'Pakistan needs contract farming or effective cooperatives to boost productivity'

BR Research recently sat down with Dr David Spielman and Dr Stephen Davies, both of whom are Senior Research Fellows at the International Food Policy Research Institute (FPRI). IFPRI is a think-tank that provides policy solutions to reduce poverty, hunger, and malnutrition in developing countries. Following are some edited excerpts from our conversation which focused on issues facing Pakistan's agriculture:

<B>BR Research: Can we begin by unpacking the problem of low agricultural GDP growth in Pakistan?</B>

<B>David Spielman:</B> In Pakistan, agricultural growth has come at the cost of resource degradation. Soil nutrients, efficient use of water, all of these things have suffered in the decades after the green revolutions of the 1960s and 1970s. That said, yields have increased per acre sine the 1960s. Now, as urban areas encroach on farmland, water becomes scarce and soil becomes less fertile, one has to find ways of increasing and sustaining agricultural productivity. It's essential to food security of this country and the economy, because this is not just about wheat. There is cotton, dairy and livestock as well. There are many ways to approach this problem.

One is to increase the efficiency with which we use ground water. In our book for instance, there is a chapter on water and irrigation where we describe the potential and impact of Diamer-Bhasha dam, as well as the potential and impact of other water management strategies, such as better canal lining. And you get a pretty big bump in economic growth, not just by the Diamer-Bhasha dam, but also from a lot more basic investments, like canal lining, water efficiency, technology and the like.

Fertilizer use is another chapter we tackle. Again, it comes down to using soil nutrients more judiciously. Farmers in some parts of Pakistan tend to overuse urea, and underuse other fertilisers, so that it messes with the nitrogen-phosphate balances, whereas other nutrients like Zinc, Boron and Sulphur remain missing elements. A lot of this has to do with pricing and the subsidies granted to these industries for production.

As the cities expand, high-value agriculture has a chance to replace staples. However, unfortunately, we are not seeing the kind of diversification in the agricultural economy as we would expect, given the growth of cities and infrastructure here.

<B>BRR: In terms of overall food security, is it better to subsidise the end product or the inputs? What does the empirical evidence suggest?</B>

<B>David Spielman:</B> Our analysis shows that a lot of the subsidies really narrow the fiscal space of the government. I mean you are talking about gas for urea production, or wheat procurement, and irrigation. You are talking about massive amounts of public spending going into maintaining systems that are not as productive in economic terms as they are made out to be, especially for farmers and consumers. As a result, you are narrowing fiscal space. The government of Pakistan has a huge opportunity cost to procuring that much amount of wheat or diverting that much gas subsidies for two companies, or however many. And you have to think about what is foregone, e.g. school, health clinics, and agricultural R&D.

The big picture is that agriculture in Pakistan has been growing very slowly, largely, due to the intensification of input use, primarily fertilizer, for which you increasingly get diminishing returns. Pakistan is using more pesticides, more herbicides, more tractors, more water, but in an unsustainable manner.

What other countries have experienced is that input intensification is only one way to get more food and more agricultural production. It's actually technical change that can help drive a much more efficient agriculture sector. There is a need to increase total factor productivity - the way in which you combine land, capital and technology, change those parameters or just shift the technological frontier. Another option is getting better crop varieties, via genetics and efficient use of new irrigation technologies. That's how you get more out of less, while being sustainable.

<B>BRR: What are some of the ways to use water efficiently? We know in Hunza, for instance, water flowing down from Ultra is diverted to different communities down the stream, but is diverted on day to day and time to time basis.</B>

<B>Stephen Davies:</B> The traditional system is not bad, but some information flows could help divert water to where it is demanded more; the International Water Management Institute in Lahore, which is related to IFPRI, is looking at real-time information flows along secondary canals to see if they can move water at different times to places that need it more, or are short.

</B>David Spielman:</B> Yes, Hunza's example is a great one; they do that in Gilgit as well. That is precisely the idea, that you have these community-based water management systems and each village has developed its own water diversion system. It serves as a social cohesion. But when you transfer that sort of thing down to Punjab, it is a completely different story. It is a lot more difficult to manage. But we do have water users' associations, panchayats, and increasingly they may have a central role to play in how we manage scarce water.

<B>BRR: Do you have any analysis of comparative subsidies? E.g. how much subsidy does India give, or other players in global wheat, cotton and rice markets, give? What kind of subsidies do they give out and how are the poor targeted in those subsidies? And if the cost of the production is high, and competing economy is giving high subsidies, how do you deal with that?</B>

<B>Stephen Davies:</B> We have looked at India's situation regarding fertilizer and what would happen if you took this subsidy off. It would make it more expensive, for sure. In India, one reason they can do these subsidies appears to be the technology industries. They get enough revenue that they can subsidise electricity and fertilizer.

<B>David Spielman:</B> In effect, they can't afford to give such high subsidies, but in a democracy like India, you can't afford to take off subsidy because of the vote bank and there is more focus on the short term. The challenge with subsidies is that in the short-term you gain a lot by tapping the rural vote bank and even in the short term, increasing production. Output of wheat or cotton increases and that is pretty easy to do for policymakers.

In the long run, if you talk about agriculture playing a role in poverty reduction and economic growth, you really have to think more carefully about what you do. If you depend on more subsidies, the less space you have to invest in long term solutions, like R&D. You would not have had the green revolution in Pakistan without significant investment in R&D. In Pakistan and other developing countries, these subsidies far exceed the money put into R&D.