The agriculture sector in Pakistan is experiencing excessive land fragmentation because of prevailing inheritance laws that divide land among family members over successive generations. Simultaneously, the expansion of housing colonies on the periphery of urban centres continues to eat up agricultural land.

Since Pakistan’s cultivable land has remained steady at around 22-23 million hectares over the past two decades, the result of the previous elements has been the shrinkage of farm sizes.

In 1971, the average farm size was 5.3 hectares, which reduced to 3.1 hectares by 2000, and further to 2.6 hectares in 2010, according to the Agricultural Census. However, this average farm size can be misleading, as the largest four per cent of farms — those exceeding 25 acres — inflate the overall average significantly. In reality, over 90pc of farms span less than 5 hectares (12 acres), with 67pc of them being even smaller, at less than 2 hectares (5 acres).

As farm sizes continue to decrease, farmers’ access to resources and essential services, such as credit and extension, diminishes. In the coming years, it appears the agriculture sector will be overwhelmingly dominated by subsistence and small farms, characterised by low productivity, limited market access, weak bargaining power, and higher transaction costs. The situation calls for a policy response that could either prevent further land fragmentation or mitigate its adverse effects.

Land fragmentation ails the agriculture sector as over 90pc of farms span less than five hectares, becoming economically unviable with low productivity and market reach

Worldwide, many countries have enacted laws to prevent land fragmentation, ensuring that farms do not divide below a certain minimum size. These laws focus on maintaining economically viable farming units to prevent the inefficiencies associated with excessively small farms.

In India, various states have implemented similar regulations that set the minimum farm size to prevent fragmentation. The Maharashtra Prevention of Fragmentation and Consolidation of Holdings Act of 1947, updated in 2013, serves as an illustrative example.

Many developing countries across the world, such as India, Bangladesh, Kenya, Uganda and Tanzania have made concerted efforts, backed by non-government organisations, international development agencies and the government, to organise subsistence and small farmers into various forms of farmers’ collectives. These include farmers’ groups, community organisations, farmer-producer organisations, and cooperatives.

These collectives, as legal entities formed by farmers, aim to enable farmers to reap the benefits of relatively larger agricultural operations that provide increased marketing power, collective procurement of inputs, pooling of resources, and access to effective extension and advisory services. The nature, size, structure and governing principles of such farmers’ collectives vary from country to country.

In Pakistan, the concept of farmers’ collectives has struggled to gain traction for various reasons. Cooperative societies — associations of persons united voluntarily — originally aimed at promoting self-help and addressing farmers’ credit needs have a long history in Pakistan. Additionally, the Punjab Cooperative Bank Limited, which is currently operating 151 branches, was set up in 1924 to meet the funding requirements of cooperative societies.

However, despite these efforts, the agriculture sector has not witnessed any significant improvement in the lives of subsistence and small farmers. While numerous banks and microfinance institutions provide agricultural credit to small farmers — even against personal guarantees — the cooperative societies, based on group lending, may not be as relevant in today’s context.

The Rural Support Programs Network — a consortium of nine Rural Support Programs (RSPs) — aims to alleviate poverty and promote sustainable rural development. RSPs operate through grassroots organisations — community organisations —following a pyramid structure.

While RSPs have achieved localised success in working with disadvantaged communities, their broader impact on the agricultural sector and value chains remains limited.

Regrettably, efforts to foster the social capital of the common man have traditionally been suppressed in the country. This intentional approach, by design, has resulted in the gradual erosion of labour and students’ unions, farmers’ associations, and even political parties.

Consequently, Pakistani society has become increasingly fragmented along the lines of language, ethnicity, class, caste, and most recently, political affiliation, characterised by an intense hatred towards opponents.

Due to this, Pakistani society has witnessed a gradual transition from collective thinking and shared objectives to a focus on individualism and personal aspirations. Various factors, including economic pressures, urbanisation, shifts in the social and political landscape, and the influence of information and communication technology, have all contributed to shaping this transformation.

Unfortunately, successive governments have exacerbated this trend by centralising power and failing to empower grassroots communities. In this context, cooperatives, community organisations, and farmers’ collectives have, by and large, failed to achieve their intended goals.

Crucially, the growing markets for tractor and machinery rental in rural areas reflect a shift away from joint ownership or cooperative pooling. Given the evolving agricultural landscape and changing social and cultural dynamics, traditional approaches of community development, aimed at strengthening communal bonds and fostering a collaborative mindset for rolling out group-based and community-focused interventions, no longer suffice.

Instead, we must embrace market-driven interventions that revolve around the common business interests of small farmers and are rooted in commercial transactions.

Social enterprises, whether for-profit or not-for-profit, led by development organisations or private sector entities like processors, exporters, banks, or inputs suppliers, hold immense potential to undertake contract farming and value chain development. This is the path forward to enhance farm productivity and farmers’ income.

Agriculture Processing Company Limited — a subsidiary of the National Rural Support Programme established in 2016 — has been working closely with rice farmers in the district of Hafizabad. Similarly, National Foods Limited has initiated contract farming to improve the chilli value chain in Sindh. PepsiCo also engages in buyback contracts with thousands of farmers annually to source chip-stock potato varieties.

Such market-driven models and approaches for the economic upliftment of farmers warrant comprehensive evaluation at the grassroots level and should, in turn, serve as replicable initiatives for other crops after necessary adaptation.

Khalid Wattoo is a farmer and a development professional, and Erum Tarin Khuhro is a former investment banker and a working farmer from Sindh

Published in Dawn, The Business and Finance Weekly, July 29th, 2024