Pakistan Agriculture News

Agriculture: A sad story of agricultural input pricing

The rupee lost 16 per cent value against the dollar last fiscal year. It has lost another 16.4pc so far in 2018-19.

In the last fiscal year, domestic prices of petrol and high-speed diesel increased 26pc and 29pc, respectively. Their prices have surged 18pc and 17pc, respectively, since the beginning of 2018-19.

The rupee depreciation and the increase in oil prices resulted in a sharp rise in the rates of agricultural inputs in both 2017-18 and 2018-19. Since the rupee’s value began falling and oil prices started rising in the second half of 2017-18, the agriculture sector’s growth remained subdued and grew only 3.8pc last year, according to provisional estimates.

Governments love to incentivise the crop output, but seldom introduce and implement plans for promoting local industries engaged in the production of seeds, insecticides and pesticides

Now 2018-19 is the first fiscal year in which we are witnessing a fuller impact of the rupee depreciation as well as the increase in oil prices. Their lagged impact will be felt by the agricultural sector in the next fiscal year too even if the rupee’s value and oil prices remain intact until June.

Initial estimates put agricultural growth during this fiscal year at about 1pc, according to a Dawn report. Doubling or tripling this growth rate in 2019-20 will require extraordinary measures regardless of the low-base effect.

It is true that the PML-N government kept the rupee overvalued throughout its term. This necessitated heavy doses of correction in the final days of its government, under the interim government and during the first year of the PTI government. It is also true that the uptrend in international oil prices is a recent phenomenon — and this is one reason for escalated local prices.

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But the problem in revenue generation that the government is facing is unprecedented. This is one reason for higher fuel prices. It is forcing the government to levy higher taxes on fuel. May 5 onwards, the government increased sales tax on different kinds of fuel by 4-10pc.

Keeping this backdrop in mind, let’s see how the prices of agricultural inputs have behaved in the past one and a half years, making the lives of millions of poor farmers miserable.

According to the Pakistan Bureau of Statistics (PBS), average monthly prices of two widely used fertilisers — nitro phosphate and diammonium phosphate (DAP) — shot up to Rs2,832 and Rs3,547 per 50kg in April, which shows an annual increase of 11.8pc and 10.2pc, respectively.

Similarly, prices of Kisan and Sona Urea also increased to Rs1,788 and Rs1,820 per 50kg, respectively, in April. This reflects an annual increase of 25.6pc and 23.8pc.

Farmer lobbies allege that the actual increase is much higher than the one shown in PBS data. Official statistics rely on the prices mentioned by manufacturers and seldom reflect the gap between official and actual prices.

Farmers kept protesting against higher fertiliser prices during the last fiscal year as well. Their representatives claimed that fertiliser prices registered a 10-20pc increase in 2017-18. But the manufacturers rejected those claims, saying the price hike was 5-10pc. Verifying the two claims is difficult since the PBS had not started reporting fertiliser prices at that time.

Prices of seeds and pesticides for food and non-food crops, electricity and gas costs, abiyana or water charges, hourly charges of rented tube-wells, tractors and harvesters and wages paid to hired hands make up the overall cost of agricultural inputs.

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Due to the rupee depreciation, the cost of imported seeds and pesticides has gone up. Elevated headline inflation has pushed up the prices of locally produced seeds and pesticides. Electricity and gas charges are much higher than a year ago as the government revamps and cuts subsidies. Utilisation charges for rented tube-wells, tractors and agricultural machinery have been on the rise.

The cost of transportation is also up. The average price of CNG, which is widely used in rural and urban transportation, has gone up about 23pc in a year. It rose from 75.18per kilogram in May 2018 to Rs92.33 last month, according to PBS data.

To add insult to injury, there is no system in place to track exclusively the change in the prices of agricultural inputs. The authorities concerned continue to rely on some relevant items included in the shallow baskets of inflation indices. Farmers’ lobbies don’t usually present details of how a weaker rupee and higher inflation are playing havoc with the agricultural inputs.

Rising input prices of food crops coupled with a weaker and less-transparent system for intervening in agricultural markets push up the rates of food items. Just look at the prices of wheat flour and its by-products. From the last week of April to mid-May, flour millers in Sindh raised their prices by Rs3-Rs3.5 per kilogram, according to a Dawn report.

One of the reasons why agricultural input prices rise too sharply whenever the rupee gets weaker is that domestic industries have not been developed adequately. Governments love to incentivise the crop output but seldom introduce and implement plans for promoting local industries engaged in the production of seeds, insecticides and pesticides or even simple farming tools and implements like threshers and sprinklers.

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As all eyes are set on an IMF-dictated federal budget next month, the government may not find it easy to announce farmer-friendly measures. Provincial governments, too, will have a chance to do so only if they get more serious about keeping their financial houses in order.—MA

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