Budget 2008-09 : doing more to boost agriculture
The budget 200809 envisages a growth of 5.5 per cent of GDP and four per cent in the agriculture sector against 1.5 per cent recorded in the previous year.
While financial allocations for agriculture have been indicated for some of the proposed programmes, the overall allocation to the sector is missing in the speech. It would, therefore, be difficult to compare it with the allocations made in the previous year(s). In the past only about two per cent of GDP and around four per cent of the total public sector development programme had been allocated to agriculture sector.
The finance minister says the present government increased the ‘support’ price of wheat from Rs510 per 40 kg to Rs625. In reality it was not the support but it was the ‘procurement’ price as ‘support’ price is always announced a few weeks before the sowing of a crop.
The new support price will be announced in August or September, after reviewing the domestic and international situation. This will help the farmers in taking decision in time, allowing them enough time to plan their sowing of the crop keeping in view the cost of various inputs, its economics vis-à-vis other competing crops, and other similar factors.
To determine the support price is a quite a complex exercise. A number of factors, like the cost of production of an average farmer, import and export parity prices, its impact on the growing of competing crops, and so many other factors, have to be considered. It cannot be done on ad hoc basis.
In the past, such an exercise was done by the autonomous Agriculture Prices Commission, which had qualified, experienced and professional staff. Recently its name has been changed to Agriculture Policy Institute which is an attached department of the ministry of food, agriculture and livestock (Minfal). There is no full-fledged head of this organisation but additional charge has been given to a senior Minfal official. Its staff has got depleted overtime. There does not seem to be any good economist/agriculture economist in the Minfal who could fill the vacuum. This is happening in spite of the government’s decision to strengthen the organisations and develop human resources.
I wrote to the prime minister on the issue. No action seems to have been taken to improve the situation.
The farmers are confused about official policy on the support price of the agricultural commodities. Whether it would apply to wheat only or would be extended to other crops, if so, which ones? Or would there be free market system as advocated by the international agencies and accepted by the previous government. This does not seem to have worked under our local conditions.
It is vital for agriculture, the economy and for the reduction of poverty that farmers get a price which at least meets their production cost and some profit to induce them to produce more. If the farmers have money, they can send their children to schools, pay for medical expenses, etc., and feed their families properly.
The budget recognises the use of fertilisers, particularly phosphatic (DAP). The subsidy on fertilisers is proposed to be increased from Rs25 billion to Rs30 billion. In the case of DAP, the subsidy will be raised from Rs470 to Rs1000 per bag. In the use of urea and DAP, it is very essential for the efficient use of these inputs that their ratio is maintained at least at 2:1 if not 1:1. In the past this ratio has been 3.5:1 or so.
The government would have to monitor the prices of both urea and DAP to see if this ratio is not much distorted. The levy of 15 per cent GST on DAP was a wrong step from economic point of view taken under the advice of the international organizations. It has been abolished by a bold step of the present government.
Another important input for agriculture development is water. The existing dams, viz Tarbela and Mangla are gradually being silted up. It is estimated that these have lost their live capacity by one third. The new dams like Bhasha will take 8-10 years before it is commissioned. The Kalabagh dam, for which feasibility report has already been prepared, has fallen prey to the differences of politicians.
The only alternatives left at present are: efficient use of the available surface water, and to build small dams; the later will provide irrigation water but no electricity.
The provincial governments should carry out intensive campaigns for educating the farmers as how to save water and make efficient use of what is available. The farmers have to be told that instead of flow irrigation, they should resort to furrow irrigation and leveling of land where economically possible through the use of lasers, adoption of drip and sprinkle irrigation.
The government should provide all possible facilities and financial resources to the farmers to enable them to adopt these new techniques which are costly. The farmers should be encouraged to grow less-water requirement crops. Research efforts to evolve drought resistant varieties should be given priority.
Availability of approved and certified seed is quite important input for raising productivity. At present, public sector provides only 33 per cent of the replaceable wheat seed (once in four years), 54 per cent of cotton and corn, and about four per cent of potato seed. The production of such seeds should be encouraged and supplied to farmers.
It is a welcome proposal that agricultural tube-wells will have continuous supply for 10 hours at stretch every night to avail rebated tariff. However, most (about 75 to 80 per cent) of the tube-wells, due to extensive mining of water, have started giving saline water. The farmers dilute such water with fresh water, but over time, it would be very injurious to the soil and thus the crops.
Balochistan has great potential for water and agriculture development, but has not received priority it deserves. The arrangement for the import of bulldozers through foreign collaboration to increase and improve cultivable area will greatly help the development of agriculture particularly in Balochistan.
Setting up of cold storages to facilitate export of perishable commodities like fruits and vegetables is a good decision. The government should also ensure that small farmers also get benefit from this facility for which some institutional arrangements should be made.
There is a need for increasing storage facilities both in terms of quality and quantity. At present, storage capacity of a little over five million tons is available in the public sector, which over time has gone down from 5.65 to 5.24 million tons. It would help meet a variety of requirements. However, their quality has to be considerably improved as some of the stores are in a very bad state of affairs. Former prime minister Shaukat Aziz told a gathering in the US that he allowed the export of wheat in 2006 because the country had a bumper crop and if he had not allowed export, the rats would have eaten the crop if stored.
An impression has been given to construct silos. Before taking any practical step, it would be worthwhile to see the operation of the four or five existing silos. Whatever I had seen in Quetta and Karachi, it was a failure.
To increase the production of cotton, the B.T. varieties should be grown only after carrying out trial production under our local conditions. The growing of B.T. cotton has its advantages and disadvantages and should be viewed very carefully before taking a decision.
At present there is no system to produce B.T. seeds. What is happening is that seed of B.T. varieties is being smuggled from India and some other countries that have developed their own varieties, or made arrangements with international institutions from whom they have to import seed every year and at their determined prices. But the quality of seed that is being smuggled is not known.
B.T. varieties are hybrid ones and their seed have to be produced every year. Moreover, it is said that hybrid varieties are resistant to only one pest or disease, mainly the bollworm. Our cotton is being attacked by a variety of insects and diseases for which spraying becomes a must, which is a costly affair.
The National Institute of Biotechnology and Genetic Engineering (NIBGE) is said to be in the process of evolving B.T. varieties suited to our local conditions. This work should be encouraged.
The five per cent federal excise duty on premium of crop insurance has been waived. But what is important is first to see if this scheme is functioning properly at all in the interest of the affected farmers. Many raise serious doubts about its working. In many countries such a programme did not find success.
Increase in the credit by Rs30 billion will help farmers to meet their needs for input purchases. Again there is a need to evaluate the programme whether it is benefiting the small farmers also, if not, what are the problems facing them so that these could be rectified.
There is a need for consolidation of holding to help improve the efficiency of inputs, like fertilisers, water, tillage, etc. Instead of stressing on land distribution under land reforms, other important issues, like the tenure system, cooperative marketing, supply of inputs through cooperatives and so on need to be considered.
The sale of agriculture land around cities has been going on unabated for house building or for industrial purposes. This has decreased the fertile cultivated area to the detriment of agriculture. Such sales should be banned. This would help increase vegetable production.
Livestock is quite important for our economy as it gives 54 per cent to the value in the agriculture sector, which is even better than the value of crops. Serious efforts have to be made to raise their productivity and production of especially meat and milk.
The budget should have given importance to collection of agricultural data. Not only the local experts question the correctness of data, but the international organizations have also shown their serious doubts. For this, a committee of experts under the aegis of Federal Board of Statistics should be set up to evaluate the present system and make suggestions to improve it. It is on the bases of such data that policies are formed.
There is no clear policy of agriculture and even the budget speech has failed to spell out the basis on which the agriculture friendly policy should be formulated, for which a committee of experts needs to be set up.
The budget speech has tried to indicate some programmes which could help farmers to raise productivity and production, but it has failed to do full justice to this sector.
Former Advisor to the Chief Executive of Pakistan on Food & Agriculture; and Founder Chairman, Agriculture Prices Commission (APCom).