Budget 2008-09 : doing more to boost agriculture
budget speech by Finance Minister Syed Naveed Qamar
recognises the importance of agriculture as the backbone of
The budget 200809 envisages a growth of 5.5 per cent of GDP
and four per cent in the agriculture sector against 1.5 per
cent recorded in the previous year.
While financial allocations for agriculture have been
indicated for some of the proposed programmes, the overall
allocation to the sector is missing in the speech. It would,
therefore, be difficult to compare it with the allocations
made in the previous year(s). In the past only about two per
cent of GDP and around four per cent of the total public
sector development programme had been allocated to
The finance minister says the present government increased
the ‘support’ price of wheat from Rs510 per 40 kg to Rs625.
In reality it was not the support but it was the
‘procurement’ price as ‘support’ price is always announced a
few weeks before the sowing of a crop.
The new support price will be announced in August or
September, after reviewing the domestic and international
situation. This will help the farmers in taking decision in
time, allowing them enough time to plan their sowing of the
crop keeping in view the cost of various inputs, its
economics vis-à-vis other competing crops, and other similar
To determine the support price is a quite a complex
exercise. A number of factors, like the cost of production
of an average farmer, import and export parity prices, its
impact on the growing of competing crops, and so many other
factors, have to be considered. It cannot be done on ad hoc
In the past, such an exercise was done by the autonomous
Agriculture Prices Commission, which had qualified,
experienced and professional staff. Recently its name has
been changed to Agriculture Policy Institute which is an
attached department of the ministry of food, agriculture and
livestock (Minfal). There is no full-fledged head of this
organisation but additional charge has been given to a
senior Minfal official. Its staff has got depleted overtime.
There does not seem to be any good economist/agriculture
economist in the Minfal who could fill the vacuum. This is
happening in spite of the government’s decision to
strengthen the organisations and develop human resources.
I wrote to the prime minister on the issue. No action seems
to have been taken to improve the situation.
The farmers are confused about official policy on the
support price of the agricultural commodities. Whether it
would apply to wheat only or would be extended to other
crops, if so, which ones? Or would there be free market
system as advocated by the international agencies and
accepted by the previous government. This does not seem to
have worked under our local conditions.
It is vital for agriculture, the economy and for the
reduction of poverty that farmers get a price which at least
meets their production cost and some profit to induce them
to produce more. If the farmers have money, they can send
their children to schools, pay for medical expenses, etc.,
and feed their families properly.
The budget recognises the use of fertilisers, particularly
phosphatic (DAP). The subsidy on fertilisers is proposed to
be increased from Rs25 billion to Rs30 billion. In the case
of DAP, the subsidy will be raised from Rs470 to Rs1000 per
bag. In the use of urea and DAP, it is very essential for
the efficient use of these inputs that their ratio is
maintained at least at 2:1 if not 1:1. In the past this
ratio has been 3.5:1 or so.
The government would have to monitor the prices of both urea
and DAP to see if this ratio is not much distorted. The levy
of 15 per cent GST on DAP was a wrong step from economic
point of view taken under the advice of the international
organizations. It has been abolished by a bold step of the
Another important input for agriculture development is
water. The existing dams, viz Tarbela and Mangla are
gradually being silted up. It is estimated that these have
lost their live capacity by one third. The new dams like
Bhasha will take 8-10 years before it is commissioned. The
Kalabagh dam, for which feasibility report has already been
prepared, has fallen prey to the differences of politicians.
The only alternatives left at present are: efficient use of
the available surface water, and to build small dams; the
later will provide irrigation water but no electricity.
The provincial governments should carry out intensive
campaigns for educating the farmers as how to save water and
make efficient use of what is available. The farmers have to
be told that instead of flow irrigation, they should resort
to furrow irrigation and leveling of land where economically
possible through the use of lasers, adoption of drip and
The government should provide all possible facilities and
financial resources to the farmers to enable them to adopt
these new techniques which are costly. The farmers should be
encouraged to grow less-water requirement crops. Research
efforts to evolve drought resistant varieties should be
Availability of approved and certified seed is quite
important input for raising productivity. At present, public
sector provides only 33 per cent of the replaceable wheat
seed (once in four years), 54 per cent of cotton and corn,
and about four per cent of potato seed. The production of
such seeds should be encouraged and supplied to farmers.
It is a welcome proposal that agricultural tube-wells will
have continuous supply for 10 hours at stretch every night
to avail rebated tariff. However, most (about 75 to 80 per
cent) of the tube-wells, due to extensive mining of water,
have started giving saline water. The farmers dilute such
water with fresh water, but over time, it would be very
injurious to the soil and thus the crops.
Balochistan has great potential for water and agriculture
development, but has not received priority it deserves. The
arrangement for the import of bulldozers through foreign
collaboration to increase and improve cultivable area will
greatly help the development of agriculture particularly in
Setting up of cold storages to facilitate export of
perishable commodities like fruits and vegetables is a good
decision. The government should also ensure that small
farmers also get benefit from this facility for which some
institutional arrangements should be made.
There is a need for increasing storage facilities both in
terms of quality and quantity. At present, storage capacity
of a little over five million tons is available in the
public sector, which over time has gone down from 5.65 to
5.24 million tons. It would help meet a variety of
requirements. However, their quality has to be considerably
improved as some of the stores are in a very bad state of
affairs. Former prime minister Shaukat Aziz told a gathering
in the US that he allowed the export of wheat in 2006
because the country had a bumper crop and if he had not
allowed export, the rats would have eaten the crop if
An impression has been given to construct silos. Before
taking any practical step, it would be worthwhile to see the
operation of the four or five existing silos. Whatever I had
seen in Quetta and Karachi, it was a failure.
To increase the production of cotton, the B.T. varieties
should be grown only after carrying out trial production
under our local conditions. The growing of B.T. cotton has
its advantages and disadvantages and should be viewed very
carefully before taking a decision.
At present there is no system to produce B.T. seeds. What is
happening is that seed of B.T. varieties is being smuggled
from India and some other countries that have developed
their own varieties, or made arrangements with international
institutions from whom they have to import seed every year
and at their determined prices. But the quality of seed that
is being smuggled is not known.
B.T. varieties are hybrid ones and their seed have to be
produced every year. Moreover, it is said that hybrid
varieties are resistant to only one pest or disease, mainly
the bollworm. Our cotton is being attacked by a variety of
insects and diseases for which spraying becomes a must,
which is a costly affair.
The National Institute of Biotechnology and Genetic
Engineering (NIBGE) is said to be in the process of evolving
B.T. varieties suited to our local conditions. This work
should be encouraged.
The five per cent federal excise duty on premium of crop
insurance has been waived. But what is important is first to
see if this scheme is functioning properly at all in the
interest of the affected farmers. Many raise serious doubts
about its working. In many countries such a programme did
not find success.
Increase in the credit by Rs30 billion will help farmers to
meet their needs for input purchases. Again there is a need
to evaluate the programme whether it is benefiting the small
farmers also, if not, what are the problems facing them so
that these could be rectified.
There is a need for consolidation of holding to help improve
the efficiency of inputs, like fertilisers, water, tillage,
etc. Instead of stressing on land distribution under land
reforms, other important issues, like the tenure system,
cooperative marketing, supply of inputs through cooperatives
and so on need to be considered.
The sale of agriculture land around cities has been going on
unabated for house building or for industrial purposes. This
has decreased the fertile cultivated area to the detriment
of agriculture. Such sales should be banned. This would help
increase vegetable production.
Livestock is quite important for our economy as it gives 54
per cent to the value in the agriculture sector, which is
even better than the value of crops. Serious efforts have to
be made to raise their productivity and production of
especially meat and milk.
The budget should have given importance to collection of
agricultural data. Not only the local experts question the
correctness of data, but the international organizations
have also shown their serious doubts. For this, a committee
of experts under the aegis of Federal Board of Statistics
should be set up to evaluate the present system and make
suggestions to improve it. It is on the bases of such data
that policies are formed.
There is no clear policy of agriculture and even the budget
speech has failed to spell out the basis on which the
agriculture friendly policy should be formulated, for which
a committee of experts needs to be set up.
The budget speech has tried to indicate some programmes
which could help farmers to raise productivity and
production, but it has failed to do full justice to this
Former Advisor to the Chief Executive of Pakistan on Food &
Agriculture; and Founder Chairman, Agriculture Prices
Courtesy: Business Recorder