No one can undermine the importance of achieving food security in Pakistan. It has become all the more important because a substantial part of staple food items i.e. wheat, rice, sugar, and edible oil in the country is smuggled to the neighboring countries.
This massive smuggling can be attributed to most porous borders but above all there is a regular exchange of products, even the governments are fully aware. Some analysts term this attitude of governments to declared and non-declared trade embargoes.
I would go to the extent of saying that it may not be possible for Pakistan to stop this smuggling. Therefore, a more feasible alternative is to increase production and productivity. This may be a long drawn process but availably can be increased up to 25 percent simply be containing post harvest losses.
According to various estimates, including those by State Bank of Pakistan (SBP), post harvest loses range from 15 to 40 percent for various crops. There is no rocket science required to contain these losses. Federal as well as provincial governments have to focus on three points: 1) construct farm to market roads, 2) build modern ware houses and 3) above all develop logistic companies.
While construction of roads remains the sole responsibility of the government, private sector should be facilitated in building warehouses and creation of logistic companies. It is encouraging that SBP has developed a scheme whereby up to 65 percent of civil work is financed on concessional interest rate.
The real bottleneck is absence of modern logistic companies. According to some estimates up to one million trucks/trawlers are operating in the country. Most of these are dedicated for transportation of POL products and taking goods from ports to up country. Most of these come back to Karachi empty due to limited availability of cargo.
It is also a fact that public transport in Pakistan is highly depleted, mainly because of lack of financing facility. Talking to some logistic companies reveals that clients prefer to use those vehicles which are insured and also have tracker mounted.
These number of corporate entities operating fleets is still around two dozen but their growth has be constrained due to bad government policies, particularly imposition of taxes on corporate entities and individuals very conveniently evading all sort of taxes. While banks and insurance companies prefer to deal with corporate entities, government policies are proving counterproductive.
In the Federal Budget for 2016-17 the definition of ‘input’ tax has been amended and Sales Tax paid under respective provincial laws has been excluded. Ideally the government should issue a clarification and follow VAT principal for Sales Tax computation and payment, irrespective of the fact that the returns are filed federal or provincial tax authorities.
This article was originally published in The Financial Daily