Pakistan: Agriculture potential yet to be exploited

pakistan-flagMany experts believe that the 20 percent of GDP contributed by agriculture is grossly undervalued keeping in view the size of wheat, rice, sugarcane, cotton, minor crops, fruits, vegetables, and edible oil produced in the country. If one adds to this livestock and dairy products, the contribution of the sector should not be less than 30 percent. This disparity in numbers is due to lack of documentation. With more focus the yield of all the produce can be doubled without increasing area under cultivation.

Without mincing words it may be said that Pakistan has not been able to exploit the real potential of agriculture sector. Those who could be held responsible for this dismal condition are: 1) policy makers, 2) PARC, 3) irrigation departments, 4) seed, pesticide and insecticide marketing companies and above 5) all poor literacy level of farmers. Added to these are ‘absentee’ landlords and fragmentation of landholding.

The yield achieved in Pakistan is far lower than the yield achieved in India. The factors responsible for lower yield include: 1) use of uncertified and poor quality seeds, 2) inadequate availability of irrigation water   especially to the farms located at the tail end of water courses, 3) rising cost of fertilizers, 4) improper crop management and 5) sale of adulterated pesticides and insecticides. All these along with drought and floods further increase the sufferings of farmers.

Fertilizer manufacturers have played a key role in promoting farming in the country. It is no secret that in Pakistan, cultivable land suffers from acute shortage of nutrient contents, particularly nitrogenous materials. The first urea unit in the country was established by Esso with an installed capacity of 178,000 tons per annum that commenced operation in 1967. The special focus of all the successive governments helped in expanding capacity that has grown to the current 7 million tons per annum.

As it is said earlier, farmers as well as the country is the net loser due to huge post-harvest losses. Farmers don’t get the right proceed of their produce and country is deprived of foreign exchange it can earn by exporting the quantities that go stale. It may not be wrong to say that despite being fully aware, successive governments have failed in containing these losses as they were not able to facilitate construction of required infrastructure, ie farm to market roads, efficient transport and storage facilities. The gravity of situation can be best understood by the fact that at an average, the country produces 40 million tons of food grains but the storage capacity is a mere 6 million tons. Since the produce is kept in the open, a large quantity goes stale during monsoon, whereas a substantial quantity is eaten away by pests like rats.

Keeping in mind some of the reasons for post-harvest losses stated earlier, it may also be said with full conviction that most of the factors contributing to these losses are controllable. Due to inadequate availability of finances, lack of farm to market roads, poor transportation, obsolete warehouses and above all heavy dependence on middleman, often the farmers are helpless. Though, State Bank of Pakistan fixed Rs500 billion lending target for the farmers, the amount is still paltry keeping in view the requirements of farmers. They are still forced to borrow from informal lenders charging as high as 36 percent per annum interest rate.

In Pakistan, farmers can be divided into two distinct categories: feudal lords and harees (landless farmers). Feudal lords are the key beneficiaries of all the government policies. Feudal lords not only get loans on top priority but their produce is also bought first. The ultimate losers are small farmers, who have no voice or representation at any forum. Though, the amount of loans disbursed among the farmers has increased manifold, bulk of it still goes to feudal lords because small farmers have no ownership of land, they are just the workers. Despite various land reforms papers of ownership of land are in the custody of feudal lords.

For ages the government has remained the biggest buyer of wheat, current production is around 25 million tons. Therefore, the private sector never thought about construction of warehouses. Though, the export of rice is in the hands of private sector and all the flour mills operate in the private sector these commodities are packed in jute/polypropylene bags and stored in conventional ‘hut type’ warehouses. Very few modern silos have been constructed. And those too were built by individuals. Farmers are reluctant in keeping their produce at warehouses operated by the private sector. Entrepreneurs are shy because they fear that some bandits would pilfer the commodities stored in the warehouses. To sum-up the situation in a few words, there hardly exists ‘collateral management companies’. Despite the best efforts by the central bank and support by the multilateral institutions, little success has been achieved as yet. Experts apprehend that it will take another five years to make this dream come true.

It may be said with great regret that hardly any ‘farmer advisory service’ is available. Some commercial programs are broadcasted on radio and television channels. The ultimate purpose of these programs is to promote the goods marketed/manufactured by the specific entities. Experts are of the opinion that more of these programs should be aired by the government, which is the ultimate beneficiary. In case there is a shortfall of any commodity the government has to spend huge amounts in foreign exchange on import and also bear the incidental charges (transportation and distribution).

It is encouraging that the amount being disbursed among the farmers has increased substantially over the years, and Rs500 billion target was fixed for 2014-15 financial year. In absolute terms the growth may look significant but keeping in view the size and importance of the agriculture sector, it is still a minuscule amount. The amount must be doubled over the next five years and specific allocations needs to be made for infrastructure projects.

The time has come for the government to go for another land reform for the consolidation of smaller holdings. One of the proposals is to allow ‘corporate farming’ that will facilitate higher borrowing for undertaking mechanized farming. There is no doubt that yield of small farms is low because growers can’t afford to use quality seeds and apply balanced doze of nutrients and pesticides.

It is encouraging that SBP has embarked upon Warehouse Receipt Financing program. However, it must be kept in mind that it is a long drawn process. First, warehouses on international standards have to be constructed. Second, farmers have to be convinced to store their produce at these warehouses. Thirdly, proper collateral management companies have to be established and made fully functional. The only concern is that unless quality warehouses and collateral management companies are established achieving the dream of Warehouse Receipt Financing will remain a far cry.

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