The pros and cons of corporate farming
Ahmad Fraz Khan
The half-cooked idea of corporate farming has received special attention of the present regime, but it has evoked more fears than hopes among farmers.
Corporate farming still remains a theory for both the government as well as farmers. None of the two parties concerned are sure as to what would be the final shape of the plan.
The government on its part has tried to put an end to the confusion and announced an eight-point policy package detailing its concept of corporate farming. However, farmers say that it has only added to the existing uncertainties. For them, the package comprises "chaotic and confusing bureaucratic overlaps rather than a credible policy guideline" as it involves 11 ministries and government departments. For farmers, such a heavy bureaucratic involvement hardly inspires confidence.
According to the package, the federal ministry of industries and production, the Board of Investment and the Ministry of Food, Agriculture and Livestock (MINFAL) will look after the industrial part of the concept. Since only those local and foreign companies will be entitled to corporate farming which have been incorporated under the Companies Ordinance 1984, the Security and Exchange Commission of Pakistan and the provincial governments would also be involved.
The provincial revenue departments will take care of the taxation part, as corporate farming is to be covered by the Agriculture Income Tax law, which happens to be a provincial subject.
According to the policy package, some special laws could be evolved to deal with possible labour problems. This would involve the ministry of labour as well as MINFAL.
The Central Board of Revenue (CBR) will ensure that all imports of agricultural machinery and storage facilities are exempted from import duty and sales tax.
State land would be provided for corporate farming on rental and ownership basis. The provincial governments, the boards of revenue and the Board of Investment would look after this part.
Provincial revenue departments would also ensure that all transactions have a one-time duty exemption.
"Such heavy involvement of bureaucracy hardly inspires confidence even among believers of the system," says a farmer. He said the idea of corporate farming was already there in the Companies' Act 1984. One does not know as to what made the government dust off the old proposals and come out with another policy package, he added.
"It is a recipe for disaster for low and middle class farmers," claims another farmer from southern Punjab. "Big landlords have once again conspired to save their holdings. Now, they can register a private limited company, transfer all of their land in its name and save it from any future land reforms," he lamented.
However, Afaq Tiwana, a member of the Farmers Associates Pakistan (FAP) and one of the architects of the concept of corporate farming, holds entirely opposite views. "Agriculture in Pakistan lacks capital," he said, adding: "Corporate farming is an attempt to attract capital in the agriculture sector."
Elaborating on the idea, he said if someone wanted to sell his house or factory for even Rs100 million, he would find a buyer, but not if he put up a 1,000-acre piece of land for sale. "It is largely because agriculture in Pakistan is backward and suffers from overemployment. These factors have turned it into a non-profitable business. In the western world, only two to three per cent of the population is normally involved in agriculture, but in Pakistan, around 70 per cent of the country's population is directly or indirectly involved in it and is still unable to feed the remaining 30 per cent. It is because the sector is inefficient due to a lack of funds. Corporate farming would attract investment, make the system efficient and end stagnation in this sector," he insisted.
"It will attract more investment but at what cost," asked an irritated farmer from central Punjab. The foreign investors come on their own terms and if independent power producers (IPPs) are any example, one should better avoid risking such investment. The whole nation has been held hostage to the investment made by the IPPs. The euphoria now surrounding the idea of corporate farming is a reminder of the enthusiasm that once revolved around the IPPs. The cost of IPPs has been borne collectively, but the price of corporate farming would be borne by small farmers alone," he said.
He said: "The government must only lend state land for corporate farming. Small farmers may be in for big trouble if they are exposed to foreign investors."
"To begin with, only state and barren lands would be offered for corporate farming," claimed an official planner. "Small farmers need not fear, as nobody could deprive them of their land. Only the willing farmers would sell their land to foreign or local investors. There is nothing to fear. Creating islands of efficient farming would have a trickle-down effect on rest of the sector," he insisted.
"Once foreign investors throng the market, small farmers would not be able to compete with them," feared another farmer. Cost of inputs and machinery would go down for them because of bulk purchases, putting small farmers at a comparative disadvantage, he maintained. The government must bind newcomers to exporting a major chunk of their produce for a certain period of time to save the local farming community, he suggested.
"This proposal could obviously be considered," the official said. "Since the whole debate is still being conducted on a conceptual level, possibilities of adjustments should not be ruled out. It is up to farmers to come up with as many suggestions as possible to refine the whole concept. The government is there to protect them and not foreign investors at their cost," he said.
"One does not need to fear a theoretical policy," claims a member of Kissan Board of Pakistan. "The problem always begins with implementation. Successive governments prepared plans that looked attractive at a theoretical level, but turned out to be a mess when actually implemented. One should not lose sight of this possibility," he insisted.
"Corporate farming presents both opportunities and challenges," claimed an official of the FAP. "The FAP supports corporate farming but with caution. The idea is the need of the hour. The sector needs money that can only come from the private sector, but certainly not at the cost of poor farmers who constitute a majority of Pakistanis," he added.