Package for farmers

Prime Minister Nawaz Sharif unveiled a Rs 341 billion farm package targeted to reverse the decline in the financial viability of farmers, including those with land holdings of less than 12.5 acres defined as subsistence farmers. The political opposition and other stakeholders have protested the timing of the package, a scant few weeks before the by-elections and elections to the local bodies in Sindh and Punjab. Furthermore, these by-elections are extraordinary as some prominent government ministers as well as the Speaker National Assembly will be re-contesting after their de-seating by election tribunals. While charges of pre-poll rigging would undoubtedly continue to resonate in the country till the final results of these elections, yet, the package itself can be supported even though it was late in coming.
The Pakistani farm sector has been teetering on the brink of financial ruin for a couple of years, the smaller the farm the more problematic the finances, for a number of domestic and international reasons. In Pakistan, input prices have been on the rise, including the price of fertiliser, energy and water. And while the rich farmers have been able to insulate the rise in input costs by inducting modern methods of farming that accounts for their yield well above the national average yet poor/subsistence farmers continue to drag the yield down.
Disturbingly, some tax decisions that were taken during the tenure of the incumbent government actually pushed the farm sector especially the vulnerable farmers defined as those with up to 12.5 acres of landholdings, into the red. Tax on farm machinery has been reduced from a whopping 43 percent to 9 percent - a rate that could not be supported as it was a tax on improving yield per hectare even though its reduction would benefit the rich farmers. In addition, rice mills have been exempted from turnover tax, the Rs 34 billion of loan repayments by rice traders have been deferred while they are allowed to incur fresh loans, a gain for the rich rice millers. A four-year withholding tax exemption has been granted to those setting up halal meat plants, a move that can be supported as Pakistan can capture this huge as yet untapped market; however, once again the beneficiaries are unlikely to be subsistence farmers.
There is a direct injection of Rs 40 billion for the subsistence farmers in the scheme through (i) Rs 5000 per acre as cash grant to support to farmers owning land up to 12.5 acres and cropping rice or cotton; (ii) Rs 500 per bag subsidy on fertiliser at a total cost of 25 billion rupees, with the federal government and provinces sharing the cost equally, and urea producers to reduce their retail price by Rs 200 per bag with effect from October 1st, 2015; (iii) Rs 2.5 billion for taking up the cost of loans taken by small farmers; (iv) interest-free loans to subsistence farmers to convert existing tube wells to solar power. The interest cost on a 7-year loan will be Rs 14.5 billion; (v) subsidy on electricity utilised by tube wells to be provided by the federal government, and provincial governments to pay sales tax amounting to Rs 7 billion; and (vi) premium on crop insurance will be provided to subsistence farmers by the federal government.
There are two major concerns with respect to the package being voiced by the farm community. The first is that the package meant for the subsistence farmers needs to be monitored and cash grants be provided by district administration through provincial revenue officials. How the subsidy on fertiliser will be provided needs to be studied and its implementation ensured since there is a need for the government to have safeguards in place that would ensure that only the subsistence farmers benefit from this and not the distributors of fertiliser.
Secondly, the concern is where would the money required to fund this package come from? There is no provision for a direct cash grant in the federal budget documents, given that agriculture has been devolved to the provinces, though crop and livestock insurance was allocated a huge amount of money. At best the government may divert a small part of Rs 104 billion earmarked for the Benazir Income Support Programme for this package - which maybe doable given that Fazeela-e-Haq, envisaging loans to small farmers, and Waseela-e-Rozgar programmes, for training, are currently undergoing a face lift and are suspended for the interim.
It needs to be understood that over 60 percent of the population is directly or indirectly involved in agriculture sector. No country, especially an agri country like Pakistan, can afford to leave its farmers to the vagaries of nature. Our local insurance companies do not have the financial strength to bear a loss incurred due to crop insurance. Thus, our farmers need help. And, that help should be available to them. Food security is a joint responsibility of both the federal and provincial governments. We also need to get out of the intellectual misgiving with regard to feudalism in the farm sector. Thus, the mindset regarding agri produce needs to change so that crop yields improve.
To conclude, one can hope that unlike in the past, the package is not designed to secure votes in the forthcoming elections and once the election results are announced the package is abandoned and efforts are made to ensure that the target beneficiaries are the subsistence-level farmers and not the rich absentee landlords sitting in the country's assemblies.