Focus on agriculture can pull Pakistan out of current economic malice

At present Pakistan faces myriad of problems, from rising food import bill to very limited availability of foreign exchange. While the industrial sector remains import dependent, focus on two of the large scale industries i.e. textiles and clothing and sugar and allied can yield multiple benefits: from huge earning of foreign exchange to creating extensive employment for low-skill workers. However, this requires commitment of the government, introduction of supporting policies and implementation of these policies in letter and spirit.

It is on record that 20% to 40% of agriculture produce goes stale before reaching the market. This on one hand deprives the farmers from modest return of their efforts and on the other hand creates shortages and use of paltry foreign exchange available to Pakistan. It is pertinent to point out that the Government of Pakistan (GoP) had come up with Warehouse Receipt Financing (WRF) program as back as in 2013. The lack of commitment on the part of the GoP as well as the financial institutions has failed in facilitating construction of modern grain storage silos in the country.

Over the years the GoP has been increasing quantum of lending to farmers and the indicative target for the current financial year is PKR1.8 trillion. The lending is being done under two heads: for the purchase of inputs and for the development. The most shocking part is that some of the financial institutions prefer to pay the penalty, rather than extending credit to farmers. This has resulted in exclusion of small farmers from the formal banking system.

Financial institutions have been lending to farmers against ownership documents of their land. Despite multiple land reforms, bulk of the land is still owned by the feudal lords. Small land holders or those who have no land ownership documents have remained out of the formal banking system. WRF system was conceived as an alternative system for financial inclusion. Under this scheme farmers could use their produce as collateral and secure funds from the financial institution.

If the GoP is serious it has to take on board State Bank of Pakistan, Securities & Exchange Commission of Pakistan, commercial banks and Naymat Collateral Management Company to undertake construction of grain storage silos on war footings.

The most disappoint fact is that the country produces over 25 million tons wheat, the federal and provincial governments are the major buyers but virtually no wheat storage silos are present. Bulk of the produce is kept in warehouses not fit for the storage of staple food grain. The result is over 20% of the produce goes stale before reaching the market.

I was amazed to hear from some religious clerics that construction and management of warehouses is not Shariah compliant, the basic objection is it facilitates hording. They are unable in distinguishing between ‘safekeeping’ and ‘hording’.

Pakistan earns bulk of its foreign exchange from export of textiles and clothing. Without any exaggeration the country is capable of producing 20 million bales of medium staple fiber. However over the last few years cotton production has reduced to around 6 million bales. An output of 10 million bales can be attained by: using certified quality seed, stopping cultivation of sugarcane in sugar belt and using certified quality of pesticides/insecticides. This would also help in boosting production of ‘cotton seed oil’ – an edible oil as well as oilcakes for feeding cows and buffaloes.

The third important crop is sugarcane which not only produces sugar but also exports ethanol and molasses in huge quantities. Cultivation of superior quality sugarcane varieties can help in boosting production of sugar, molasses and ethanol.

It is necessary to remind the policy planners, if they still don’t know, that ethanol is used for the production of bio-fuels. At one time the GoP had started sale of E-10 - petrol containing 10% ethanol. Only the policy planners know why this project was abandoned?

Maize is yet another crop that can help in containing food import bill. Maize yields oil, flour and oilcake (used in the production of chicken feed). Now cultivation of two crops is a norm and in certain areas third crop is cultivated.

It may be pertinent to mention that maize yield in Pakistan is substantially low and the prime reason is high price of DAP fertilizer.

This takes to another key industry, fertilizer industry. Over the years the industry has help in saving precious foreign exchange. Now it has the capacity to export one million tons of urea. At times the country has to import urea, which is due to the bad policy of stopping gas supply to fertilizer plants during winter.

The GoP must also facilitate running of power plants on furnace oil. The plea taken by the GoP for not running power plants on furnace oil is most absurd – it contains high percentage of sulphur. The GoP must immediately arrange fund for installing sulphur at local refineries. It would yield two benefits: use of furnace in local power plants as well as its export - extra foreign exchange will be earned from the export of sulphur.