“We can’t afford a setback to the agriculture sector and will take collective measures. It’’ a very big challenge for us.”
Muhammad Ishaq Dar (Federal Minister for Finance)
Agriculture sector plays a vital role in Pakistan’s economy. It provides the raw materials to down-the-line industries and also helps in poverty alleviation. Traditionally, this sector has been performing well but in FY 2015-16, the performance of agriculture sector as a whole remained dismal as it witnessed a negative growth of 0.19 percent against 2.53 percent growth during the same period last year. This sector could contribute only 19.8 percent in GDP, as compared to 20.9 percent in the previous year. This dismal performance led the government to introduce a pro-agriculture budget for the FY 2016-17 that has massive incentives and concessions for the farmers. This write-up is a realistic analysis of the factors that led to the negative growth of this important sector in the previous financial year.
At present 60-65 percent of Pakistan’s population is either directly or indirectly dependent on Pakistan’s agriculture and the sector is by far the largest employer, absorbing 42.3 percent of the country’s total labour force. It provides inputs to the country’s largest industry as well as the largest export item — textiles. Therefore, agriculture has direct as well as indirect effects on Pakistan’s export earnings. But, various factors have hampered the growth of this sector.
Here is a brief description of those along with the suggestions to resurrect the agriculture sector of the country.
1. Climate Change
The central problem with the agriculture sector is that over the last almost two decades the fluctuations in agricultural output have increased. This means the frequency of bad harvests has increased and the bad harvests are becoming much worse than before. The single most important reason behind these increased fluctuations in output and, hence in agriculture growth, is global warming and the consequent increased variability in the monsoons. There is a strong relationship between agriculture and climate — temperature, precipitation, floods and other aspects of weather that finally affect economic performance including agriculture production, commodity prices and finally economic growth. The crop output is critically dependent on the timing and quantity of precipitation during the monsoons.
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2. Seed Quality
The second consequence of global warming is that, with higher temperatures, the yield per acre is on the decline. This is because the particular seeds being used in Pakistan are highly sensitive to temperature increases. This is the second major reason why we have not been able to accelerate agriculture growth on a sustained basis. So, not only is agriculture growth unstable, the rate of growth has also slowed down as far as crop output is concerned.
3. Small Landholdings
Agriculture growth can’t accelerate substantially in Pakistan in a stable fashion due to the agrarian structure. Over 60 percent of country’s farm area is being cultivated by those having less than 25 acres of landholdings. So the predominant proportion of the total arable land is in form of small- and medium-sized farms. The problem with the small farm sector is that more than one-third of the farm area is being cultivated by tenants who have neither the incentive to increase yields, because they know that a major chunk of the fruit of their effort would be appropriated by the landowner; nor do they have the investable surpluses to invest in raising yields per acre.
4. Financial Problems of Small Farmers
Moreover, small farmers are more vulnerable to variability of the monsoons because, unlike big farmers, they don’t have any financial or asset base to serve as a cushion against shocks. In case of a bad harvest, the small farmer has to borrow money to buy even his household requirements for food. So he gets into debt, it is difficult for him to reconstitute the production cycle the next year.
5. Water Scarcity
Shortage of water is also taking a heavy toll on country’s agriculture. One basic reason behind the negative growth of agriculture was the scarcity of water. The Economic Survey of Pakistan 2015-16 says, “During 2015-16, the availability of water for Kharif 2015 stood at 65.5 million acre feet (MAF) showing a decrease of 5.5 percent over Kharif 2014 and 2.4 percent less than the normal supplies of 67.1 MAF. During Rabi season 2015-16, the water availability remained at 32.9 MAF, which is 0.6 percent less than Rabi 2014-15 and 9.6 percent less than the normal availability of 36.4 MAF.”
6. Government’s Neglect
The emerging challenges of national food security and climate change have shifted the policy focus globally toward the development of agriculture sector in the recent years. But, unfortunately, in Pakistan, the govern-ment has not quite grasped the nature of the problem. After poor performance of the agricultural sector in FY2015-16, increasing the subsidy on fertilizer is only a knee-jerk reaction as the initiative will have limited effect and over time the underlying structural constraints to growth indicated above will re-emerge. We must remember that problems of water, heat-sensitive seeds and inadequate investible resources faced by the small farm sector, cannot be solved simply by increasing subsidies to the fertilizer producers.
How to resolve the issues?
The first and foremost need, at present, is to address the underlying structural problems that are responsible both for the slowdown in agriculture growth as well as its instability. There are three basic policy initiatives which we immediately require.
1. Increase Water Storage
First of all, we need to increase the storage of water. Since the global warming is here to stay, therefore, the rains are going to fall at the wrong time and in the wrong quantities. For storing of water, we need to build dams. Besides this, digging large holes all along the dry river beds during the off season and creating natural lakes during periods when there are heavy rains and the water covers the entire river bed or even overflows the banks are also important methods. That will reduce the impact of floods and will also increase the supply of seasonally flexible supply of irrigation water to the farmers. But, the government has not really grasped the nature of the problem yet and it is due to this incorrect diagnosis of the problem that they have not allocated adequate funds in this budget for improving the water storage.
2. Launch Agriculture Growth Strategy
The government must also launch a small-farmer-based agriculture growth strategy. This would require providing land ownership rights to tenants through three basic measures:
- distributing the 3 million acres of arable state land to tenants. It would make 60 percent of existing tenants the landowners;
- making credit available to the remaining 40 percent of tenants to buy land.
- setting up a support service organization owned by small farmers and run by professionals. This organization would provide support services to the small farm sector such as technologies for increasing value added of crops through tunnel farming; drip irrigation and laser levelling for more efficient water use on small farms and access over credit, crop insurance and quality inputs such as seed, fertilizer and pesticides.
3. Reinvigorating PARC
Immediate steps are required to be taken in order to reinvigorate the Pakistan Agriculture Research Council (PARC) and making it do its job efficiently. The Council has a number of competent professionals who must be incentivised and given time-bound targets to develop heat-resistant varieties of seeds etc. They can link up with multinationals or do their own research.
4. Focusing on Research
A report of the Inter Governmental Panel on Climate Change (IPCC) predicts that the effect of heat on seeds alone will cause a reduction of up to 30 percent in the yields per acre of grain crops in South Asia. If these predictions come true, the food deficit will be so large that we wouldn’t have the foreign exchange to import the required amount of food. And even if we could beg, borrow or steal that foreign exchange, the marketable surpluses available in the world market may not be adequate for our import requirements.
5. Food Storage Silos
A Nobel Laureate and a world-known economist Prof Amartya Sen, in an in-depth research, has shown that famines in the nineteenth and early twentieth century were largely because food could not get to the right place at the right time. It means that there may have been adequate food but that could not reach places where there was acute shortage or the people didn’t have access over that food owing to a lack of purchasing power. Similar is the condition in Pakistan where we put food out on the ground and cover it with a tarpaulin and by doing so we’re losing 25 percent of that stored food to rats and weather effects. So, we need to build food storage silos in every district of Pakistan.
If there is a major food shortage, make food free; release the food from those silos without charge, because people won’t have the buying power. Contingency plans need to be made right now and silos must be built, apart from policies of increasing agricultural growth and stabilizing it. We need to be prepared for severe food shortages in the years ahead.
The challenge thrown up by Pakistan’s stricken agricultural sector will require not just additional financial resources, but also a major push to reform key institutions. A combination of years of neglect and growing challenges such as corruption have together hampered the performances of the agricultural research outfits and service delivery networks. A failure to tackle challenges to the agriculture sector at the earliest will only widen an already explosive situation.