Pakistan enjoys enormous cultivable area, the largest man-made irrigation system, excellent and high yielding varieties and hardworking farmers. However, yields of different crops have remained below global average. Farmers’ income is further reduced due to huge postharvest losses. Production of various crops can be doubled without increasing area under cultivation. This target can be achieved by applying balanced nutrients, introducing farm mechanization, improving knowledge and induction of modern farming technologies and increasing lending to farmers.
It is encouraging to note that banks disbursed Rs1,174 billion or 94% against the ambitious target of Rs1,250 billion set by Agricultural Credit Advisory Committee for 2018-19. This disbursement is a sizable performance, keeping in view demand and supply side challenges. The last year’s disbursement was 21% higher than the disbursements of Rs972.6 billion a year ago. The outstanding portfolio increased to Rs562.4 billion by end June, 2019, registering a growth of 20% as compared to Rs469.4 billion. Similarly, the agricultural credit outreach has increased to 4.01 million farmers or 91% against target of 4.42 million farmers at end June 2019, recording growth of 8% from 3.72 million farmers at end June 2018.
To achieve these numbers, State Bank of Pakistan adopted a multifaceted strategy and made concerted efforts for pursuing a massive agricultural credit target which included; sensitizing banks to adopt lending to farmers as a viable business, exploring new avenues of financing, value chain financing, mobilizing e-credit, warehousing receipt financing, implementation of crop/livestock insurance and credit guarantee schemes for the farmers etc. The achievement could be made due to the integrated efforts of federal/provincial governments, SBP, financial institutions and other stakeholders.
Further, the efforts included rigorous follow up with the top management of banks and agri. credit heads and conducting regular follow-up meetings with regional management were instrumental for target monitoring. Conducting regular farmers’ awareness & financial literacy programs across the country, initiation of one window operation in KPK and holding job fairs for agri. graduates in underserved provinces were also helpful. Moreover, the support of SBP BSC field offices in monitoring the district/regional targets was also supportive.
The recently announced Rs309 billion agriculture package aiming at improving crop yields, livestock development and import substitution can be termed a right step in the right direction. Out of the allocated funds, 7% is planned to be targeted towards increasing the average yield of wheat and sugarcane. The aforementioned developments, if materialized, could result in improved fertilizer offtake amid better demand and potential subsidies. Likely beneficiary of higher disbursement of funds could be Islamic banks. The successful implementation might also provide some respite to the dull infrastructure demand where cement and steel demand in rural Punjab will be a key beneficiary assuming the increased spending will result in improved purchasing power of farmers.
According to experts, despite the strategic importance of the agriculture sector, tangible government support remained low. This led to subdued performance, sector growing by meager 2% annually. Recent policy announcement by the government is a right step in the right direction. The reform package – if properly executed would have wide ranging long term positive effects on the economy, particularly the external sector. Pakistan presently imports US$4.65 billion worth of agriculture products annually. Substitution of the half of the agriculture imports would save US$2.33 billion worth of precious foreign exchange.
Official support price for at least 20 major crops, research budget equal to 2 percent of the agriculture GDP, abolishing all taxes from farm inputs and providing a level playing field to the local farming community to put them at par with their counterparts in neighbouring states are some of the proposals to which government should pay immediate attention.
The sector experts warn that if the abobe mentioned factors are not addressed, the sector will reach nowhere. They also demand incentivizing the farmers to supplement their income, manage supply of raw material and regulate prices of the final product. The lack of incentives is marked by non-reduction in fertilizer prices, exploitation by middlemen in agri-marketing and high input costs.
It is also demanded that the government should provide subsidies to small farmer, reducing taxes on electricity, fertilizer, diesel, pesticide, seeds, tractors and farm implements, announce wheat and cotton support prices.
There are also concerns about low disbursement of funds for the purchase of farm machinery, which can be attributed to lack of policy direction, low bank lending and poor local farm machinery manufacturing. It is believed that a well-integrated agriculture mechanization plan with a focus on local industry and the government should provide small-scale farmers machinery on minimal rent”.