Are we food-secure? Pakistan's agriculture challenges

DAWN BUSINESS & FINANCE April 22, 2019
Are we food-secure?
Afshan Subohi
A democratic Pakistan can certainly better cater to the nutritional needs of its citizens. “No
famine has ever taken place in the history of the world in a functioning democracy,” wrote
Amartya Sen, an economist and a Nobel Laureate.
Pakistan is blessed with cultivable land and a sizeable peasant population. The information
explosion and ease of connectivity have instilled high economic aspirations in the rural
populace.
But if the implementation effort of successive governments has tapped only half the
potential of the agriculture sector, is it perhaps the lack of a cohesive policy?
Three decades ago the Agriculture Commission of Pakistan, in a report, blamed the
underlying rural power structure, which wields disproportional representation in the
federal and provincial assemblies, for the underperformance of the sector.
Abusing the decisive power vested in the state to manage the economy these elements, it
was found, colluded to evade taxes and divert subsidies and concessional bank credits to
serve its narrow interests.
The expert’s report, however, overlooked the growing role and influences of the reckless
trading community; particularly those involved in import and marketing of seeds, pesticides
and livestock.
The National Food Security Policy, launched by the PML-N government last May, two days
before its term ended, recognises food security as a key challenge.
It did not draw on the findings of the Agriculture Commission Report. Instead, it attributed
the slow pace of agriculture development and lack of food security to the following: high
population growth, rapid urbanisation, low purchasing power, high price fluctuations,
erratic food production and inefficient food distribution systems.
The policy hinted at power dynamics when it stated that the benefits of whatever agriculture
growth has been achieved have not been equitably shared in the rural economy. For some
reason the said policy document clubbed wheat, a key crop in context of food security, with
water intensive rice and sugar cane. It stated that the latter two have been given ‘more
attention’ in the previous related policies.
Ignoring the key factor — the political clout of the self-serving landed aristocracy — it listed
slow technological innovation, problems with the quality, quantity and timeliness of input
supply, inadequate extension services and technology transfer as factors responsible for the
situation. As the share of urban-based manufacturing and the services sector expanded, to
around 80.5pc of GDP collectively, the share of
the agriculture sector in GDP narrowed by
almost half; to 19.5pc in 2018 from close to
40pc in the mid-1960s.
The hold of the landed elite might be loosening
owing to growing economic strength in urban
areas. But, so far, they have managed to guard
and promote their interests using political
structures and by blocking any move in the
federal and provincial assemblies that may hurt
them.
As the country adopted market-based policies
of deregulation, privatisation and liberalisation
in the 1990s, the landed elite expanded its
commercial interests in companies in the
agriculture input market.
In a water scarce country, the story of the sugar
industry’s growth and expansion in the water-
intensive sugar cane crop, and the subsidy
managed for its market disposal, is a classic
case that sheds light on the mindset and
machinations employed by this class.
There is a lack of proper planning that
magnifies natural disasters or emergencies as
is highlighted by the unusual rainfall and
windstorms last week that, farmers fear, have
caused ‘irreparable damage’ to the local variety
of wheat crops.
The issue of agriculture income tax is another
example where the landed elite have been able
to prevail under all governments, before and
after the 18th Amendment. All the talk of
expanding the tax base to improve revenue generation remains just that — talk, when it
comes to taxing agriculture income.
This income is not even reported judiciously while businesspersons and petty salaried
workers are made to contribute to the national exchequer. The corporate sector in contrast
to big farm owners is routinely called on to pay extra, in the form of super taxes, to limit the
resource gap.
The role of the influential rural elite in water consumption is yet another area where abuse
of power is rampant. The diversion of water to farms owned by politicians and their lackeys
is rampant in the southern Sindh. There are several instances where the course of canals
have been diverted, or dikes constructed or destroyed, in an attempt to benefit some at the
cost of many.
The neglect of the key sector by successive governments — which continues to employ 42pc
of the labour force, provides livelihood to 62pc of the population and constitutes 65pc of
export earnings — becomes almost criminal when it comes to biosecurity.
The unsupervised commercialisation and audit-free import of seeds, pesticides and
livestock is said to be responsible for new crop and livestock diseases. These diseases have
compromised the local soil quality and agriculture ecosystem and have a far-reaching,
negative, impact on the health of consumers and on export prospects.
There is no dearth of organisations, mostly public but some foreign-funded, active in the
sector. According to information available on the website of the federal Ministry of National
Food Security and Research, there are 18 fairly big departments manned by several hundred
officers and staff.
A stopover at several research and extension service centres during a flying visit across rural
Punjab in 2017 depressed the writer. Most of these deserted buildings wore a haunted
appearance. Their directors blamed low budgets for the lack of capacity and seemed more
focused on survival than in meeting organisational targets.
“Besides the country, it is the grower and the end consumer of commodities who are at the
losing end of the agriculture equation in Pakistan,” commented an expert associated with
the government.
‘The goal is to curb import bill’
SAHIBZADA Muhammad Sultan, federal minister for the Ministry of National

Food Security and Research, talked to Dawn from his home town Jhung in
Southern Punjab. He expressed confidence that the PTI government will
resolve the long standing issues of the farming community that have held
agriculture growth potential hostage for so long.
The minister was preoccupied with attending to the post-stormy weather situation that
damaged the standing crop in several areas of the country. Perturbed by losses incurred by
growers across the country owing to harsh rains, he was working on a strategy to contain
losses and ensure that the affected growers get the support they deserve from the
government.
“I intend to go to affected areas for a realistic damage assessment to put up a case for a
relief package for those who lost their crop and incurred unsustainable losses,” he said.
The three time MNA, following in his father’s footsteps, entered parliamentary politics in
2002 by winning a national assembly seat on the PML-Q ticket. In 2008, despite PPP
groundswell after Benazir Bhutto’s assassination, he won again from the same platform.
He lost the election in 2013 when he contested on the PML-N ticket but made a comeback
with a bang in the National Assembly on a PTI ticket in 2018. Many consider him to be a
key politician who turned Jhung into a PTI stronghold by bagging all national and
provincial assembly seats.
The minister, with a landed background, was confident that the full potential of the rural
economy can be realised by implementing the food security policy with the active support of
the provinces.
Earlier a set of questions were mailed to the Ministry of National Food Security and
Research seeking the minister’s views. Citing the pressing current situation and a close
deadline, the responses to three out of five questions were mailed back that are reproduced
below:
Is Pakistan food secure? Do we have sufficient stocks of essentials to brave a sudden drop in
production in case of some calamity?
SMMS: Yes, Pakistan is food secure. We do have sufficient stocks of essentials in case of any
challenge. For major crops
like wheat, sugar cane, maize and rice, Pakistan is not only self-sufficient, it produces a
surplus.
Do you have a plan to reduce dependence on imports of edibles, particularly oil and pulses?
SMMS: Yes, the ministry is working with the provinces to launch various projects in the
agriculture sector for its betterment. One of the goals is to reduce the import bill of oil and
pulses. We want to produce indigenous oilseeds to achieve self-sufficiency.
Post-18th Amendment, how effectively is your ministry working with the provinces to
achieve food security?
SMMS: For the first time since the devolution, the ministry is working in collaboration with
the provinces to launch projects worth Rs290 billion of which the federal contribution is
around Rs90bn. These projects will be spread over the next four years. —AS
Tackling poverty via higher agri lending
BANKS have increased their agricultural lending; but whether higher lending has had any
impact on rural poverty remains debatable.
The percentage of those suffering from undernourishment, between 2000 and 2016, slipped
from 23 to 21, according to the Food and Agriculture Organisation. However, according to
the World Bank, people living below the poverty line of $1.9 a day fell from 29 per cent in
2001 to 4pc in 2015.
These readings show whereas overall poverty rate is declining fast, extreme poverty as
measured through undernourishment or hunger is not.
Agriculture lending can, and does, help in hunger eradication and poverty reduction if it is
backed by the right set of government policies and sociopolitical attitudes. Changes in
absolute numbers of agricultural lending can be of little help in analysing how helpful this
lending is.
But the quality of the lending and even its outreach can tell us where we are heading.
The problem with Pakistan’s agriculture lending is, it is still directed mostly towards the big
and powerful agriculturists’ lobbies. Further, this lending is injudiciously centred in Punjab.
Also, banks tend to lend more for agri-production and less for agriculture development.
The central bank, in addition to microfinance banks, is also involving
microfinance institutions and rural support programmes for lending
The State Bank of Pakistan (SBP) has tried to address all three issues by encouraging banks
to lend more to small farmers, keep an eye over district-wise agri-credit disbursement and
accommodate requests for agri-development borrowing more passionately than before.
For many years the central bank has been assigning indicative targets of agri lending to
Islamic and microfinance banks. But we have a long way to go.
Just consider this: 17,998 big landlords got agricultural credit worth Rs129.5 billion in FY17.
Against this, 1.64 million small farmers got just Rs158.4bn. A little more than 116,464
midsized landowners received Rs67.9bn, according to revised date by the SBP. Statistics for
FY18 have not yet been released.
Also consider this: As per SBP data, during July-Dec 2018, 84.8pc of the total credit offered
by banks went to Punjab; 12pc went to Sindh; 2.4pc to Khyber Pukhtunkhwa; 0.3pc to Azad
Jammu and Kashmir; and 0.2pc each to Balochistan and Gilgit Baltistan. More recent stats
are awaited.
And now, look at this: During July-Dec 2018, banks’ agri lending for development purpose
was just 8.6pc of overall lending to the agriculture sector (Rs76.6bn against the total of
Rs819bn).
Agriculture lending via microfinance banks is growing rapidly and has the potential to make
a positive impact on the lives of smaller farmers, thus helping in poverty control and hunger
eradication.
But owing to the nature of operations of these banks and their rules of business, including
per party lending limits; volumetric gains in their lending makes a small percentage of the
total agri lending.
Between July-Dec 2018, microfinance banks offered Rs81.5bn, or 15.5pc, of the entire
banking sector’s agricultural lending of Rs527.3bn. Going forward there is a need to assign
larger agri lending targets to these banks and make necessary changes in their rules of
business to meet those targets.
Also, there is a need to monitor banks’ agri lending at district levels more closely,
incentivise those that meet their district-wise targets and penalise the ones that don’t.
It is good to see that the central bank, in addition to microfinance banks, is also involving
microfinance institution and rural support programmes in agricultural lending
programmes.
And surprisingly, despite limitations in their scope of business, they are doing pretty well.
Between July-Dec 2018, all such institutions and programmes lent Rs16.7bn to the farming
community. That was equal to 3.2pc of the total agri lending.
In addition to addressing the technical aspects of agriculture lending, the political aspect
also needs to be addressed with wisdom.
Unless the federal and provincial governments develop a more harmonious relationship and
join hands in poverty minimisation, no instrument can become effective. Not even higher,
micro- level targeted lending.
Legal framework necessary but not sufficient

THE agriculture tax ordinance was enacted in 1997 and amended in2001. The post-
Amendment law obligates farmers with a landholding of 50acres or more of irrigated land,
and 100 acres of Barani land, to submit adeclaration of agriculture income on a prescribed
form.
They have to paytax on land ownership or income basis, whichever is higher.Post-18th
Amendment, agriculture was transferred to the provinces.
Currently, the legal framework and the administrative set-up to levy andcollect agriculture
income tax exist in all four provinces. Despite having anadequate record of landholdings,
the lack of political will, a weak infrastructureand the skill to assess income render the
exerciseworthless.
The revenue generation under this head isbetter in Punjab but it still continues to be a
tinyfraction of the actual potential.---AS
Report from the stock market

Dilawar Hussain
Unlike their counterparts in banking and oil and gas exploration sectors, agriculture-related
companies do not enjoy a commanding position in the Pakistan Stock Exchange (PSX).
Agriculture-related companies are part of fertiliser, food, textile and sugar sectors. Market
capitalisation of the fertiliser sector is Rs554.3 billion, representing 7.27 per cent of the
aggregate market capitalisation of all listed companies that amounts to Rs7.64 trillion.
Fourteen listed companies are directly or indirectly related to the food segment. Most of
them make juices, milk, ketchup, jam and jellies. They rely on agriculture that generates
basic raw materials. Major companies include Mitchell’s Fruit Farms, Shezan International,
National Foods, Nestle Pakistan, Unilever Foods, Rafhan Maize and Fauji Foods. There is
gruelling competition among producers to acquire cheaper orchards from farmers. Many
companies offer assistance to farmers to grow better-quality fruits.
Most of agri companies are engaged in fruit, citrus, milk and meat production,
which are essentially the healthiest ingredients of a balanced diet
Most of these companies are engaged in fruit, citrus, milk and meat production, which are
essentially the healthiest ingredients of a balanced diet. Although most companies cultivate
their own orchards, the wastage is still colossal. “Citrus, which can be easily converted into a
healthy diet, rolls down the river and ends up as wastage,” said an entrepreneur who set up
a food processing plant along the Jhelum River but closed it down soon due to losses
beyond his control.
According to a recent article in Herald, Pakistan is the world’s 10th largest producer of
citrus. But we are not as good at exporting — or even consuming — our produce as we are at
growing it. Farmers believe the government has done no research on the subject. Also, the
government hesitates to share with farmers whatever little research it has done, they say.
They also claim that agricultural subsidies — a norm in similar economies — are minimal in
Pakistan. A big landowner claims that the Indian government generously supports its
farmers through subsidised electricity for tube wells. Similarly, citrus trees in Japan
produce fruit until they are 70 years old, thanks to research. But such trees dry up in only
20-25 years in Pakistan, he says.
Milk and meat processing companies also complain about the poor availability of the main
raw material. The quality of milk and meat is often compromised, thanks to the fierce
market competition.
The big four fertiliser producers are Dawood Hercules Corporation, Engro Fertilisers, Fauji
Fertiliser, Fauji Bin Qasim and Fatima Fertiliser.
Fourteen listed companies are directly or indirectly related to the food
segment
Analysts projected that the tight supply of urea in 2019 would keep the pricing power with
major players. They believed that urea prices would remain elevated given the lower
probability of subsidised gas availability, reduced urea imports and the government’s
intention of selling imported urea at market prices.
Directors of Engro Fertilisers stated in their forward-looking statement in the latest annual
report that 2018 was the year of record profitability for the company.
The Engro directors expected that local urea demand for 2019 would remain stable at
current levels due to the price inelasticity of urea. Its production for 2019 was expected to
be 5.6m tonnes. International diammonium phosphate (DAP) prices were expected to
remain at the level of last year.
In the two dozen sugar and allied companies listed on the PSX, prominent ones are JDW
Sugar, Al-Abbas Sugar, Al-Noor Sugar, Baba Farid Sugar, Faran Sugar, Mirpurkhas Sugar,
Mehran Sugar; Premier Sugar, Shahtaj Sugar, Shahmurad and Shakarganj Ltd. Production
and profitability of sugar mills depend on the quantity, pricing and quality of sugar cane.
Listed companies in the textile sector are divided in three groups: spinning, weaving and
composite (which includes both spinning and weaving). Textile mills in the composite
segment remain under the shareholders’ glare as such entities usually post higher sales and
profitability that translate into dividends. Prominent among composite textile mills are
Nishat Mills, Nishat (Chunian) Ltd, Bhanero Textile Mills, Masood Textile Mills, Sapphire
Fibres, Blessed Textile, Faisal Spinning and Gul Ahmed Textile Mills.
Outdated techniques in the modern world

Mohammad Hussain Khan
SINDH’S first sugar factory was

established in Tando Mohammad
Khan — then part of Hyderabad
district — some time in the early
sixties. It was situated on the left bank
of the Indus.
Cotton cultivation was allowed on the

left bank while rice cultivation has
been banned in this area, at least on
paper. The right bank areas, however,
were to produce rice as a matter of policy. And all this land was fed by the colonial era
Sukkur barrage, built in 1932.
The crop-mapping or zoning strategy for Sindh’s agriculture sector was based on
parameters established long ago. Sadly, things are different today. A major shift is seen in
crop cultivation as the government, both provincial and federal, has turned a blind eye to it.
Crop zoning regulates the farm sector. It determines how and where a particular crop or is
to be cultivated so as to achieve the greatest yield. Such zones are defined in view of weather
conditions, available water flows, drainage system and soil fertility etc of that area. This
method helps ensure efficient utilisation of resources.
Sindh and Punjab are both bearing the brunt of adverse implications of this change.
Punjab’s southern parts are home to sugar cane cultivation thanks to the unusual growth of
the sugar industry in water deficient areas that do not suit the crop. Sugar cane is
considered Pakistan’s political crop commanding patronage of all bigwigs.
The crop-mapping or zoning strategy for Sindh’s agriculture sector was based
on parameters established long ago. Sadly, things are different today. A major
shift is seen in crop cultivation as the government, both provincial and federal,
has turned a blind eye to it
Pakistan’s National Food Security Policy was approved for the first time in 72 years by the
outgoing PML-N government. Punjab and Sindh — Pakistan’s two main grain producing
provinces — have also framed their own agriculture policies.
Besides these two provinces, Balochistan contributes towards the paddy crop while Khyber
Pakhtunkhwa focuses on tobacco, although it also has a lot of potential for maize
production.
The national food security policy, coupled with the two provincial agriculture policies, cover
all policy areas for sustainable agriculture growth. However, to ensure sustainability, what
appears to be missing is synchronisation at federal and provincial levels.
“The government needs to share information-based knowledge to convince growers about

which crop should be sown in a given season. This culture needs to be developed if we aim
to achieve sustainability in our farm sector which has a huge potential for growth,”
contended Dr Yusuf Zafar, former chairman Pakistan Agricultural Research Council.
Water, a precious commodity, is becoming scarce. The government often uses the public’s
purse to provide subsidies to first produce a certain crop, such as sugarcane, and then
export the sweetener with rebate, without benefitting either genuine farmers or consumers.
Farmers don’t get the desired price for their produce while consumers get expensive sugar
thanks to institutional
lacunas at the
implementation stage.
It is owing to a missing
zoning system that Pakistan
often has a bumper sugarcane
crop coupled with sugar
surpluses, all at the cost of
declining cotton acreage and
looming water scarcity. The
country has a huge potential
for cotton production and a large textile industry.
To borrow from a Punjab-based agriculture analyst, Ibrahim Mughal, Pakistan is spending

Rs600-700 billion on import of various agro-commodities especially cotton, edible oil and
pulses.
“We can easily produce [these commodities] by ensuring proper zoning to protect our
ecosystem. But we have to protect the natural habitat of our crops and we must stop
tinkering with the natural ecosystem or be ready to face the consequences,” he observed.
If the country earns foreign exchange on rice exports, it also spends a huge amount to
import edible oil and pulses. And both crops can be grown domestically, as evident from the
experience gained in the 2010 super floods when sunflower cultivation boomed.
The West Pakistan Rice (Restriction on Cultivation) Ordinance 1959 is often invoked in
command (left bank) areas of Ghotki Feeder canal (Guddu barrage), Nara and Rohri canals
(Sukkur barrage) to ban sowing of paddy. This mirrors the zoning system. But due to weak
governmental writ these rules are not strictly enforced, thus paddy surpluses are seen in
banned areas.
Pakistan exports a freshwater resource when rice is exported, says former chairman
Pakistan Council of Research in Water Resources Dr Mohammad Ashraf. Out of 8.6 million
tonnes of rice produced in 2015-16, 4.2m tonnes (worth Rs194bn) were exported. These
exports required 6.8MAF of freshwater amounting to Rs8.4bn (at Rs1,233 per acre foot of
water)
Due to nonexistent zoning, high delta crops

are grown in areas where surface water is
insufficient and groundwater is deep or
saline. Edible oil crops should be
introduced which require less water and
don’t affect foreign exchange.
Dr Ashraf underscored the need for crop

zoning given depleting water resources.
The focus should be on water conservation
and maximization of per acre productivity
to lessen the usage of surface freshwater
resources. Abstraction of groundwater,
another important resource, is going
unchecked and is another burden on the
ecosystem.
Over the years Pakistan has become largely dependent on cotton import thanks to declining
domestic production of cotton bales. The textile industry needs around 15m cotton bales
while domestic production hovers around 10m, resulting in imports.
The area under cultivation for cotton faces massive encroachment in Sindh and Punjab by
the sugar cane crop which continues to be politically patronised regardless of which party is
in power. This has lead to an unnatural growth of the sugar industry.
Special Report: Machiavellian middlemen
SYED Hasan Ali had a foolproof business plan last year when he decided to grow vegetables
on a 20-acre leased farm in Dhabeji, a small town 60 kilometres away from Karachi.
But his hopes came crashing down when his produce fetched a surprisingly low price in the
wholesale market. His revenue did not even cover his expenses.
“Every business has a mafia. In agriculture, that mafia is the middleman,” says the 45-year-
old grower.
Commonly known as Arthis, these middlemen buy produce from growers — sometimes
through their local contractors — and sell to wholesalers and retailers in major fruit and
vegetable markets for a cut of 6-10 per cent.
“I have no idea about the rate my brinjal was sold at in Sabzi Mandi. Wholesale prices of
perishables have a high intraday volatility. There’s no mechanism to stop the Arthi from
lying to growers,” he says. “The grower has no seat at the table.”
Trading is just one part of the crucial role that these middlemen play in the supply chain.
What makes them indispensible, however, is their status as informal moneylenders. Banks
shy away from lending funds to small growers citing lack of collateral as many of them work
on rented farms of less than 25 acres.
Hence, Arthis provide growers with funds at a mark-up that the latter use to buy seeds,
fertilisers and chemicals. In some cases, Arthis buy entire crops at the beginning of the
season while in others they conduct auctions and charge a fee from both sellers and buyers.
According to Asif Ahmed, one of the prominent Arthis who also serves as vice chairman of
the market committee that manages Karachi Sabzi Mandi, criticism of middlemen is
uncalled for. “Arthis take risks, growers don’t. It’s our money that’s at stake. We extend
financing to growers when banks look the other way,” Mr Ahmed says.
He denied that Arthis charge ‘exorbitant’ interest rates, although a study published by the
State Bank of Pakistan (SBP) in 2014 found out that growers pay a mark-up of almost 50pc
on funds they borrow from informal lenders. This mark-up is in addition to their 6-10pc fee
that they charge for trading about 90pc of the entire produce that comes to the market.
Muhammad Kashif, a Karachi-based wholesaler, says growers are ‘captive customers’ of
Arthis. “Sabzi Mandi is off-limits to independent growers. They can’t bring their produce
inside the Mandi without involving an Arthi. The only way for growers to cut out the Arthi is
to become one by setting up shop,” he says.
Middlemen defend this rule, claiming that gatekeepers exist in every line of business. “You
can’t trade shares in the stock market without a broker. Why should that not be the case in
Sabzi Mandi?” says one Arthi, requesting anonymity.
But the issue becomes thornier whenever a grower tries to change Arthis without any ‘fair
reason’. In such a dispute, market committee members convene a Jirga to settle the issue.
Both the grower and the new Arthi are fined for causing a loss of business to the original
middleman.
So how exactly do these Arthis make money? Most of them maintain informal credit lines
with suppliers of farm inputs like seeds and fertilisers. Arthis provide growers with inputs at
a higher than actual price that is adjusted at the end of the season along with the standard
commission.
For example, the SBP study found that a bag of urea selling for Rs1,800 in the cash market
was sold for Rs2,400 in credit. This translates into 33.3pc mark-up for a four-month crop
cycle or 100pc mark-up on an annual basis.
“The credit extended through Arthis is without any guarantees. Arthis have a dual
advantage in getting commission on produce sold through them in the wholesale markets,”
it said.
Lending and recovery methods of these middlemen are not subject to any regulatory
oversight. Except for a small ‘market fee’ on the total traded value, they operate mostly out
of the tax net.
Growers believe the banking regulator should simplify procedures for agriculture financing.
They say the regulators should promote ‘group lending’ on personal guarantees for
agricultural inputs through growers’ representative bodies. “Arthis exist because growers
have no one else to borrow from. Making banks extend credit at market rates will wipe out
informal lenders,” says Mr Kashif.
“The provincial government should set up farmers’ markets across major cities where
growers can bring and sell their produce without engaging any middlemen,” he adds.
After his loss in the last crop cycle, Mr Ali of Dhabeji is now growing animal feed on his
leased farm. One of the reasons for his decision to switch from vegetables to animal feed is
the upcoming Baqra Eid.
“I can bypass the Arthi of the Cattle Market and set up a retail stall anywhere in the city. I’ll
save money by not paying the middleman. At least I’ll know for sure the actual selling price
of my produce.”
Deadly pesticides for profit

Nasir Jamal
GLOBALLY, policymakers and

researchers are trying to find
solutions that can help farmers
move away from, or at least cut, the
use of chemicals — harmful for
human and animal health, the
environment and biodiversity — to
a sustainable level without affecting
their livelihoods and ability to feed
a growing population.
Although the elimination or

reduction of the use of fertilisers,
pesticides and other synthetic chemicals on major and minor crops is just one of the several
sustainability goals, it remains on top of the priority list of most countries across the world.
However, in Pakistan, we continue to try to swim against the global current at the cost of
human health, water contamination, soil erosion, decreasing soil fertility and yields.
The indiscriminate and unbalanced application of chemicals has been on the increase as
farmers, particularly small landholders, continue to try to cope with rising insect and
disease attacks on their crops.
Although the elimination or reduction of the use of synthetic chemicals

remains on top of the priority list of most countries across the world, in
Pakistan we continue to try to swim against the global current
Ironically, the abuse of chemicals has increased the requirement for fertilisers to improve
soil fertility and made insects more resistant to the pesticides.
Farmers from across Punjab, for example, say their use of soil nutrients is increasing by the
season to maintain their productivity levels. Similarly, they are forced to spray their crops
four to five times, instead of the two to three times required a few years back, to fight insect
attacks and plant diseases.
“Many of the problems our farmers are facing today are the result of an imbalanced use of
fertilisers and excessive spray of pesticides,” Dr Sagheer Ahmed, the director of the Cotton
Research Institute (CRI), Multan, tells Dawn.
“Fertilisers should be used only after a lab analysis of the soil, and insecticides must not be
sprayed on crops unless the pest or disease attack crosses the minimum threshold.
“But our farmers do not care about these requirements and resort to an indiscriminate use
of chemicals to ‘protect’ their crops, mainly because a vast majority of them are
smallholders and cannot afford losses,” he says.
Dr Sagheer Ahmed argues that the entire agriculture land in Punjab is massively deficient in
three major nutrients — nitrogen, phosphorus and Potassium.
‘Our farmers do not care about safety requirements and resort to an

indiscriminate use of chemicals to ‘protect’ their crops, mainly because a vast
majority of them are smallholders and cannot afford losses’
“Since chemicals containing phosphorus and potassium are expensive, the growers choose
to use just urea — and that too in excessive quantities. Likewise, the farmers start spraying
the crop on the first hint of disease or insect attack.
“Our farmers lack awareness, education and cash, and the crop protection companies take
advantage of them and misguide them to meet their sale targets,” the director concludes.
According to Punjab agriculture department officials, less than a fifth of the farmers across
the province have ever received basic training on how to handle and use pesticides.
“Most pesticides used to protect crops are hazardous or moderately hazardous to human
and animal health and the environment. Over-reliance on pesticides for better yields, and
lack of knowledge to properly handle their use, mean high risk of pesticide exposure and
pesticide residues on crops, especially on vegetables and fruit,” a senior official, who refused
to speak on record, insists.
Dr Javed Ahmed, the director of the Ayub Agriculture Research Institute, thinks the
solution to sustainable agriculture lies in adopting Integrated Pest Management systems
shifting towards new seed technology with inbuilt pest resistance.
“The world is moving away from chemical sprays on crops and fertilisers, and new seeds
with higher resistance to pest and disease attacks, water scarcity and drought conditions are
being developed. We need to bring in such new seed varieties that will reduce the need for
chemical sprays,” he says.
Integrated pest management, according to experts, means the use of plant protection
products and other forms of intervention at levels that are economically and ecologically
justified. They minimise the risk to human health and the environment.
But many farmers disagree. “The concept of integrated pest management as a crop
protection system has failed to deliver its promise. Take the example of Bt cotton. The use of
Bt cotton has increased the frequency of pesticide sprays in every country it is being grown
in, including India,” asserts a progressive farmer from Bahawalnagar, Ijaz Ahmed Rao.
“Now the farmers are turning back to the crop rotation method — the practice of growing a
series of different types of crops in the same field so that the soil is not used for only one set
of nutrients and build-up of pests is mitigated. This is to control pests, protect soil fertility,
obtain higher yields and minimise damage to human and animal life and the environment.
We must return to nature for sustainable agricultural practices,” he concludes.
No walls on our borders

Fatima S Attarwala
DESPITE being an agri-based economy, with an import bill of $6 billion in 2018, Pakistan is
hardly food sufficient.
Though we produce enough rice, dates, wheat, and potatoes for our needs, staples such as
edible oil — used to make ghee — and pulses are imported. And what is grown within the
country is not protected from imported pests.
The composition of food imports as a percentage of total imports has averaged at 11 per cent
since 2003, with edible oils taking the lion’s share, according to Trade Map data. While in
absolute terms, edible oil imports, mostly palm oil, has increased over the years, its share
has declined from 53pc to 36pc over a decade and a half.
The decrease in share of edible oil as a percentage of overall imports is in part because of an
increase in oilseeds, namely soybeans. Most oilseeds are mainly crushed for oil, however
soybean seeds are crushed for protein and used in poultry feed.
Increase in soybean imports actually contributes towards food security, says Shakil Ashfaq,
chairman of the All Pakistan Seed Extractors Association and CEO of Shujabad Agro.
While countries have advanced systems to detect food items entering their borders, in Pakistan
there is no checking, especially at points such as Torkham and Chamman
Soybean formulation of poultry feed was introduced by Charoen Pokphand Group, a Thai
company, in 2013. Incorporating soybean in poultry diet has decreased their Feed
Conversion Ratio (FCR).
The FCR indicates the amount of feed that needs to be given

to get one kilogram of meat. Typically, the FCR in Pakistan
used to be 2.5kg but with the introduction of soybean it has
been reduced to 1.6kg because of which the cost of poultry
has come down. Simply put, more nutrition is now packed in
a small amount of feed.
While soybean imports may be good news, the volumetric

rise in palm oil imports is not. The key ingredient in making
vegetable ghee is palm oil. Palm oil is also the preferred
choice in the confectionary, baking and frying industries.
An increasing population and the rise of the fast food culture

and snack industry has increased the consumption of palm
oil and made it a staple of the country’s import bill.
At 2.96 million tonnes, as per Trade Map data, 2018 saw the highest quantum of palm oil
import to date. Import substitution in the form of cultivation of oilseeds leaves a lot to be
desired.
Over the last decade, area under oilseed has decreased from 8.47m hectares to 7.6m
hectares despite the country’s growing population, and hence, need for edible oil.
Other than edible oil, oilseeds, and tea, pulses are a top food import. Though we grow a
variety of pulses, including gram, lentil, moong bean, mash, red gram, and cowpea,
production is not enough to satisfy domestic demand. At nearly a billion dollars, 2017 saw
the highest import of pulses in the country’s history.
Import dependency aside, lack of sanitary and phytosanitary (SPS) standards for food
imports opens a whole different can of worms.
A senior official of the Ministry of National Food Security and Research lamented the lack of
agri-protection from pests, including insects, diseases, bacteria, and viruses.
“Around 60-65pc of pests that infect our crops are imported because we do not have
regulatory checks or a holistic set of SPS standards,” he said.
Due to insects and disease, production decreases while production costs increase. In 2012,
Pakistan consumed pesticides in the range of Rs25-30bn. Today this number has increased
to stand at Rs75bn.
The official indicated that the existence of infections and pests in our crops prevents access
to high value markets.
He narrated the example of dirt accompanying potato seeds imported from Holland that
was infected with Golden Nematode. This is one of the world’s most damaging potato pest
and can remain present, dormant in the soil, for up to 30 years. As a result of this infection,
Russia stopped importing all agri-products from Pakistan for a while.
Another example he narrated was of the weed Parthenium that was imported through food
substance from Australia. This weed is not only capable of destroying 60-80pc of the
country’s crop but can also prove to be deadly to cattle.
While countries have advanced systems to detect food items entering their borders, in
Pakistan there is no checking, especially at points such as the Torkham and Chamman
border. Not only is the country vulnerable due to import dependency of certain staples, its
lack of biosecurity is a threat to domestic cultivation as well.
Stories From The Field

Fraz Ahmed Khan | Amjad Mahmood
Technology all the way

Abad Khan - Member of the Farmers
Associate Pakistan and President
Guava Association
Abad Khan owns three different farms in as

many ecological zones in Punjab. He
believes that instead of flashy and grandiose
ideas, the government should help farmers
with technology adoption at the ground
level.
For example, incubation centres should be set up where farmers can go and learn about the
latest technologies for specific crops. This way they can return and use their knowledge to
tackle problems that they face. The government should also try to reach out to farmers
individually.
“The soil textures of all of my three farms differ, even within one farm, and usage of
fertiliser is linked with this texture. I should be able to upload soil texture and get specific
requirements for my farm,” he says. “This was started by the previous government but
stopped by the present one. It needs to be restarted. Help for farmers should be GPS
enabled rather than based on lengthy paperwork as is done currently,” he added.
No place for food

Chaudhry Maqsood Jutt - President Potato, Vegetable and Fruit Growers
Cooperative Society
Storage capacity is a subject of confusion rather than

planning asserts Chaudhry Maqsood Jutt. The
government does not have credible figures of
different crop area, crop production or storage.
For example, the provincial government has been

insisting that potato production is at 4.3 million
tonnes. The figure could be well over 10m tonnes.
Similarly, there are no accurate storage figures
available. Okara district, the main potato producing
area, has over 2.5m tonnes of storage capacity, which
fills to the brim every season.
In the last few years, new storage was built by investors from Sargodha. While the capacity
is sufficient there are operational issues. Firstly, the cost of storage has become a deterrent.
Storage owners charge Rs450 per bag for a season. Cost of a bag is Rs200 and labour
charges add another Rs100. This adds Rs6.5 per kg to the cost.
With exports slowing down, for the last two years no farmer has been able to recoup this
cost, said Mr Jutt. Storage charges are prohibitive because initial investment has been
massive at around Rs2,000 per bag. This added up to Rs60m, excluding cost of land. Cost
of running storage is exorbitant as well, mainly due to electricity.
To make matters worse, storage owners do not take responsibility for potatoes rotting in
case of electricity failure. There is no insurance system in place. Entire stores of produce
have gone to waste due to this. At Rs3,000 per bag, potato seeds are costly. If 100 bags of
seed rot, famers suffer irreparable losses. Thus, instead of building storage capacity, the
regularisation of existing capacity is needed.
Taxation: discriminatory and

arbitrary
Sarfraz Ahmad Khan - Vice President of
Kissan Board Pakistan
A practising farmer and former member of the

Federal Board of Revenue, Sarfraz Ahmad
Khan says that the current taxation system is
discriminatory, arbitrary and loaded against
farmers.
For example, let’s take the case of exemption. For non-agricultural income the first
Rs400,000 earned is tax-free whereas the corresponding amount for the farmer is only
Rs80,000 — five times less than that of businesspersons.
Similarly the progressive rates work against the farmer’s interest. For a slab of Rs100,000,
farmers have to pay five per cent of the income. Similarly, for agricultural income up to
Rs200,000, farmers have to pay Rs5,000 plus 7.5pc on over Rs100,000. Going further up
the slabs, at Rs300,000 of agricultural income, farmers are charged Rs22,500 plus 15pc on
income above Rs300,000. On the other hand, non-agricultural income is not taxed for any
of these slabs.
The disparity is further evident when the tax rate for non-agricultural income is analysed.
For the slab of Rs400,000-800,0000 tax is only a lump sum rate of Rs1,000. For the next
slab, above Rs800,000-1,200,000, those with non-agricultural income must pay only
Rs2,000. This is indicative of how the dice is loaded against farmers.
What complicates the issue is the income assessment mechanism. Farmers’ income varies
from region to region, season to season and crop to crop. The revenue bureaucracy is simply
not trained in such assessment mechanism, resulting in discrimination and arbitrariness. A
system of progressive per acre taxes should be put in place instead.
A woman at the farm

Batool Kauser - Farmer
Batool Kauser was rushed to the civil hospital when she fell
unconscious due to heat, the fumes rising from the
chemical fertiliser she was applying, and weak health.
Taking care of the family’s five acres of land since the death
of her husband a couple of years ago, Ms Kauser is amongst
the 68 per cent illiterate female farm workers. Even before
her husband’s death, she had been working in the fields
shoulder to shoulder to save labour costs.
A mother of three, she says fainting is not the only hazard

at the farm. Without day care centres, babysitters, or a joint
family system, children have to be carried to the fields.
Proximity to hazardous agricultural chemicals, snake bites,
and stray dogs are all threats to children as well as their
mothers.
Harassment at the hands of male workers and landlords is

common due to the women’s subservient position. Unlike industrial or commercial sectors,
there is no help at hand in the form of nearby colleagues, she narrates.
During her husband’s lifetime, she knew little about micro-credit facilities. After his death,
fear of getting trapped in the vicious cycle of interest made her depend on loans from
friends and family. Furthermore, a social restriction on women’s mobility prevents her from
attending meetings and signing (thumb impression) required documents to obtain formal
loans.
She admits that she had little control over decision making during her husband’s lifetime.
Similar to other women workers, she was involved in ‘manual’ tasks such as digging,
stacking of bales, sowing seed, plucking vegetables, and peeling sugar cane. Her husband
would do the ‘heavier’ and somewhat more technical work, such as ploughing, watering,
tractor driving, and dealing with heavy agricultural machinery.
The country’s step-children
Mahr Ikramullah Lak
Farmer
“Forget funds and other facilities, we (the farmers) do

not even receive guidance or technical support from
the government,” bemoans Mahr Ikramullah Lak.
Agricultural extension services provide knowledge of

scientific research and application through farmer
education. “Extension services men rarely visit us. If
we approach them ourselves to seek guidance, they just direct us to certain dealers for
pesticides. But the way the government talks, it appears that all state resources have been
put at our disposal,” he laments.
Mr Lak asserts that farmers get poor returns because of lack of storage capacity. The
government provides storage for strategic wheat stocks only, while talk of building storage
for other crops remains just talk. There are also no markets where farmers can sell their
produce directly without paying [commission] to the middlemen.
Farmers have to sell their produce at the earliest to pay for farm inputs bought on deferred
payment of the crop. Investors take advantage of this fact and purchase at low rates to sell
at exorbitant prices during the season.
Poor training and lack of technology lead to losses before and after production. Absence of
crop insurance results in heavier losses when the weather turns hostile. “We face up to 30
per cent production wastage on normal days. This figure goes up to 50pc in case of rain and
thunderstorm, and as high as 70pc in case of hail,” he says. Yet promises of the crop
insurance scheme have yet to be fulfilled.
Farm labour is another factor which Mr Lak believes will hit the farm sector hard in days to
come. Previously, workers would themselves approach a grower a month before harvesting
of wheat against 80kg per acre. But now they are not available at double the rate as most
have left for urban centres in search of better opportunities, he adds.
Common sense cultivation

Dr Anjum Ali - Director General of Punjab Agriculture Department (Extension)
Grow food not plants and plant only those trees that bear fruit. This is the best option to
ensure food security with available resources, believes agricultural scientist Dr Anjum Ali.
Referring to the prime minister’s one billion tree
plantation target, he says the programme should not just
take care of lungs but also people’s stomachs. In an
agrarian society, while availability of food is not an issue,
nutrition and affordability are.
Efforts such as soil analysis are being undertaken by the

public sector for natural fortification of grains. When
completed, it would allow application of micro-nutrients
like zinc in soil found deficient of it. To increase
affordability, Dr Ali calls for focus on enhanced crop
yields, diversification and value addition so that cost of
production may be reduced.
He believes that nutrition standards should be set in accordance with local tastes and
consumer behaviour instead of blindly following international standards. For example,
while people here do not consume as much meat as they do in developed countries, ghee
consumption, which is also a source of animal fat, is higher in Pakistan. Forcing consumers
to adopt world standards will not improve the nutritious value of their food.
Prelude to a drought
Khaleeq Kiani
THE country’s precarious water situation

has become one of its most well-known
facts. Per capita water availability has
declined from 5,260 cubic metres in 1951 to
less than 1,000 cubic metres at present.
A more painful reality to accept is that since

Mangla (1967) and Tarbela (1976), the
country has failed to build one-dam-a-
decade as required under the development
plans of the Indus Water Treaty of 1960.
While the share of agriculture in the

country’s GDP is declining, the population
is growing at an annual rate of 2.4 per cent.
Water scarcity has raised food security
concerns given Pakistan’s overwhelming
economic dependence on agriculture.
Importantly, irrigated agriculture is the

backbone of the country’s economy and
consumes around 95pc of the nation’s water
resources, according to the Ministry of Water Resources.
Changing demand patterns may increase demand for water outside agriculture. Within a few
decades, growth in agricultural consumption of water may be limited. This will require
reforms and investments that dramatically reduce water losses
“With a rapidly growing population, Pakistan is heading towards a situation of water

shortage and by corollary, a threat of food insecurity,” the ministry’s National Water Policy
stated.
The main challenge is that water per capita availability is estimated to further drop to about
860 cubic meters by 2025, marking our transition from a “water stressed” to a “water
scarce” country. Hence, there is a need for rapid development and management of the
country’s water resources forthwith; to ensure food security on a sustainable basis.
It was in this background that the country’s first national water policy was unanimously
approved in April 2018. The centre and four provinces agreed to increase the allocation for
water sector projects to at least 20pc of the Public Sector Development Programme (PSDP)
next year, from about 9.6pc at present. Subsequently the allocation is to be increased to
30pc by 2025.
The allocations used to be 17.6pc of total PSDP in 2003-04 and dropped to a meagre 3-4pc
before it was increased to 9.6pc in recent years. This was with the induction of Diamer-
Basha and Mohmand dams in the development portfolio.
Another sustainability challenge is unregulated groundwater extraction across the country.

The water resources ministry estimates that more than 1.3 million tube wells operate
without any monitoring or regulation, putting unprecedented stress on the water table.
The centre has prepared a pilot project for Islamabad to start formal registration and
licensing of groundwater extractors. An annual fee will be charged for higher than licensed
quantities consumed. This model would then be replicated in the provinces to ensure
sustainable groundwater extraction.
The World Bank (WB) agrees that the National Water Policy provides a sound basis for
reform, but provincial water policies need more attention. Furthermore, the underpinning
legal framework is incomplete and needs strengthening.
In a WB report “Pakistan: Getting More from Water,” the bank noted irrigation water use
could increase to meet growing food demand if efficiency improvements were made. As
wealth increases, changes in diet will have significant impact on commodity demands and
crop choices.
While the share of agriculture in the country’s GDP is declining, the population
is growing at an annual rate of 2.4 per cent
While irrigation dominates water use in the country, the four major crops (rice, wheat,
sugar cane and cotton) use 80pc of the water while contributing only 5pc to GDP. Poor
water management, conservatively estimated, costs the country 4pc of GDP or around $12
billion per year, the WB noted.
Changing demand patterns may increase demand for water outside agriculture. This means
that within a few decades, growth in agricultural consumption of water may be limited. This
will require reforms and investments that dramatically reduce water losses.
It is argued that to ensure continued food security and contribution to accelerated economic
growth, the productivity of water in agriculture must be greatly increased. Reforming
distorted agricultural policies that support wheat and sugar cane will help move water
toward high value crops.
Changes in diet — already apparent as incomes rise — will further change patterns of food
consumption. If production of low-value cereals declines in response to falling demand,
more water may shift to growing cotton for export.
Cotton, and the associated textile industry, generate considerable export income for
Pakistan and should remain economically attractive over the long term, especially if greater
value addition post-harvest is achieved. These benefits can only accrue, however, if major
reductions in water losses can be achieved.
Assuming optimistic rates of economic growth, modelling suggests Pakistan can reach
upper-middle income status (GDP of $6,000 per capita) by 2047, ensure adequate food
supply, improve environmental sustainability, and deliver better municipal and industrial
water security; even in the context of a rapidly warming climate. However, this will not be
easy and will require action on many fronts.
‘To regulate or not to regulate,’ that is the question

APPROPRIATE rules and regulations are imperative for the resolution of a
conflict of interest among stakeholders, to discipline the market and to
support reforms required for the country’s socio-economic progress. This is
expected to translate into a ruled-based economy, politics and society.
But the reality is different because of ad hoc, ill-conceived and extractive government
policies and weak regulatory oversight. It indicates poor governance. For rule-based
economic activities, good governance is a pre-requisite. To quote development economists,
governance has to be ‘problem-driven, context-specific and people-centric.’
Nevertheless past experience demonstrates that over-regulated, state-directed economies
have failed to deliver. Regulations should not stifle the economy. Experience calls for
creating awareness for voluntary compliance by improving the government’s service
delivery, not by sermons by state functionaries.
Administrative and regulatory measures operate within the ambit of a given social and
cultural milieu. For example, issues become more problematic in a backward agriculture
sector. That much of farming remains in the informal sector shows that neither past
reforms nor regulatory measures have worked effectively.
In the absence of modern production methods, crop yields per acre are so low that 42 per
cent of the country’s workforce produces and survives on 20pc of the national income.
Agriculture is growing at less than half its potential of 7pc per annum. Sustainable
development remains elusive because farming is not being run on industrial lines.
Experience demonstrates that over-regulated, state-directed economies have failed to
deliver. It calls for creating awareness for voluntary compliance by improving the
government’s service delivery, not by sermons by state functionaries
As the backbone of the country’s economy, and for ensuring food security for all, farming
deserves to be placed at the centre of the national development strategy. It contributes
19.5pc to GDP, employs 42pc of the labour force, provides livelihood to 62pc of the
population and 65pc of export earnings.
The Food Security Assessment Survey 2016 shows that agricultural growth has not
benefitted the rural poor. Approximately one-fourth of the population in the countryside is
undernourished with child wasting and stunting posing major problems.
Millions are just subsistence farmers or landless peasants whose families suffer from
malnutrition and are unable to afford proper education or healthcare facilities. The output
and accessibility of crops such as vegetables, fruits, nuts, oilseeds, pulses, livestock products
etc, which contribute 50pc of nutrition, are inadequate for the vulnerable.
Diets of the people are deficient in essential micro-nutrients such as iron, calcium, vitamins.
The “zero hunger’ and poverty reduction programmes have yet to become a part of the
mainstream farming or food processing industries.
The issue of rampant poverty and inequality remains essentially unresolved despite two
land reforms and subsidised farm inputs given to small growers. Big farmers, according to
anecdotal evidence, often force small farmers to sell their land.
Perhaps the major reason for discontinuation of distribution of state lands to landless
peasants in Sindh was the opposition by the landed gentry. Big growers occupy, illegally or
legally, kutcha lands. Maximisation of yields suffers at the hands of absentee landlords.
Supply of irrigation water and subsidised gunny bags are skewed. Tenancy laws are
observed more by their violations. The question arises: what are regulatory authorities
doing? Answer: helping the powerful.
Barring farm lords, earnings of the majority of the famers are squeezed by a host of other
stakeholders, leaving very little money in their hands for much needed savings and
investment.
The production of crops, their prices and cost of farm inputs fluctuate from one harvest
season to another. Indicative prices of wheat and sugar cane are becoming increasingly
controversial and a mounting burden on the government exchequer.
To achieve economies of scale and empower growers with technology and innovation, small
farmers should be encouraged to join corporate or cooperative farms. Their individual
share, in a corporate entity, could be determined by the size and fertility of their
landholdings.
Digitalisation has made title of landholdings transparent while de-freezing the murky
farmland market. This can help consolidate landholdings, encourage bank lending, spur
documentation, and increase tax revenues.
In this age of individual self-determination, the real issue is to empower farmers and
households to boost production. This shall ensure food security for all and enable farmers to
improve their own livelihood.
DAWN BUSINESS & FINANCE March 25, 2019
Our LNG flaws

Khaleeq Kiani
Pakistan LNG Terminals Ltd proposed that the private sector be allowed to import LNG to
reduce idle capacity.
Last week, rates of liquefied natural gas (LNG) in the fixed spot market for deliveries in May
dropped to $4.7 per million British thermal units (mmBtu). This coincided with Pakistan’s
public-sector entities finalising the bidding for six cargos with deliveries due between May 1
and June 30.
The lowest evaluated bids ranged between 9.278 per cent and 9.938pc of the Brent price. At
the Brent price of around $69 a barrel, the effective bids work out to be between $6.4 and
$6.85 per mmBtu, way above spot rates.
That means Pakistan will be paying roughly $4m extra on every cargo. A raw extrapolation
— based on more than
70 cargoes under normal
circumstances, even
though terms and
conditions vary for
different import
arrangements currently
in place — would take
the annual loss to
around $300m. The cost
then trickles down to the
consumers through
electricity rates, fertiliser
price and cost of
production.
That apparently shows a flaw in Pakistan’s import mechanism that is based on the Brent
price besides the inherent inflexibility in the public sector and the procurement rules and
procedures. Thanks to oil politics involving big players like Saudi Arabia, Russia and the
United States, crude prices have been on the rise of late.
Pakistan LNG Terminals Ltd proposed that the private sector be allowed to
import LNG to reduce idle capacity charge by about $12m. This will ‘pave the
way for the optimal utilisation at LNG terminals while opening avenues for
private participants in the RLNG value chain, which will result in competitive
prices and lowered financial risk for the government’
For long-term secured supplies, a Brent-based arrangement might be a compulsion. But it
has to change for the short term to improve the overall basket. This is important because
some long-term imports are based on 13.37pc and others 12pc or so of the Brent price.
Import quantities are rising with each passing day.
Arguably, Pakistan’s entire public-sector is operating inefficiently. Besides, gas companies

transporting these expensive imports suffer a 10-11pc system loss that is also built into the
consumer price. The gas companies recuperate their high distribution system losses
through this 10-11pc extra charge to bulk consumers that are mostly on the transmission
system having less than a 1pc loss. This is despite the fact that they claim their profitability
on the basis of their return on assets.
Pakistan is reported to have imported about 7-8m tonnes of LNG last year. Imports are
expected to be 15-30m tonnes over the next four to five years, according to official
estimates. This stems mainly from the fact that Pakistan is adding at least 300,000 small
gas consumers every year who consume most of the local production at cheap rates and
elbowing out productive sectors to imports.
According to the Oil and Gas Regulatory Authority (Ogra), the country’s gas shortage is
estimated to touch four billion cubic feet per day (bcfd) — almost equal to current total
supplies — by the next year. It will go beyond 6.6bcfd by 2030. “The shortfall in gas is
expected to reach 3.999bcfd by 2019-20 and the gap will reach 6.611bcfd without imported
gas by 2029-30,” Ogra said.
It noted that a significant rise in demand and consumption of gas by residential and
domestic consumers is owing to the price differential vis-à-vis other competing fuels —
liquefied petroleum gas (LPG), firewood and coal.
Over the past five years, more than 300,000 consumers were added to the gas network
annually by gas companies and the growth in power, commercial, residential and fertiliser
sectors resulted in a shortage, Ogra said. “Demand for natural gas will further increase in
coming years,” it added.
For the next fiscal year, the government expects about 1.2bcfd of additional demand. It is
trying to secure a third LNG terminal before the 2020 winter to avoid a repeat of the acute
gas shortage that would force the closure of industries, fertiliser plants and power units
until a couple of years ago. However, it remains unclear how the government will go about
it.
Despite having developed a legal and regulatory mechanism, the government has not yet
practically permitted private entities to import LNG at their own risk nor has it allowed
them to set up LNG terminals. This is despite the fact that five to six major investors have
been lobbying in this regard. Some market players believe such a move can reduce LNG
prices and re-gasification charges through competition among private parties.
The state-run Pakistan LNG Terminals Ltd (PLTL) has already reported that LNG
consumers were affected by a cost loading of $45m (Rs6.2bn) in 2018 only because of the
sub-optimal utilisation of the existing two terminals. It forecasts that 53pc capacity of the
second LNG terminal will remain idle in 2019 based on the annual delivery plan agreed
upon by public-sector entities, with an additional cost of $40m. In 2018, the first operating
year of Pakistan Gasport Terminal, the government had to pay an average tariff at the rate
of $0.784 per mmBtu instead of $0.417 per mmBtu, or 72pc costlier because of 47pc idle
capacity.
PLTL proposed that the private sector be allowed to reduce the idle capacity charge by
about $12m and shift a substantial part of the government’s LNG import bill and guarantees
for letters of credit. This will “pave the way for the optimal utilisation of LNG terminals
while opening avenues for private participants in the RLNG value chain, which will result in
competitive RLNG prices and lowered financial risk for the government,” it said.
For that to materialise in a cost-effective contribution to the economy, Pakistan has to open
up the entire LNG supply chain to the private sector — from import to transportation and
down to retail sale — with simultaneous pricing reforms for domestic gas.
_______________________________________________________________
Fruit and vegetable exports need attention

Mohiuddin Aazim
Mobilising local investors for upgrading the horticulture sector is a must. Without this even
foreign investment, within or outside the CPEC umbrella, can hardly make a big difference.
─ APP/File
THE country is exporting a greater quantity of fruits and vegetables, but forex gains remain
limited. The reason is we are not investing in those technologies that are a must for
enhancing outputs and improving quality of exports. Besides, our effort to reach out to new
export markets needs impetus.
In eight months of this

fiscal year i.e. between July
2018 and Feb 2109, forex
earnings of fruits and
vegetables totalled $479
million. In the same period
last year it was $387m.
While this gain of $92m or
about 24 per cent looks
impressive, we achieved
this only after exporting
much larger quantities of
fruits and vegetables, squeezing supplies in local markets.
Between July-Feb FY19, Pakistan’s exports of fruits and vegetables stood in excess of 1.165m
tonnes. In July-Feb FY18 it was 1.016m tonnes. In other words, supplies to local markets
shrank by no less than 149,000 tonnes. Its effect can be seen in higher prices of almost all
fruits and a number of vegetables, minus potato. We had a potato glut this year.
The numbers, reported by the Pakistan Bureau of Statistics, bring a couple of things to the
fore:
First, exports of fruits and vegetable are far lower than the country’s potential. Second, the
average per tonne export price is low. And third, since this is in continuation of a trend, we
need to invest more in revamping and modernising our horticulture sector.
Mobilising local investors for upgrading the horticulture sector is a must. Without this even
foreign investment, within or outside the CPEC umbrella, can hardly make a big difference
In the entire last fiscal year, combined export earnings of fruits and vegetables rose to
around $641.7m from $565.8m a year ago — or just around 12pc. Meanwhile, export
volumes grew to 15.85m tonnes from 12.78m tonnes — or 24pc.
If forex gains grow by just half the rate of the export volume, our export efficiency comes
under question. It is time to set our house in order.
Pakistan is famous for its mangoes and citrus though it also exports dates, melons and
apples. We also export lots of vegetables but potatoes are our mainstay. Vegetable exports
get a boost when we export onions, though exporting large quantities of onion every year is
not possible as crop size is highly dependent on climatic conditions, and local demand keeps
mounting.
Mango and citrus fruit exports suffer heavily whenever their crops are hit by disease or
when pre-export treatment and tests fall short of global standards.
During kinno export season that closed in mid-March, Pakistan failed to meet the export
target of 300,000 tonnes, which in itself was below the last season’s actual exports of
370,000 tonnes. Growers say the inability to control the spread of disease in kinno orchards
in Sargodha, the main growing area, created this situation.
Apart from the structural flaws in our horticulture sector the ongoing weaker rupee and
high-inflation phenomenon is also playing havoc. The cost of growing fruits and vegetables
has been on the rise after a substantial rupee depreciation in the past year and headline
inflation now scaling new heights every month.
Increased cost of inputs is also making it difficult for fruit and vegetable exporters to remain
competitive in international markets.
Over the last few years, Pakistan has lost its key kinno markets such as Australia, Canada,
New Zealand, Norway, USA and UK. During the last season we sold kinno mostly to
Afghanistan, Indonesia, Philippines, Russia, Saudi Arabia, Ukraine and Uzbekistan,
according to the Trade Development Authority of Pakistan.
Mango exports are expected to start from mid-May and an export target is yet to be set. But
just as in the case of citrus fruits, mango exports too may come under stress, both on
account of quality as well as pricing, exporters fear.
In the vegetable sector, we have just experienced a massive potato glut due to the absence of
a reliable system of future price discovery, broken chain of supplies and mismanagement in
commodity market operations.
Official warnings of super floods revisiting Pakistan next year amplify fears of a loss of
vegetable crops. Growers of these crops are already in trouble as they cannot get a fair price
for their produce owing to the continuing practice of advance-selling of entire fields to
middlemen. This, by the way, is a problem facing fruit orchards as well.
Pakistan’s export potential of fruits and vegetables is huge, by some estimates up to $5

billion a year. But the reason why the country manages to earn less than $1bn is that despite
an increase in volumes of bank credit the to agriculture sector as a whole, the share of
horticulture is fractional — less than 5pc.
A very large part of bank loans extended to this sector is used for growing produce and not
for acquiring technologies to help upgrade growers’ skills or modernise orchards and farms.
In recent years, some funds have flown towards companies engaged in tunnel farming of
vegetables.
Just how scary the situation is can be gauged by the fact that the country does not have
disease-free nurseries of citrus fruits and mangoes. Facilities for pre-export temperature
treatment of both fruits are also scant.
Modern machinery used in speedy fruit picking from trees is a rare commodity. The same is
true for machinery meant for economised and efficient watering of fruit trees, for example
of apples, growing in high-altitude areas of Balochistan and KP.
Date processing plants are few and not well-equipped. Losses due to fruits falling from trees
before or after they have ripened are very common. In case of vegetables, the loss of crop
due to rudimentary methods of cultivation and lack of proper on-farm storage facilities is
just too high — in some cases up to 30pc.
_______________________________________________________________
Wheat purchase under question while scams continue

Mohammad Hussain Khan
THE procurement of wheat has always been a hassle for farmers in Sindh. Successive
governments have been unable to establish a system where public money, in the shape of
the support price, reaches small and medium farmers so that they are not exploited by
market forces.
While the Kharif season began from April 1, the government remains indecisive about wheat
procurement; largely due to huge carry-over stocks from last year’s crop.
As of March 26 such stocks, according to Sindh food department officials, stood at 870,000
tonnes. This year there seems to be another bumper crop owing to good weather conditions.
The official wheat price
remains unchanged at Rs1,300
per 40kg.
The Sindh government

procures a specific quantum of
the crop at the support price.
Growers, by and large, sell
their grain in the open market
or to middlemen to save time
and get cash payments that
they then use for cultivation of
Kharif crops.
Ground realities indicate that the support price doesn’t reach farmers. It is pocketed instead
by middlemen in collusion with officials from the food department. In addition,
parliamentarians, ministers, top government functionaries and representatives of
influential growers’ bodies get gunny bags, free of cost, that are meant for poor farmers.
Ground realities indicate that the support price doesn’t reach farmers. In addition, vested
interests get, free of cost, gunny bags that are meant for poor farmers
Gunny bags are of particular importance as it is only after farmers get them that they are
able to take their crop to the food department for sale.
Many cabinet members believe that the crop should not be procured this season in view of
the carry-over stocks.
A possible reason why the Sindh food department hasn’t floated tenders for this season’s
gunny bag purchase may be because it is believed to have moved a summary to the chief
minister. It has requested approval for the procurement of 500,000 tonnes of wheat which
is to be discussed in the forthcoming cabinet meeting.
Currently, there is no ban on the inter-provincial movement of wheat whilst exports of

wheat remain open. There are reports that the Pakistan Agriculture Storage and Supplies
Corporation also intends to procure 1.1m tonnes of the current crop.
But amidst reports that the Punjab government will procure 4m tonnes of wheat, anxiety
among farmers is growing as the wheat crop in Sindh has been harvested and has reached
the market. To quote a grower leader, Mahmood Nawaz Shah, wheat prices have declined to
Rs850-900 per 40kg in the open market due to the missing crop procurement target.
Former Sindh agriculture secretary Agha Jan Akhtar contended that wheat in Shikarpur is
being sold at Rs1,240 per 40kg which is an unacceptable price for farmers. Given the
current rupee devaluation farmers will be at the losing end when selling their crop in the
open market.
He also opposed the procurement, even 500,000 tonnes, of wheat considering the
availability of stocks. He argued that since the government has statistics it must ensure
equity in next season’s procurement — after linking it with area under cultivation and
production in each district — coupled with civil administration’s oversight, to ensure
transparency.
In February the Hyderabad accountability court sentenced flour mill owners for colluding
with food officials in Mirpurkhas, in a wheat procurement case that had been ongoing
since 2011. The case has raised questions about over the entire procurement exercise as
inquiries into past procurement practices continue.
Sindh Chamber of Agriculture Vice President Nabi Bux Sathio observed that hardly 5-10pc
of farmers are actually able to get the benefit of the support price, otherwise it is mainly the
traders who are provided gunny bags by those with vested interests.
“Food officials mint money by providing gunny bags to those who don’t own farmland or
grow wheat. In connivance with officials, these people manage the paperwork in such a way
that they win the support price. Ultimately, the price is shared with and amongst food
officials while the government looks the other way,” alleged Mr Sathio.
He proposed the formation of committees led by deputy commissioners and having farmers
as members to ensure transparency in the entire exercise.
Farmers with small landholdings usually borrow money from private lenders in the shape of
farm inputs for cultivating crops. They settle their accounts by providing grain to the same
lenders at a lower price.
So, growers are always hard-pressed to sell their crop at an inadequate price to settle
accounts. The objective of the support price is to keep the price of wheat stable since the
arrival of a new crop always suppresses price.
With the government’s presence felt in the market through the announced support price,
traders are pressurised to offer a reasonable, if not an ideal, rate to growers.
Growers would, however be at the mercy of market players if the support price mechanism
is completely done away with. This, in turn, may enable hoarders to store crops bought at
low rates to be resold at higher prices in case of a shortage in the market.
Estimates from the Sindh agriculture department show that the wheat sowing target could
not be met this season. Against a target of 1.15 million hectares, 1.047m hectares (91 per
cent of the target) were sown in FY19 whereas 94.7pc of the target had been met the
previous year. The wheat sowing target remains unchanged since FY15.
The province produced 3.64m tonnes of the crop last season against a target of 4.2m tonnes.
The food department had procured 1.4m tonnes of crop with carry-over stocks of 360,000
tonnes last season.
Agri-finance: are banks missing out on a big opportunity?

Younus Sandeela
Informal credit and the ease with which it is available are the biggest menace prevalent in
the agricultural sector since it has kept farmers hostage to money lenders from pre-partition
era. Referred to as aarti in domestic lingo, the phenomenon of borrowing for the
middleman is common not just in the subcontinent but in many third world countries.
Subsequent to partition and migration

of Hindu money lenders, informal
credit in the agriculture sector is now
almost fully dominated by aartis, the
basis of which is usually personal
relations. Normally, no interest is
charged, no documents are signed
(except for aarti unilaterally noting it
down in a register maintained by him)
and no collateral is required. Most
importantly, no questions are asked regarding the purpose of the borrowed amount or the
schedule for release of funds to match with crop production stages.
The only condition imposed on the borrower is that he has to bring his produce for
auctioning at the lender’s shop and pay commission on the value fetched. Failure to fulfill
this condition makes the borrower liable to pay interest in proportion to the shortfall in the
quantity the farmer was supposed to auction. In an event of complete crop failure, farmer is
usually extended credit again to enable him to grow the next crop and repay the combined
outstanding loan amount. However, in this case farmer pays interest on the unpaid loan.
The borrowing cost of informal credit significantly surpasses the interest

charged by commercial banks
On the face of it this interest free, uncollateralised and undocumented informal running
finance facility should have been a blessing for poor farmers. However, unlimited greed has
turned these financial messiahs into blood sucking moneylenders. Being perpetual
borrowers, poor farmers are never in a position to question their financiers about the
fairness or transparency with which their produce is auctioned. It is very common for aartis
to manipulate the auction process to disadvantage the farmer who is almost never present
when the auction is taking place.
Similarly, aartis have a free hand with respect to weighing the shipment normally sent by
farmers on shared cargo vehicle. Any quantity can be declared substandard and categorised
as wastage. The cost of borrowing paid by farmers in the form of losses incurred due to
these unfair practices, plus the commission paid, significantly surpasses the interest
charged by commercial banks.
The main reason that farmers are unable to borrow from commercial banks is the cultural
practice of keeping family assets in joint names. In many areas it is considered improper to
transfer inherited property, particularly the agricultural land, into the names of individual
heirs’ even years after the original owner has passed away. Sometimes the property is not
only in the name of siblings but also first cousins. Therefore, it is not the unavailability of
collateral but the manner in which its title and possession is held that limits farmers’ ability
to offer agricultural land as collateral against commercial borrowing.
Secondly, farmers are highly uncomfortable dealing with banks. Bankers appear to be
people different in terms of dressing, language, and environment, offering products that
farmers do not fully understand. The invariably lengthy documentation process necessary to
avail bank borrowing further scares away farmers as they often lack the ability to read
papers that they are required to sign.
Religion also plays a huge role. One of the major reasons why farmers do not opt for formal
financing is the interest factor. Many farmers do not want to pay interest and willingly
prefer to be fleeced by aartis.
Lastly, the unstable and unpredictable wholesale market hugely limits farmers ability to
predict revenues and hence their capacity to repay the loans. The crop insurance products
that are currently available, and are made mandatory for farmers to avail if they opt for
bank credit, are quite ineffective. Their protection is limited as a claim is only entertained
when a farmer’s entire land has been declared calamity hit by the relevant government
authorities.
Banks are also reluctant to increase exposure into this highly lucrative but semi
documented market. Farmers are prone to high default rates due to volatile wholesale
markets that limit farmers’ ability to have consistent revenue streams.
Another problem faced by banks is their limited ability to understand the farming sector.
Officers dealing with agri credit are mostly business graduates who lack in-depth
understanding of agriculture. It’s a pity that agriculture economics or agriculture marketing
is not part of any major MBA program offered by numerous business schools in the country.
In order for banks to effectively penetrate the agri credit market they must completely
overhaul their strategy. Agriculture extension services have failed to provide the required
support to farmers. Banks must assist farmer’s earning capability by playing a role in
educating them and introduce better paying crops. This in turn will help them attain a more
stable revenue stream.
State Bank must step in to remove the mismatch between value of collateral and loan
amount in agriculture lending. Farmers are required to place their pass books (ownership
document for agricultural holding) as collateral with the bank when they borrow, which
pledges their entire holding. This is especially painful when per acre value of land is more
than ten times the State Bank’s approved per acre credit ceiling for different crops.
Working with select group of farmers and forming them into cooperatives will slowly
develop entities in the agriculture sector that could borrow from banks based on the
strength of their balance sheets.
Financing viable projects in downstream agro processing will create alternate marketing
channels for farmers. This will eventually stabilize wholesale prices and enable farmers to
better predict their revenue cash flows. Also, a vibrant Islamic Banking arm will aid banks
into exploiting lending potential in the agri sector.
However, these shifts in approach will take place only when banks genuinely want to
explore new avenues for increasing their profitability. This will remain a far cry as long as
government borrowing continues to crowd out the private borrower.

Are we food-secure? Pakistan's agriculture challenges

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DAWN BUSINESS & FINANCE April 22, 2019

‘The goal is to curb import bill’

SAHIBZADA Muhammad Sultan, federal minister for the Ministry of National

Tackling poverty via higher agri lending

Legal framework necessary but not sufficient

Report from the stock market

Outdated techniques in the modern world

SINDH’S first sugar factory was

Cotton cultivation was allowed on the

“The government needs to share information-based knowledge to convince growers about

To borrow from a Punjab-based agriculture analyst, Ibrahim Mughal, Pakistan is spending

Due to nonexistent zoning, high delta crops

Dr Ashraf underscored the need for crop

Special Report: Machiavellian middlemen

Deadly pesticides for profit

GLOBALLY, policymakers and

Although the elimination or

Although the elimination or reduction of the use of synthetic chemicals

‘Our farmers do not care about safety requirements and resort to an

No walls on our borders

The FCR indicates the amount of feed that needs to be given

While soybean imports may be good news, the volumetric

An increasing population and the rise of the fast food culture

Stories From The Field

Technology all the way

Abad Khan owns three different farms in as

No place for food

Storage capacity is a subject of confusion rather than

For example, the provincial government has been

Taxation: discriminatory and

A practising farmer and former member of the

A woman at the farm

A mother of three, she says fainting is not the only hazard

Harassment at the hands of male workers and landlords is

Mahr Ikramullah Lak

“Forget funds and other facilities, we (the farmers) do

Agricultural extension services provide knowledge of

Common sense cultivation

Efforts such as soil analysis are being undertaken by the

THE country’s precarious water situation

A more painful reality to accept is that since

While the share of agriculture in the

Importantly, irrigated agriculture is the

“With a rapidly growing population, Pakistan is heading towards a situation of water

Another sustainability challenge is unregulated groundwater extraction across the country.

‘To regulate or not to regulate,’ that is the question

Our LNG flaws

Arguably, Pakistan’s entire public-sector is operating inefficiently. Besides, gas companies

Fruit and vegetable exports need attention

In eight months of this

Pakistan’s export potential of fruits and vegetables is huge, by some estimates up to $5

Wheat purchase under question while scams continue

The Sindh government

Currently, there is no ban on the inter-provincial movement of wheat whilst exports of

Agri-finance: are banks missing out on a big opportunity?

Subsequent to partition and migration

The borrowing cost of informal credit significantly surpasses the interest

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