According to provisional GDP figures, agriculture sector’s performance proved to be the saving grace for economic growth during FY20. If the suspicions raised on sector’s 2.67 percent growth are correct, overall economic contraction during the outgoing year would be much deeper than the reported 0.38 percent (For more, Read “Agri-GDP: a house of cards”, by BR Research published on June 12, 2020).
At a time when both Industrial and Services bases are predicted to miss their target growth due to Covid-led demand suppression, a V-shaped economic recovery would require that agriculture sector outperform its 2.8 percent growth target as set by Annual Development Plan FY21. However, several centrifugal forces appear to be having extreme impacts on sector’s performance this year, making achievement of growth target unlikely.
The challenge begins with the locust invasion, which is said to have already caused substantive damage to cotton and sugarcane crops in their early phase. As the monsoon season is now on its head, farmers are anticipating a much bigger second wave near July-close, which may exacerbate the problem into a crisis.
But a much more menacing challenge is slow brewing in the form of cotton sowing itself. Already at its lowest output levels in 25 years, cotton with its 20 percent contribution to Important Crops Index will face multi-faceted crisis in the upcoming season.
On one hand, price for domestic cotton has received severe battering since the lockdown began, declining by as much as 12 percent. Despite lowest ever output in over two decades, the ginning segment is anticipated to end its marketing year in July with an unsold inventory of 0.5 million tons.
On the other hand, anticipating a massive shortfall, the spinning segment is said to have booked orders of 3-4 million tons import, which come next textile marketing season will sting like a thorn given weak global demand outlook (For more, Read “Cotton importers at a loss”, by BR Research published on June 18, 2020).
Come harvest season in August, cotton growers may face the spectre of poor prices amid weak demand. Note that cotton yield is expected to perform no better than last year given the lowered germination rate requirement on cottonseed. If cotton growers are forced to sell off their output at throwaway prices amid locust outbreak, will a subsidy on cottonseed be sufficient?
What actions then has the federal government taken to ensure that the growth target set for agriculture is anything more than a flight of fancy. According to the budget documents, an estimated Rs10 billion has been set aside to deal with the Locust Emergency. This has deserved a special mention in official speeches, as the allocation is in addition to allocations under NFS&R budget.
A sum of Rs12 billion has been allocated for NFS&R under PSDP; however, lack of details therein reflects that the funds allocated shall likely be utilized towards schemes and initiatives already announced under the four-year Agriculture Emergency Programme laid out last year.
This does not seem to account for an estimated Rs 66-67 billion allocated under ‘Agriculture, Food, Irrigation, Forestry, & Fisheries”. However, no such allocation is found under PSDP or current expenditures for NFS&R. Curiously, the figure is eerily similar to the amount allocated to Water Resources Division, which may be the likely explanation for the demand to have been clubbed under the Agri and Irrigation head.
Is the estimated Rs25 billion outlay for agriculture than sufficient to achieve lofty growth targets? For one, agriculture has never been a federal subject; thus, an expectation from the federation to pick the tab may be unnecessary (For more, Read “Agriculture’s constitutional arrangement”, by BR Research published on January 13, 2020). On the other hand, the outlays other than PSDP and grant for locust emergency may explain why federal expenditure on the sector reeks of resource allocation inefficiency.
While federal and provincial governments continue to battle the jurisdiction on locust control, a mere Rs1.6billion has been set aside for various crop and livestock insurance and credit guarantee schemes. Considering that an estimated 39 million workers are employed in agriculture as per Labour Force Participation Surveys, that comes out at a per capita allocation of just Rs41.
Similarly, the allocation for wheat procurement operations under federal government is Rs13 billion; higher than total PSDP allocation for the Food Security & Research ministry. Consider that Pakistan’s commodity operation debt for wheat stood at Rs650 billion as of March 2020. Consider also that Pakistan’s wheat yield has been stagnant at just 2.8 tons per ha for the last 11 years; would the money be better spent on developing high-yielding seed varieties, considering research and innovation still continues to be under federal ambit?
It may be unfair to complain that federal government’s expenditure for agriculture and food security are below par. The more relevant question to ask is whether an improved resource mobilization could be achieved within the existing pie?
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