animal husbandry, machinery and equipments, or research and developments.

The monetary constraints have also confined the agriculture to the prehistoric ways of production and thus restricting the productivity to achieve its real potential. Low yield per acre is a common phenomenon associated with every major crop grown in the country: wheat, rice, cotton, sugarcane, etc. Minor crops face the similar problem. Cotton that is a cash crop and forms the base of leading export-oriented sector of textile has to be imported from abroad to meet the local shortfall. This should be a point of concern for an agriculture economy like Pakistan.

Alone induction of modern technologies can enhance the productivity of this crop, which is a lifeline of the economy; and it is the only way to realise Vision 2015 of 20.7 million bales per annum. Research and developments in agriculture is the neglected area in the country. State-funded researches are being conducted in government department and educational institutes, but the research outcome is surfacing painfully slow. Funds are actually not sufficient to make the research sustainable. Pakistan Central Cotton Committee (PCCC) is perhaps the only government research institute conducting in-house experiments on genetically modified cotton varieties. The institute is yet to come up with a major breakthrough in GMO technology for wants of funds. Technology is the weak side, according to an expert closed to the research works. Virus attack on cotton is also a cause of low yield and GMO can solve this problem through Bt cotton. However, Pakistan - the fourth largest cotton producer in the world has a long way to go before it develops the cotton leaf curl virus (CLCV-resistant) varieties. So far eight Bt cotton varieties have been approved to replace traditional cotton seeds from the next sowing season. Cotton yield in the country has come down to 700 kgs per hectare, though Sindh has received record bells (850 kgs per hectare) last year, because of the Bt cotton cultivation on a massive scale. Cotton production is likely to decrease by two million bales this season, since the July-August floods washed out significant acreages of standing Kharif crops. Certainly, this means the country will continue to face widening demand-supply gap of around three-to-four million bales. Pakistan's local demand stands at 15 million bales per annum. At present PCCC whose recommendation is necessary for Bt cotton variety to be commercialised, has 12 candidates from both the local and multinational biotech companies in its experimentation laboratories. A candidate (Bt cotton variety) undergoes an average two year pretesting before coming into popular use. That means it will be not before 2012 there in commercial virus-resistant cotton seeds would be launched in the market. Until then either government continues to undertake this job of supply with its wherewithal or smuggled seeds from India would do so.

Banks disbursed only Rs248 billion in financial year 2009/10 as against the credit disbursement target of Rs260 billion, showing an increase of 6.5 percent over the last year's Rs233 billion agri financing. State Bank of Pakistan has emphasised upon the importance of agriculture sector and its role in the economic growth. The bank has instructed the scheduled banks to extend loans to the farming sector, as it is commercially viable. The SBP has recently constituted a committee that will be a joint effort of federal and provincial governments to increase credits to the agriculture sector. Governor SBP, Shahid H. Kardar, said that the agriculture credit advisory committee would take inputs from all stakeholders to devise strategy for the promotion of agriculture credit. "Banks need to develop a comprehensive agriculture finance policy, dedicated human resource, simplified procedures, and other pre-requisites for building lending portfolios and timely provision of credit to farmers," he said in the press statement. The SBP has also introduced financing facilities for farmers to modernise rice husking and cotton ginning mills, silos, warehouses, and cold storages, simplification of agri lending procedures and turnaround time for timely availability of credit to farmers, he added.

Water shortage is also a shortcoming of crops giving low yield per acre. Former can be resolved through building and strengthening infrastructure. Since the government is trimming down development budgets, and will continue to confront with the problem of revenue generation in this fiscal year, banks and other financial institutions should come forward to share the state responsibility of agriculture development, which will be for the mutual benefits of the private ventures and the economy.