THE growers of kharif crops — cotton, rice and sugarcane — appear to be in great trouble. Though the rise in the cost of production and the fall in prices of output have persisted for the last four years, the gap has now become unbearable for cultivators if the latest claims by farmers are to be believed.

According to the figures released by the Pakistan Kissan Ittehad last week, the farmers of these three crops are suffering a loss of Rs74,800 per acre. As calculated, even if a farmer picks 26 maunds of cotton, which is rare as the national average is much less, it costs him around Rs3,235 per maund, or Rs84,100 per acre. The average sale price has been Rs2,200 per maund, — inflicting a loss of Rs1,022 per maund, or Rs26,900 per acre as he has to sell the entire yield for Rs57,200 at the current price.

The government needs to break the current cycle of high production cost, which renders Pakistani

produce non-competitive abroad, and keeps building domestic glut at a very high financial and administrative cost

Similarly, the average cost of production for paddy is calculated at 35 maunds yield per acre. Only progressive farmers get Rs1,920 per 40Kg, whereas the average farmer gets only Rs1,200 per maund — a straight loss of Rs720 per maund, or Rs31,200 per acre; it amounts to total income of Rs36,000 against investment of Rs67,200 per acre.

As per farmers’ calculation, sugarcane’s cost of production is Rs202 per maund against the official sale price of Rs180 per 40Kg, with a loss of Rs22 per maund. This cost of production is calculated at a yield of 750 maunds per acre, which is at least 100 to 150 maunds more than what an average farmers gets. By this calculation, each farmer, even if he gets the officially declared price and lucky enough to get cash as well, is suffering a loss of Rs16,700 per acre — Rs135,000 against an investment of Rs151,700.

These calculations, even if exaggerated by the farmers’ association in their favour to make their case more compelling, hold, by and large, true — and show where the three major crops are heading for. The official calculations of the cost of production of all these crops are not far behind either. For example, the provincial government calculated cost of cane production at Rs195 per maund last season — only Rs7 less than the farmers’ claim. But still, the sale price was kept at Rs180 per maund — causing a loss of Rs15 per maund to the farmers, given the support price.

Additional problems like the millers’ exploitation of including long-delayed payments and induction of middlemen in the procurement process work to the disadvantage of the cane farmers while rigging at weighing stations has a separate cost for

growers. That may also be the reason why the share of crops, even within the agriculture sector, has declined by almost 5pc in the last four years and share of livestock is increasing correspondingly.

These three crops had been traditionally considered as cash crops, which provide liquidity and sustain livelihood in the rural Pakistan, where, as per Agriculture Census of Pakistan, 62pc of population resides. The World Bank, however, puts the figure at 64pc. If farmers keep losing money even on cash crops, their investment on food crop would naturally plummet, threatening the country’s food security.

The government could afford to delay required action as long as world cereal prices maintained a high trend, riding the exceptionally high cost of oil. With the cereal international prices now stabilizing at the lower side, Pakistan’s farming is becoming increasingly unviable commercially.. That is precisely why Pakistan has not been able to clear its wheat and rice (despite being of high quality, great demand and fetching premium price even from the European Union) stocks for the last two to three years. If the government needs to check cost of production, which is a direct result of its monitory and fiscal policies.

The government should ensure that the cost of inputs falls.It can balance its books by cutting down billions of rupees of subsidies, which have never benefited small farmers. It needs to break the current cycle of high production cost, which renders Pakistani produce non-competitive abroad, and keeps building domestic glut at a very high financial and administrative cost.

Published in Dawn, Economic & Business ,July 21st, 2015

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