Given the increased strain on the import bill in recent times, the government is expected to prioritise the agriculture sector, making self-sufficiency in food staples a top priority in the upcoming FY24 budget, scheduled to be announced on 9 June (Friday), said brokerage house JS Global on Tuesday.

“We anticipate the agricultural sector would be prioritised by government in the FY24 budget, given the need to manage food inflation and maximise export potential from exportable products such as rice and cotton,” said the brokerage house in its report.

The report expects the government to take prompt measures to prevent the agriculture sector getting affected from the impact of heavy rainfall like the previous year.

The monsoon deluges of last summer submerged a third of the country, killing 1,700 people and displacing another eight million. The floods devastated the country’s crucial agriculture sector, leading to severe supply chain disruptions and causing massive food inflation.

The country’s annual inflation rose to 37.97% year-on-year in May, the statistics bureau reported earlier.

The finance ministry attributed the potential reasons for the rising price levels to flood damages, disruptions in supply chains, devaluation brought by the macroeconomic imbalances and political uncertainty.

Meanwhile, the JS report on Tuesday said that government may raise its allocation for research and development of agriculture in the FY24 budget.

“Government is also expected to allocate resources to farmers for the delivery of quality seeds, solarisation of tube wells and agri machinery,” it said.

The report highlighted that Fauji Fertilizer Bin Qasim (sole manufacturer of DAP) has proposed the government to either exempt General Sales Tax (GST) at input stage for the company or impose GST or duty on imported DAP.

“We concur that this does have weight as the company has been at a relative disadvantage to peers.

“We also expect incentives regarding farm credit policies which will provide greater access to capital for the agriculture community,” it said.

JS Global said that the aforementioned incentives would benefit the fertilizer sector “since higher farmer income will allow farmers to tolerate fertilizer price increases in the event of any further hike in input costs”.

“As gas price increases are on the cards again, where previous gas price increase announced in Feb-2023 still hasn’t received clarity, it is vital for the fertilizer sector to gear up for any pass on,” it said.