Policy risks to agriculture
By Ahmad Fraz Khan
If
farmers’ fears are to go by, the new year might not be any
different for agriculture from the last one. They think that
this year too, the terms of trade would be unfavourable for
them, international recession would keep commodity prices
down and an ever-expanding domestic tax regime would keep
the cost of production high.
Listing factors causing fears, farmers maintain that
uncertainty is also haunting them. At the policy level, no
one knows who is in-charge of the sector? The federation has
abdicated the sector to provinces after the 18th amendment,
but the federating units have yet to come to grips with the
problems agitating the growers.
Ideally, it should be a temporary phase and the provinces,
especially Punjab and Sindh, should quickly develop the
capacity to plan and execute their own agricultural
priorities. The problem, however, is that agriculture, as a
sector, is yet to appear on provincial policy radar. The
budgetary allocations reflect the level of neglect that the
sector faces by the provinces. Punjab, which is considered
to be the food basket of the country, allocates only Rs3-3.5
billion for the sector each year. To put the things in
context, it has allocated Rs50 billion for police this year.
The spending patterns leaves even more to be desired. Out of
Rs3.5 billion, the subsequent budgetary revisions regularly
rob almost half of the amount, which leaves the sector with
less than Rs2 billion to spend during an entire year. For
the last three years, the actual budgetary spending has
never crossed 60 per cent of the allocations. It means,
actually, the sector gets only Rs1 billion each year; it
indicates the commitment of the provincial government. With
this meagre money, it can hardly meet the level of
expectations raised by the 18th Amendment. That is precisely
the point that continues to haunt the farmers. Can the
Punjab government reverse the spending trend in 2012, the
farmers are not convinced.
Second, the farmers fear crop cycle failure during this
year. They feel that the country has started the year on a
wrong foot.
The cane crop is sprinting towards marketing failure and
wheat would be the next one. The cane crop, which is hugely
healthy, has seen delayed start of the crushing season and
price sliding. The millers, fully aware of the crop size,
are making up to 25 per cent deductions in price on excuses
like quality. If crop is short, the millers never mention
the quality issue. But now, they are doing so with full
fiscal ferocity.
On the other hand, farm temperatures have dropped much below
the zero degree, injuring the crop from within. Both these
factors are hurting the farmers. Cane has overlapping
harvesting and sowing activity; on the one hand, it is
harvested, and on the other, sown. If farmers don’t get
proper returns, the sowing would immediately suffer.
The wheat failure is also feared, not because of production
but procurement, as is the case with cane. The country is
currently holding close to ten million tons of wheat, with a
clogged debt of around Rs300 billion. Servicing this debt is
costing the country around Rs6 billion per month. The State
Bank has warned everyone that they would get as much loan as
they retire.
Thus, money would severely be in short supply when the
government needs it the most four months down the line.
The federation has increased wheat price by more than 10 per
cent, correspondingly raising the inventory keeping cost. If
these factors lead to a price crash, the farmers would be in
for a big trouble.
Both crops, if they fail as much as the farmers fear, can
take the entire crop cycle down next year. If farmers do not
get money from one crop, their investment would naturally
drop on the next one. The fertiliser crisis has already
taken a toll on wheat this year. Punjab is still lagging
600,000 acres behind its target, which it would, most
probably, miss this year because temperatures have already
dropped in the country to a level that make germination
impossible.
Third fear factor is prices of inputs, especially fertiliser.
In the last one year, urea prices have doubled and that of
DAP increased by more than 50 per cent. It has already
reflected in their off-take; urea consumption in Rabi has
dropped by more than 15 per cent so far and DAP by 40 per
cent.
The new increase in gas prices, effective from January 1,
would further increase urea prices, taking them out of
farmers’ fiscal reach. To make the matter worse, the
government, instead of controlling ever-increasing
fertiliser prices, is contributing to their increase.
Taxation, increasing gas prices, failure to print prices on
bags and failure to move its machinery for regulating prices
are a few examples of government unwillingness or inability
to keep prices in check.
The fourth factor is the federal attitude. After lobbing the
sector in provincial lap through the 18th Amendment, it
seems to have abandoned even those decisions it can take.
Like, export of agriculture commodities and imports of
inputs. The country is still holding huge wheat stocks
because it failed to export wheat due to federal fears and
delayed decisions. Its import of fertiliser got dangerously
delayed because the federation took time to get fully
convinced.
Courtesy: The DAWN