AGRI SECTOR FACES MANIFOLD CHALLENGES
LACKS EFFICIENCY AND GLOBAL COMPETITIVENESS DESPITE IMMENSE POTENTIAL
May 21 - 27, 2012
The gross domestic product (GDP) in Pakistan is projected to grow by four per cent in 2012, which is an improvement from 2.4 per cent in 2011. The agriculture sector improved on the post-flood recovery in cotton, rice, wheat, sugarcane and other minor crops.
As per the estimates, the crops registered an increase of three per cent, livestock 4.1 per cent, forestry 4.1 per cent and fishing 1.8 per cent. The revision shows that agriculture share in GDP has increased from 24.1 per cent to 24.7 per cent, industrial sector increased from 21.7 per cent to 22.2 per cent while services sector share rose from 47.2 per cent to 53.1 per cent.
Experts believe that despite enormous potential, the agricultural sector lacks efficiency and global competitiveness, while loss of efficiency, hurdles in credit disbursement, poor marketing system, and water shortage are denting the country's self-sufficiency in production of various farm goods.
According to former CEO of Engro Corporation Asad Umar, production of various farm products has been as low as 90 per cent, if compared with the global benchmark. Sugarcane yield is 40 per cent lower, wheat yield 20 per cent lower, non-basmati rice yield 40 per cent lower, cotton yield 20 per cent lower and milk yield per animal 90 per cent lower than the global standards.
Pakistan, once dubbed a 'great bread basket', is now struggling due to these factors, and increasingly becoming an importer of a large number of agri-commodities.
Pakistan's agricultural sector also faces larger post-harvest losses of 40-80 per cent. This double blow - low output and high losses - diminishes the income of growers further.
AGRICULTURAL CREDIT DISBURSEMENT
Credit disbursement to farmers declined from $3.4 billion in 2007/08 to $3.1 billion in 2010/11. During the same period, agricultural credit in India increased from $63.3 billion to $103.4 billion. Agricultural credit in Pakistan is eight per cent of agri-GDP while in India it is 31 per cent of agri-GDP.
Water - a major input for the agricultural sector - is also overlooked as far as increasing supply for farmers is concerned. Losses of water are as high as 40 per cent before reaching farm gates. There is need for efficient use of water for optimal benefits. Nevertheless, irrigating an additional five per cent of land can generate an extra Rs100 billion in farm incomes.
The government had announced Rs1,050 as support rate for 40 kilograms of wheat, but it could be ensured only when markets had sufficient funds and competition.
The absence of food processing industries, storage and other value-addition industries is another issue, which could not be tackled by any government despite tall claims during the yesteryears. No new scheme or investment was brought in this sector, which could not only overcome waste of perishable and nonperishable agricultural commodities but could also help both producers and consumers in shape of sustained prices.
Existing legislation allows formation of farmer cooperatives, which can buy inputs, sell produces, and obtain credit for member farmers.
Pakistani farmers can benefit from this model by ensuring lending to cooperatives from commercial banks, and the provision of crop insurance.
On overall basis, the agriculture sector in 2011-12 has performed better and major crops including cotton, rice, maize, and sugarcane witnessed sizable growth over the last year. The wheat crop, however, is expected to be around 23.2 million tons, which is two million tons less than the last year production.
The CPI and food inflation are easing down. The CPI inflation is expected to be around 11 per cent this year as against 13.7 per cent previously. Similarly, food inflation has witnessed a big reduction from 18 per cent in the last year to 11.5 per cent in the current year. The large-scale manufacturing has shown some improvement. The external sector, especially export, is expected to be behind target, while worker remittances have shown growth.
On the other hand, agriculturists and farmers have termed the year 2011 as 'black year' for agriculture as imposition of general sales tax (GST) on agriculture inputs/implements and withdrawal of subsidies have multiplied cost of farming in the country.
On the one hand, withdrawal of subsidies and levy of GST increased the input cost by over 35 per cent, while on the other hand agriculture produce prices, except wheat, dropped by nearly 25 per cent that caused huge losses to farmers.
The country witnessed negligible agriculture performance in 2011 that compromised its growth. The imposition of GST on fertilizers showed 30 per cent decline in diammonium phosphate (DAP) usage, besides drop in urea and pesticides usage.
Agriculturists stated that loans to agriculture sector also witnessed a declining trend because both the provincial and federal governments had already borrowed excessively from banking channels that left hardly any amount for agriculture.
They urged the economic managers to allocate an amount equivalent to the share of agriculture in GDP, which was 23 per cent.
Loaning has not only shrunken for farmers but also for those involved in the business of agricultural inputs and agricultural produce.
Even the loan spread has been squeezed for rice sheller, flourmills and agriculture produce distributors (arhtis).
Nevertheless, decrease in loaning to agriculture sector badly hit the farmers, as market forces limited liquidity to buy agriculture produce.
They pointed out that huge increase in agriculture and food products imports further disturbed the trade balance, which is a matter of great concern for an agricultural economy.
They said it was the worst year for formers as fertilizer prices witnessed an unprecedented rise of over Rs800 in 2011, mainly because of suspension of natural gas supply to fertilizer plants.
The country was short of urea fertilizer and absence of price control further aggravated the situation by offering an opportunity to profiteers and hoarders. Conservative estimates indicated that profiteers had fleeced some Rs10 billion from poor farmers by exploiting the situation.
They also pointed out that massive increase in the cost of agriculture inputs compromised its growth. They indicated that it was not an agenda item for the government in the whole policy making process.
"It would not be wrong, if we say that the government had ruined agriculture sector in 2011."
Almost all agriculture and farmers bodies urged government to cut agriculture inputs cost, improve marketing system, and enhance loan spread besides investing in research to increase per acre yield. These steps are essential to overcome food shortage and avoid any threat to food security in the future.