SPECIFIC POLICIES NEEDED TO ENHANCE ECONOMIC SHARE

SHABBIR H. KAZMI
(feedback@pgeconomist.com)
July 18 - 24, 20
11

Over the years share of agriculture in Pakistan's GDP has remained around 25 percent. Experts term this poor share to three factors 1) low yields 2) grossly understated numbers and 3) lack of credit.

There is a growing realization that if the country wants to achieve food security sector specific policies have to be introduced. Experts are of the opinion that doubling the yield of its major crop is possible without bringing additional area under cultivation. They also say that land holding has fragmented which does not allow mechanized farming.

Yields of almost all the crops in the country are nearly half of that achieved in neighboring countries. The key constraints responsible for the prevailing situation are: 1) inadequate water availability, 2) cultivable land deficient in nutrients, 3) low level of mechanization, 4) hardly any crop rotation, 5) cultivation of sugarcane in cotton growing belts and 6) little focus on cultivation of oil seeds.

Most of these factors can be overcome by enhancing disbursement of credit to the farmers.

Agriculture produce can be divided into 1) food and cash crops, 2) oil seeds, and 3) livestock. Pakistan is among the top five largest cotton producing countries and has also attained the capacity to export wheat, besides exporting large quantity of rice, fruits and vegetables and molasses.

The country can become major producer of bio-fuels, E-10 and bio-diesel and save billions of dollars spent on import of motor gasoline and diesel.

Sugar industry is also capable of supplying around 3,000MW electricity by burning baggase.

Though agriculture sector employs a large number of people, the demand remains mostly cyclic. With the growing use of mechanized harvesting demand for work force is on the decline. As such, experts believe that the government should allot more and more land among the landless farmers to bring the barren areas under cultivation. However, bringing additional area under cultivation is not possible mainly because of acute shortage of water in the country.

Many experts are of the view that Pakistan has limited water at its disposal but the shortage is the outcome of highly depleted canals and watercourses, lack of storage facilities and above all huge wastage. Pakistan must learn a lesson from some of the Middle Eastern countries, which had deserts, but have attained the status of wheat exporters and have lush green fields. This has become possible simply by using modern irrigation techniques.

Exports of textiles and clothing contribute over 60 percent to Pakistan's total exports. Lately, Pakistan has also started export of live animals as well as meat. Allowing export of animals/meat is often held responsible for rising prices in the country. However, experts say that instead of banning exports efforts should be made to establish breeding farms on modern and scientific basis.

It is often said that Pakistan is among the top five largest producers of milk but little was done to preserve the fresh milk. Introduction of milk in tetra packs has encouraged farmers to also focus on livestock. Since the milk collection is on the doors of farmers not only their income has increased but new employment opportunities have been created. Now the time has come to go for upward integration.

It is known to all and sundry that cultivable land in the country is grossly deficient in nutrients, which require use of various types of fertilizers. Over the years, the government policies have encouraged adding new capacities on regular basis but the recent shortage of gas in the country has led to mandatory closure of fertilizer plants as well as reduced supply. The policy of curtailing gas supply of fertilizer plants is adding to cost of production and also necessitating import of urea.

On one hand, it erodes foreign exchange reserves and forces the government to pay billions of rupees as subsidy due to the difference in price of locally produced and imported urea. On the other hand, the country, which is capable of producing exportable surplus, has been rendered net importer of urea.

To overcome water shortage, Pakistan needs to construct new reservoirs. The common perception is that since the country has little water at its disposal, there is no justification for constructing new storage facilities. However, the torrential rains and subsequent floods of 2010 made it more than evident that the country could have had ample storage facilities, had flood water been diverted.

At present, the country spends around US$2 billion on import of edible oil. It has been repeatedly pointed out that focusing on cultivation of oil seeds can make the country self sufficient in edible oil. The country already produces canola, sunflower, and corn.

Enhancing production of these oil seeds is possible without affecting production of any other crop. The added advantage is that these crops have brief life cycle, spread over around 120 days. Ideally, efforts should be made to harvest two crops in a year by using different varieties. Since these crops can be cultivated on average soil and water requirement is also low more and more areas can be brought under cultivation without encroaching cultivated areas.

Pakistan needs to increase lending to farmers to help them acquire inputs and implements.

At present, the annual disbursement of credit to farmers hover around Rs250 billion, which is a minuscule amount keeping in view the importance of agriculture in Pakistan's economy. However, to enhance lending two of the impediments have to be overcome 1) clean title of the land and 2) comprehensive crop insurance.

The devastation caused by floods in 2010 has once again highlighted the importance of crop insurance. Interestingly, insurance companies have already submitted the proposals to the central bank and need only a formal approval.