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The budget speech and the Agriculture sector  
    An overview  

The budget speech of federal Finance Minister Shaukat Aziz revealed various steps taken by the government regarding the agriculture sector for the year 2001-2002.

Under the head of Economic Review, the minister said: As you are aware, the Economic Survey, published by the Ministry of Finance, has been issued a couple of days ago, giving complete details of the performance of the economy during the year. Accordingly, I would not want to take your time in repeating the details of the Survey. What I would like to highlight, however, are four important aspects of the economy:

Mainly due to the large scale and unprecedented drought, which led to a decline in agriculture output, the overall economic growth will be 2.6% compared to 3.9% last year. Agriculture has 25% share in country’s income and as such its performance affects the overall performance significantly. If we exclude agriculture, the rest of the economy has grown by 4.3% compared to 3.1% last year. Excluding full impact of drought, the increase will be 4.8% 

While exclusively talking about the Agriculture the Finance Minister said:

Agriculture is the most important sector among the four sectors the government has selected for leading the process of economic growth. Pakistan is endowed with an immensely productive agrarian base, but its harnessing on a sustainable basis has always remained a distant dream. The vulnerabilities to which agriculture is exposed, was only brought to sharper focus in the wake of recent drought. There are essentially four challenges our agriculture sector is facing:

(1) Water shortages emanating from deficiencies in country’s storage capacity and poor use of available water;

(2) Price uncertainty and poor marketing methods;

(3) Narrow export base of agriculture value-added largely confined to crop sector, at the cost of neglecting higher value added sub-sectors like fisheries, livestock, poultry and horticulture

(4) Limited supply of credit compared to actual needs.

These challenges are formidable, but we have to face them squarely for our survival depends on our ability to create a dynamic and vibrant agriculture sector, which is the main source of export-led economic growth. The following key measures in the agriculture sector have been taken to improve its performance and give it a new orientation:

(1) A medium term plan for radically augmenting water resources in the country is being undertaken at a cost of Rs.86.1 billion over the next three years, which will see construction start of new storage capacity through such projects as Gomalzam and Meerani dams, and new irrigation schemes like Thal and Katchi canals and lining of numerous water courses. These initiatives will provide an additional storage capacity of 4.5 MAF of water, nearly a million acres of land will be brought under cultivation and thousands of jobs will be created during construction of these schemes;

(2) A package of assistance is being drawn with the help of all the public sector financial institutions to provide funding for water conservation and development schemes by introducing new means of irrigation and extending loans for installation of tubewells, open wells desilting and brick-lining for water channels, precision land leveling, drip irrigation system, construction of mini dams, bed planters and water sweeter processing machines. Furthermore, 10,000 tube-wells will be installed in the provinces to increase the availability of water at farm level;

(3) To induce water conservation, farmers will be encouraged to substitute water-intensive crops with crops requiring less water. In particular, government is supplying cottonseed in parts of Punjab and Balochistan for substituting cotton crop with rice. Similar efforts will be encouraged for substitution of sugarcane with cotton.

(4) Price certainty is an essential need of the farmers. However, this objective has to be weighed against the need to provide the farmers the international prices, which were normally higher than the prices prevailing in the domestic market. Accordingly, last year we had abolished all restrictions on export of agriculture commodities except wheat. I am pleased to announce that the government has lifted all restrictions on movement of wheat within or outside the country. We have undertaken additional reforms in wheat procurement and release procedures with a focus on greater role of private sector and market forces. These reforms will have a salutary effect on the price of wheat. To give the necessary confidence to farmers, government will continue to follow its policy of announcing support price for wheat and indicative prices for other crops like sugarcane, cotton and rice. Role of TCP to stabilize prices as an active second buyer will remain intact.

(5) To give a big push to agriculture farming practices, government has designed a new policy for corporate agriculture, which will shortly be announced by the Minister for Agriculture.

(6) A Horticulture Export Board has been established, comprising all the stakeholders from farmers down to exporters, to promote exports of fruits, vegetables and flowers. Government will provide all the necessary infrastructure support to facilitate the export of horticulture products;

(7) Agriculture credit is receiving due attention by the State Bank of Pakistan. During July-April, total disbursement of credit to agriculture sector was Rs.31.3 billion as against Rs.30.1 billion last year, representing an increase of 4%.  For next year, State Bank plans to give as much credit to agriculture sector as can be absorbed by the farming community. This is an unprecedented move that would greatly enhance the flow of credit to the agriculture sector.

(8) To enhance the role of Agriculture Development Bank, a new management of Bank and Board of Directors with complete autonomy of operations have been appointed. The management will undertake a grass-roots reorganization of the Bank and adopt measures to significantly improve the participation of the bank in agriculture development.

(9) Government will be distributing land to landless farmers as a measure toward their empowerment. On the directive of the Chief Executive, 92,792 acres of land in Sindh and Balochistan has so far been distributed among 9601 landless Haris/farmers. This process will be further extended to ensure proper cultivation of such land. ADBP has been asked to design special package for providing credit to these farmers.

Mr Shaukat Aziz described concessions to agriculture sector as follows:

I have already underlined the significance of agriculture in country’s economy. To supplement the policy initiatives aimed at accelerating growth in this sector certain relief measures are proposed. Pesticides are an essential requirement for agriculture. With a view to reducing farmers’ cost of inputs, duty on active ingredients of pesticides as well as the formulated pesticides is being reduced from 10%-25% to 5%. This would help reduce input costs to farmers;

  • Similarly, duty on inputs of fertilizer industry such as sulphur and zinc dust are also being reduced from 10-35% to 5%; 

  • A major irritant impeding healthy growth of poultry industry is the duty on soybeans meal, which is an important element of chicken feed. At present, duty at the rate of 35% is chargeable to such imports, which makes the cost of feed quite high. It is proposed to reduce the duty to 10%. This measure will have a salutary effect on the poultry industry;

 

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