PRICES of crops like onion, cotton, paddy and sugarcane are depressed in Sindh, while farmers continue their outcry against the government, urging it either to regulate prices or subsidise farm inputs.

Crop prices have recorded a decline, starting from last year’s kharif to the current rabi season. To make matters worse, cane-growers are being paid less than the officially notified rate, as millers insist they can’t afford to buy the crop at official rate.

Fluctuations in commodity prices cannot be isolated from the subsidy and free-market mechanisms, since multiple factors govern the agriculture sector. Unless the underlying issues in farming are addressed, the price distortion will not go away.

Theoretically, a free market idea sounds good. But price distortion is usually linked with the working of the free market. The developed world, including countries like the US and Japan and those in the EU provide huge subsidy to their farm sector. This lends credence to the fact that they lack comparative advantage and remain uncompetitive.

On the other hand, Pakistani farmers not only have the potential to get higher per acre yields, but also the comparative advantage.

Subsidy, say stakeholders, is opposed by the developed world, but it subsidises its own farm sector.

Presently, India’s export of agri commodities to Pakistan is the main cause of the low prices here. This is more a case of institutional support and an enabling marketing environment in Pakistan rather than that of subsidy. There is a strong need to curb the exploitation of farmers by the market.

India is a case in point. It subsidises agriculture despite being part of the WTO. Some reports put the annual amount of subsidy at 100bn Indian rupees.

The cotton season has just concluded in Pakistan, with farmers not getting a fair price — a fact admitted by the Economic Coordination Committee. On the other hand, India decided to procure 10m bales this season to keep its minimum support price (MSP) intact in the larger interest of farmers.

Out of 10m, about 5m bales have already procured, says Mahesh Kumar, former chairman of the Pakistan Cotton Ginners Association (PCA), while referring to cotton market reports. The Indian government is ready to buy 15m bales to support farmers, if needed.

“Comparatively, the Trading Corporation of Pakistan (TCP) lifted only 88,000 bales across Pakistan, despite the ECC’s decision to buy 1m bales at Rs3,000 per 40kg for seed cotton producers. Procurement has closed now after having lasted for just 11 days.”

This is one example of the government’s indecisiveness or inaction, and translates into monetary losses for the farmers. So, growers remain reluctant to modernise farms or use vital farm inputs. The cost of inputs continues to rise unchecked, defeating the idea of subsidy or support price, and benefitting input-suppliers.

With poor investment, farmers don’t get the desired productivity and find it hard to compete internationally. Access to free market is not unhindered either. According to Mahmood Nawaz Shah, a progressive farmer, China slapped a quota on cotton imports this year to stabilise prices domestically.

India gives huge subsidy and developed countries create inefficient producers by artificially reducing the cost of production. “The European and American markets deny access to Pakistani textile products at the pretext of regulatory duties. With tariff or non-tariff barriers, can we think that the market is free and offers a level playing field to everyone?”

The Sindh government remains indifferent to the farmers’ plight. After the 18th amendment, agriculture became a provincial subject, but the province has yet to build capacity to deliver. For instance, paddy growers get Rs800-900 per 40kg, which they used to get years ago. The Sindh government, this year, proposed the price of Rs1,000 for irri-6, but didn’t officially notify the price.

Nabi Bux Sathio, general secretary of the Sindh Chamber of Agriculture (SCA), argues that the government doesn’t ensure administrative protection for the growers. And it doesn’t even exercise its authority to ban the cultivation of rice in cotton-growing area.

Resultantly, the surplus rice production depresses prices. “The cultivation of rice in the cotton zone not only results in a surplus, but causes water-logging and affects cotton production. Same is the case with sugarcane, as the government looks the other way. We lack institutional support so we suffer financially.”

Urea prices, he says, remain beyond the reach of an average small grower. It was Rs560 per bag in 2008 and now stands at Rs1,855. Urea was imported for Rs35bn in 2013-14, but never reached small farmers, he says. “Urea factories increase their prices, saying they are not getting gas and the government claims that 75pc of their gas needs are met. This shows that the regulatory environment is non-existent.”

Besides, the government lacks the required storage capacity for the surplus output. Sindh can’t procure wheat beyond 1.3m tonnes for want of storage. And it hires private facilities to hold this 1.3m tonnes. Ad-hocism mars policymaking, which affects producers.

Published in Dawn, Economic & Business, January 26th , 2015

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