The farmers’ cost of production has jacked up exorbitantly in the recent years on the back of rising prices of the farm inputs like fertilisers and pesticides, fuel, electricity. The mounting cost of agriculture production has particularly hit and compounded problems of the crop sector, which has long been trying to grapple with a number of other challenges – erosion of soil fertility, persistent water shortages, lower productivity, unavailability of quality seed, etc.

The upsurge in the cost of agriculture inputs in spite of substantial subsidy by the federal as well as provincial governments to hold down prices of fertilisers, power and other agriculture inputs has also triggered the old debate: whether or not Pakistani growers should get international price for their crops?

The AgriForum Pakistan maintains that growers spent almost Rs150 billion in 2006 on account of a sharp spike in the prices of such farm inputs as fertilisers, pesticides and seed for their major crops – wheat, sugar cane, cotton, maize, etc – as compared to around Rs97 billion in 2002, a jump of around 55 per cent in just four years.

The farmers’ expenditure on these inputs is feared to shoot further, and sharply, this year, owing primarily to a substantial rise in the prices of fertilisers. The price of DAP, for example, has shot up to Rs1850 per 50kg bag (exclusive of the government subsidy) from Rs650 in 2002. As a consequence, farmers used half a million less bags of DAP for their current wheat crop than the previous year. Similarly, a bag of urea available for Rs327 in 2002, is now sold for Rs615-620 while prices of other fertilisers have more than doubled during the same period.

“On the one hand, growers are forced to pay a higher price for fertilisers while on the other, their average use of these chemicals has also gone up from 2-2.5 bags to 3-4 because of the eroding soil fertility and other factors. This means a hefty increase in the cost of crop production,” says AgriForum chairman Ibrahim Mughal. He laments that the producers/importers also create artificial shortages of fertilisers and pesticides in order to make extra money when these chemicals are direly needed by farmers. Further, he insists, the subsidy that the government announces for fertilisers and pesticides is pocketed by manufacturers and importers and the farmers rarely benefit from it.

The cost of other major inputs like electricity and diesel too has gone up manifold over the years, affecting viability of the sector. “The rising cost of production could be one of the possible reasons for the reduction in cultivable land area to 54.4 million acres in 2006 from 55 million acres in 2002,” maintains Mughal. “Farming is no longer a profitable profession. Margins have come down substantially, so has the growers’ interest,” he adds.

Mughal maintains that farmers do not get a price for their output commensurate with their input cost. “Hence the small growers have developed a tendency to reduce the use of inputs like DAP, which essential for increasing the yield,. To save on their cost, the country often ends up missing its targets for various crops, which impact on the overall economic health of the nation.”

Nevertheless, Mughal is not in favour of raising the domestic prices of the agriculture produce to the global level as is being demanded by big farmers. Punjab Water Council’s Hamid Malhi says, Pakistani farmers should also be given international rates for their products. “Why shouldn’t our farmers get international prices for their products when they pay international rates for inputs like fertilisers, pesticides, diesel, tractors, etc? Even electricity in Pakistan is more expensive,” he says.

Caretaker finance minister Dr Salman Shah also recently called for bridging the gap between the domestic and international prices of wheat and other crops in order to avoid repetition of the current wheat crisis in future. The government blames smuggling and hoarding of wheat by private sector for the flour shortage, which spiked its price up to Rs30 per kg in some parts of the country, to make money by taking advantage of the huge gap between the domestic and global rates of wheat. Dr Shah also holds that increase in the price of their output would offer farmers an incentive to produce more. That would also help reduce rural poverty as more money gets pumped into the rural economy, he was reported as having said last month. Malhi is of the same view.

Former finance minister Sartaj Aziz, who strongly advocates the linking of the agriculture output prices with the farmers’ input costs, however, is opposed to sudden increase in the domestic prices to the international level. He proposes that the prices of wheat and other crops should rise gradually.

Mughal too concurs. “I don’t believe that you can eliminate rural poverty or even reduce is substantially by raising the prices of domestic produce to the international level,” he says. He feels that such a measure would benefit only the big landholders and middlemen and not the small farmers.

According to him, 73 per cent of the total 6.6 million families involved in farming hold less than 12.5 acres of land while 14 per cent of them are landless tenants. Only eight per cent farmers have more than 12.5 acres of land. “So how can you expect the increase in prices of farm produce to reduce poverty in the rural areas? The solution does not lie in raising the output prices to the international level. It will only increase disparity within the rural areas and add to urban poverty. The solution lies in providing cheaper inputs to farmers, especially the smaller ones, and ensuring that they get sufficient electricity, water and quality seed at reduced prices. The government needs to make its research and extension networks stronger and more effective,” he says.

In spite of the fact that the share of the agriculture sector in the national GDP has dropped to around 21 per cent from above 24 per cent a few years ago, it still employs over 45 per cent of the total labour force. In addition, the agriculture forms the basis of more than 4/5th of the export revenues. Thus, its crucial role in ensuring the food security and alleviating poverty cannot be overstated. Unless agriculture is organised on modern lines and the farmers’ access to farm inputs and credit is ensured, the experts warn, the government should forget reducing poverty and sustaining GDP growth.

“If you want sustainable economic growth, you shall have to support your agriculture sector. If you don’t, the wheat and cotton and other crises will keep visiting us in future as well. But Give us a new but not a raw deal,” urges Mughal.