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Coronavirus
VERY HIGH Source: covid.gov.pk
Pakistan Deaths
27,072
6824hr
Pakistan Cases
1,218,749
2,92824hr
5.08% positivity
Sindh
448,658
Punjab
419,423
Balochistan
32,707
Islamabad
103,720
KPK
170,391

Aamer Hayat Bhandara is a young farmer from district Pakpattan of southern Punjab. He was an elected member of the district council 2016-18. Prior to joining his family farming business, Hayat Farms, he studied politics and journalism at Bahauddin Zakaria University, Multan. He has also attended a short course in “Pro-Poor Market Development in Rural Areas” at the University of Queensland, Australia. He is a Fellow of Leadership for Environment and Development (LEAD) under LEADership Development Program. And has received a certification on Women Leadership in Trade Policy by Pakistan Regional Economic Integration Activity (PREIA).

In his role as a district council member, he served as member of various district and divisional level committees of Agriculture Department, Price Control Committee, and district Aman committee of Punjab government. As a livestock farmer, he is also attached with milk processing companies as a commercial development farmer.

Bhandara’s areas of interest include rural development, tertiary level governance and community politics, and sustainability of small- and landless farming. As a grassroots politician, his activism has focused on climate & food security, specifically, on the subject of Water- Food-Energy nexus. He is currently serving as Vice President, Australia Awards Alumni Pakistan. He regularly contributes op-eds to various international and national publications on issues of agriculture policy, and climate change.

In the context of food security challenges currently being faced due to Covid-19 related lockdown, BR Research sat down with Bhandara who shared insight from the rural battleground, while I also adding candid comments  on the ongoing inquiry into sugar industry and the regulatory distortions therein.

Below are the edited excerpts:

_________________________________________________________________________________­­­__

BR Research: Let’s start with a discussion of ongoing situation due to the epidemic. Logistically, is it even possible to implement a lockdown in rural areas?

Aamer Hayat Bhandara: It is very difficult to implement a lockdown in rural areas. There are not enough law enforcement personnel to make it happen. Moreover, people in rural areas are not as receptive of accepting the urgency of this situation.

BRR: While the government may succeed in meeting its wheat procurement target, how will the open market transactions take place if the lockdown persists?

AHB: The government has announced a procurement target of over 8 million tons. Remainder 16 million tons is sold in open market. That’s twice the amount. If the situation worsens and the government is forced to order a shutdown of grain markets, farmers will struggle to make ends meet as surplus may go to waste. Next season’s sowing may be impacted due to resulting liquidity dry up.

BRR: Do you believe that the prevalent situation will impact mobilization of machinery required during the wheat harvest season? What challenges do you believe the agricultural industry may face?

AHB: Much more than the lockdown, we are hoping to remain protected from inclement weather. Damage to crop, or delayed harvest because of hailstorm will impact availability of key staple household commodities. Agricultural monitoring bodies in Pakistan do not have the resources to accurately ascertain the output volume or the machinery needed to harvest it.

Often farmers are dependent on manual harvest. If a lockdown decision is taken for rural areas, it will impact the harvest of key crops and in the absence of adequate machinery, consequences may be unprecedented. Small farmers in Pakistan prefer using threshing machine, which alone requires 8 people.

BRR: Given the need to encourage social distancing to control spread of virus, do you agree that use of threshing machines should be banned?

AHB: Small farmers in Pakistan rely on inexpensive feed for livestock. While combine harvester machinery is efficient, and requires fewer people for harvest, it does not leave behind the straw from the grain that can be utilized as fodder for livestock. The threshing and reaper machine are preferable in this respect. They are also available more easily within every village and UC/tehsils at lower rents.

In contrast, combine harvesting industry operates on a ‘rental model’, as it moves across country beginning from Sindh where harvest begins early. Partial lockdown means that the movement of combine harvesting machinery to central and northern Punjab will most likely suffer hindrances and unavoidable delays. Meanwhile, the prospect of damage from hailstorm and inclement weather means that harvest cannot be delayed any longer.

While the threshing machine requires more labour, it also provides employment for rural community. It must be emphasized that thousands of landless rural families wait for the harvest season, as they are often paid in kind for their service; that is, receive wheat in lieu of cash income. Banning use of threshers in favour of combine harvesters’ risks worsening the crisis of grain availability to the poorest of poor.

BRR: Let’s now shift gears to the sugar industry. Is it correct that the role of middlemen – arth – is limited in the case of sugarcane because mills procure directly from growers?

AHB: That’s only partly correct to the extent of procurement; especially because many mills provide input financing to growers in the mill area at the beginning of sowing season, and thus prefer to transact directly come harvest, to ensure settlement of outstanding loan.

However, role of middlemen in sugarcane begins with payment. Mills issue Cane Purchase Receipt (CPR) to growers, which are non-negotiable promissory notes issued against the CNIC of the grower. Because raw material is procured on credit, role of informal lender arises. These may be called middlemen, arths or even investors/opportunists, who provide bill discounting services.

While some of these market players may act independently, often these are informally appointed on behalf of sugar mill managers, with or without the knowledge of the owners.

Thus, while the CPR may be issued at the notified price or a higher negotiated rate, terms of credit mean that growers seeking immediate cash payment to procure inputs for next sowing season receive cash inflow lower than the minimum notified price. This in my view is exploitation, especially because it occurs in contravention of the law.

BRR: What is your view of the support price mechanism? Do you believe that it benefits the growers and should be retained?

AHB: As a principle I am against all subsidies. While not a cash support, support prices also act as subsidies as they incentivize cultivation of one crop over others, by setting the price higher than the market rate. This breeds inefficiencies, as unproductive producers receive the same price for their output as those who make higher investment in inputs.

Support price system has turned wheat into a political crop. If the cost of production of domestic producers is higher than the price in international market, growers should be encouraged to move away to more productive commodities.

Policy makers must appreciate that farmers are businessmen just like any other and prefer sowing crops that offer highest returns with minimal investment. Because most farming in the country consist of smallholders that lack access to finance, they invariably turn towards crops that offer guaranteed returns.

BRR: Considering farmers’ lack of access to investment, an argument may be made that the government should notify support prices for all crops to create a level playing field.

AHB: The mismatch in farm’s working capital cycle fuel these distortions. Is it fair to force farmers to make utility payment during the sowing period when they have no income? I had made suggestions back in 2016 that the banking system should issue credit cards to growers and limit their use for purchase of farming inputs and to make pre-harvest utility payments. The outstanding loan may then be settled from earnings received post-harvest. This will also bring farmers and input providers into tax net, and help in revenue generation for the taxman.

BRR: Considering the gap in the market, why do you believe microfinance institutions with rural penetration have not forayed into these services?

AHB: Behavioural factors come into play. Unfortunately, it has been witnessed that farming families use loans to finance personal expenses such as their children’s wedding or education.

Institutional inadequacy is also to blame. Crop insurance is mandatory for agriculture credit advanced by banks. Yet, farmers are rarely compensated for crop failure; heat waves witnessed during last season offers once stark example. Regulation requires that in order for the claim to kick in, government must first declare the farm region as “Natural Calamity Area”, only then the insurance company pays the claim.

Given the seasonal nature of the business, farmer’s foremost objective is to ensure capital protection, yet the existing mechanism fails to meet that very goal.

BRR: It is argued that even if support prices were removed, crops such as sugarcane will remain popular due to their climatic resilience. Same may hold true for wheat given its persistent demand as a staple commodity. Does the motivation for investment protection drive preference for these crops?

AHB: While this is true for wheat, sugarcane’s case may not be the same. Given that domestic market has witnessed surpluses for several years, it can be safely concluded that if support price is removed, farmers will no longer have the financial security before making the cropping decision.

BRR: Is it correct that sugar mills are mandated by law to crush all cane harvested? Millers note that powerful landlords armtwist them into crushing more cane which leads to surpluses and need for export subsidy.

AHB: Yes, the law even says that if a mill refuses to procure cane, growers can register an FIR against them. But it is rarely enforced. The 2017-18 season was worst for the growers; if records are checked across the country, seldom will you find instances where an FIR was actually registered. If mills can get away with paying less than the notified rate, can they be really be forced into procuring raw material against their will?

BRR: As a politician, do you agree with the position that regulatory distortions such as support price and mandatory crushing persist in law because the ‘grower lobby’ is even more powerful than the millers?

AHB: Numerically, it may be true that number of legislators from agricultural landholding families may be higher than the rest. But let’s delve a little deeper. How many of those are practical farmers and not absentee landlords?

Whenever agricultural policymaking is discussed across political spectrum, how often are the farmer-politicians seen leading the way? While all major political parties have kissan wings; almost in all cases it is the feeblest wing among the rest. A review of manifestos of all major political parties will validate my point: rarely does the coverage of agriculture sector – which is touted as the backbone of the economy - goes beyond lip service.

Let’s not forget that the sugar milling industry witnessed an industrywide shutdown in December. If the grower lobby is really that powerful and the mandatory crushing law enforced, why did they not force mills to continue crushing? It is a matter of influence exercised by millers in the political sphere, and not a question of their representation.

Copyright Business Recorder, 2020

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