RECOGNISING agriculture as a major growth vehicle, the Punjab government has approached the federal government for seeking exemption from general sales tax and import duty on farm inputs to meet one of the major demands of the farming community.

To support the demand, a provincial government report notes that major crops registered a growth of 4.12pc against the target of 2.5pc during one year because of the subsidies offered to farmers on fertiliser and pesticides.

The Punjab government is also willing to bear the cost of GST on electric tubewells on behalf of the farmers and an announcement to the effect is expected to be made in the next budget.

Around Rs20bn is also proposed to be allocated for developing land and farm irrigation network, and Rs15bn for promoting crop diversification and high-value agriculture, and over Rs10bn for climate change resilience activities.

Under the Kissan Package — the province’s flagship intervention in the sector — Rs40bn is proposed; Rs100bn will be earmarked for kissan empowerment through a Digital and Financial Inclusion scheme of interest-free loans

Under the Kissan Package — the province’s flagship intervention in the sector — Rs40bn is proposed; Rs100bn will be earmarked for kissan empowerment through a Digital and Financial Inclusion scheme of interest-free loans. The banks’ markup to the tune of Rs7bn will be paid by the government.

To promote private investments, matching grants will be offered for agri-businesses and post-farm value-chain segments. At least Rs2bn is proposed to be apportioned for the scheme.

“We’ve proposed to the federal government to exempt farm inputs like fertiliser and machinery from GST and import duties and bear the expenses which are likely to be over Rs40bn,” an official privy said, requesting not to be named.

A letter to the effect has been sent to the federal finance ministry on May 5, he says.

The tube-wells’ power bill, according to him, will also be made ‘GST-free’. The provincial government will bear the cost that is likely go up to Rs5bn. The steps will reduce the cost of production and encourage investment and development in the agriculture input industry, the official believes.

The Farmers Associates Pakistan (FAP), a representative body of medium-size land holders, welcomes this proposal to make farm inputs GST-free. FAP Chairman Malik Afaq Tiwana attributes this year’s bumper wheat crop to the earlier relief in the form of subsidised fertiliser and pesticides and expects that other crops may also achieve growth targets if the growers are facilitated.

Kissan Board Pakistan’s Sarfraz A. Khan seconds Mr Tiwana by saying the community won’t seek subsidies for various crops if the government makes farm inputs tax-free. He argues that the step will enable export of current surplus output of four major product — wheat, rice, sugar and potato — by making them competitive in the foreign markets.

The former bureaucrat says that with just Rs45bn investment into cheap farm inputs provided to the farmers, the government will save Rs150bn for just, wheat, for which it has to seek bank loans to maintain the crop’s support price.

Pakistan Kissan Ittehad leader Khalid Mahmood Khokhar hopes that the provincial authorities can proactively convince the federal government to include farm subsidies in the forthcoming budget.

The farming community, however, doubts that the government has had enough resources for carrying on its interest-free loans scheme. “What I know is that the government lacks funds for financing its Rs100bn Digital and Financial Inclusion initiative,” says Mr Tiwana.

Referring to the budget being allocated for climate change resilience activities, the FAP chairman hopes the provincial government will pay attention to on-farm water storages and small dams, particularly in the Potohar region, where hundreds of sites are available for the purpose.

Through on-farm water management, the government should encourage and finance ponds at village level for better utilising rain and flood waters as Punjab is a ‘land-locked’ agrarian economy and unlike KP has no natural water resources, he says.

Mr Khan says research on ensuring harvesting during rains and sowing during drought conditions should be one of the prime objective. And development of hybrid seeds that could better face erratic weather should also be a priority.

He also advocates projects to introduce and improve modern storage of surplus vegetables and fruits to prevent wastage. He demands that the receipt issued by the storage owner(s) should be used as a credit-card enabling the producer to purchase against it farm inputs for the next crop.

Published in Dawn, The Business and Finance Weekly, May 29th, 2017