SBP shifts credit focus to farm sector

Post Source: DAWN By Shahid Iqbal
Wednesday, 19 Aug, 2009

KARACHI: Agriculture has become focal point of State Bank’s credit growth as the bank observed that the share of agriculture sector in banks’ credit was just 4.6 per cent while its contribution to Gross Domestic Product (GDP) was five times higher.

State Bank governor Salim Raza, while chairing the meeting of Agriculture Credit Advisory Committee (ACAC) on Tuesday, said that in spite of a structural shift towards industrialisation, the agriculture sector was still the largest sector of economy, having deep impact on socio-economic setup.

The SBP set an indicative target of Rs260 billion for agricultural credit disbursement for the current fiscal 2009-10.

‘It is the source of livelihood of at least 45 per cent of the total employed labour force in the country,’ said Mr Raza, adding that despite 22 per cent contribution in the GDP, agriculture sector has only 4.6 per cent share in banks’ credit portfolio which is not an encouraging picture.

He said that major chunk of the farm credit went to small farmers and their share rose to 63 per cent from 59 per cent. Last year (2008-9) agriculture sector credit target was Rs250 billion but only Rs233 billion could be disbursed.

The SBP governor asked banks to revamp and re-structure their agriculture lending mechanism by adopting modern and innovative techniques to boost agricultural financing.

In addition, the government needs to devise the policy for introduction of corporate and cooperative farming to enable the majority of (86 per cent of the total farms) farmers of the country to have the benefits of access to financial resources, new technology, quality inputs, marketing and storage facilities etc.

‘This would result in higher production and income to small farmers,’ he added.

Mr. Raza said that the SBP was working on development of a national crop insurance scheme, launching of pilot project for agriculture loans, credit guarantee scheme for small farmers, capacity building of banks, awareness of farming community, simplification of agriculture lending procedures, group based lending for small farmers, implementation of Benazir Zarai Card, introduction of Shariah compliant agriculture credit through Islamic banks etc.

Adequate availability and access to institutional credit is essential for accelerating the pace of agriculture development to ensure food security and poverty alleviation in the country, he said.

Mr Raza pointed out that high agriculture NPLs, cumbersome and lengthy lending procedures, issues of passbook and non-automation of land record; low yield, inordinate delays in payment of agricultural products by mills, ineffective implementation of government’s support price are the major bottlenecks in agricultural financing.

The focus on agricultural growth was not only for the development of the sector but also reflects that the poor industrial growth forced banks to shift their target.

The private credit growth during the entire 2008-09 was negative, showing the paralyzing picture of economy, other than agriculture which actually helped economy grow by two per cent.

The banks have vast opportunity to finance agriculture which has enormous potential to grow while financing gap is huge as share of agriculture sector in banks’ credit is still just 4.6 per cent.

Roots of the sugar crisis

Post Source: Economic & Business Review August 24 – 30, 2009

By Ahmad Fraz Khan

THE sugar crisis is not simply a trade issue created by millers and hoarders as portrayed by many including the federal and provincial governments. Scratch the surface and the issue becomes largely agricultural, which is now being thrown at the door of millers and stockists by the government to hide its own failure to take holistic view of the crop and mishandling of import process.

It is not to suggest that the millers, who have turned out to be hoarders as well, and dealers are not benefiting from the current crisis, making money at the cost of the consumer. But only to emphasise that sugar availability, and the price crisis has its origin in sugarcane farming – drop in acreage and production, payment issue, farmers replacing sugarcane with high-priced crops like rice and ever-increasing sugar demand due to rising population.

The federal and provincial governments seem to be treating it as more of a trade management problem – needing administrative solutions. This way, it would temporarily treat symptoms of problem but leave the disease festering underneath.

The government’s logic is simple; de tach the issue from its origin, take some quick fix administrative measures – raid stocks, seize them, throw them in the market – project it being in total control, declare victory and claim consequent political mileage.

Th administrative crackdown, however, seems to have backfired even in short-term if the declared aim – smoothening of supply and controlling prices – is something to by. The price, which was under Rs45 per kilogramme, went up to Rs54 per kg during the five-day crackdown.

After five days, the federal government not only ended the crackdown, asking the provinces to follow the suite, but included the hike in new sugar price.

The federal government lost on the table in subsequent dialogue with the millers. It conceded Rs48 and Rs49.50 per kg ex-mill price.

The cost of government’s caving in is staggering for common man. He would continue paying exorbitant prices for next four months, if the millers do not find new excuses to continue raising the price, and government falls flat as it did this time. According to some calculations, people may end up paying additional Rs21 billion, as compared to last month’s price.

The government is guilty of failing to take holistic view of the cane crop and value addition. The payment problem to farmers by the same millers is a perennial and well-documented prob lem. All the successive governments have failed to take note of it, and the current government is no exception.

Due to these policies, the cane crop is declining, both in acreage and production. In 2008-09 alone, there was 1.13 million acre drop and 11.4 per cent slide in production as compared to last year. This is the point where the problem originates from and then snowballs into national crisis. Until and unless, the government comes to grip with this issue, the situation would remain precarious.

The situation only worsened by the lack of any valuable cane variety. For years, the farmers and the government agencies have been importing differ ent varieties of cane from world over and multiplying them locally. The multiplication is a decades-long process, given the quantum seed needed for crop – some 100 maunds per acre. Due to the old varieties, non-millable cane is on the rise and millable production on the decline.

Both these issue needs to be solved before the government starts claiming to care for common man and keep sugar part of his daily diet. It is a bit longer route, but only way to solve crisis on permanent basis.

Only after solving the sugarcane supply chain problem, the government would be able to fine tune value-addition line. It also refused to act when the area and production went down substantially, leaving a gap of one million tons in demand and supply.

This gap had to be met through timely import, which did not take place despite the Economic Coordination Committee (ECC) ordering it twice – in March and April. This failure of the government institutions to follow official order is the biggest question mark on the writ of the government.

The millers played both ways; one section of millers writing to government about shortfall and need for import. The other kept telling the government that there was no need for import. The official functionaries failed to order import. This is what has come to haunt everyone now.

Modernising agriculture

Post Source: By Afshan Subohi Monday, 24 Aug, 2009

The draft policy, as reported last week, does not say anything on weakening the rural power structure. - File photo

The draft agriculture policy designed to achieve food autarky by letting the tillers of the land share the gains in productivity is silent on the inherent weakness of rural setting that is holding up modernisation of agriculture.

The fact that much of the incentives and subsidies to farmers end up in pockets of the big and the mighty who directly or indirectly control all input and output related trades in the rural sector have rendered all earlier attempts to modernise agriculture futile. The draft policy, as reported last week, does not say anything on weakening the rural power structure. As long the nexus of feudal-politicians-middlemen-big companies and the bureaucracy is allowed to exist, there is a little hope, even for the best of policies to deliver on their promised goal.

The draft Agriculture Policy aims to achieve food security and improve the living standards of the rural population. The main thrust of the policy, as claimed by its architects, is to increase agricultural growth rate by increasing the quantity and quality of agricultural production, promoting farm profitability/productivity and achieving competitiveness in agriculture.

There are 22 components of the proposed policy encompassing a wide range of subjects including agricultural research, food policy, irrigation management, farm mechanisation, seed certification, oilseed development, cotton research and the policy for land use. It also includes chapters on fertiliser, credit and investment policy.

Federal Food and Agriculture Minister Nazar Mohammad Gondal told this writer that the policy would not only focus on improving farm production but also on increasing acreage. For increasing cultivated area, the policy encourages rehabilitation of the degraded land rendered uncultivable due to water-logging and salinity.

Mr Gondal said that the country needed to modernise farming. ‘The role of private sector has to be increased for commercialisation of agriculture and promote agribusiness’.

The agriculture policy was stated to have been drafted in close coordination with stake holders. People associated with independent agriculture forums and certain progressive farmers from Punjab and Sindh, however say, they neither received any document nor were consulted in formulation of the policy. The seniors in the relevant ministry in Islamabad said, by ‘stakeholders’ they meant different government departments under the ministry of food and agriculture.

Mehmud Nawaz Shah of Sindh Abadgar Board and Khawaja Shuaib of Farmers Vision said they have not received any draft nor contacted like other relevant people.

A senior bureaucrat in the last set-up sidelined by the elected government when contacted for his comments on the draft policy mocked the ministry saying, it lacked the capacity to do anything meaningful. ‘The Minfal is a four-crop ministry under a two-crop minister with one policy instrument — support price. It would be naïve to expect wonders from them,’ the gentleman responded.

‘When you try to cover all subjects in one document you tend to loose touch with all. A generalised document may serve its architects by enabling them to show around something but can it transform the gigantic agriculture sector? I don’t think so,’ another expert told this writer commenting on the policy.

‘You need not be a rocket scientist to know what needs to be done to set agriculture right. The real test is that of determination to carry through reforms required to transform agriculture to achieve its potential. As long as higher yields are rewarded with a drop in farm gate price, no farmer is going to invest in innovation,’ Mehmud Shah Nawaz, Secretary Sindh Abadgar Board told Dawn over telephone.

‘The government needs to give agriculture the priority it deserves and production could be more than doubled within few years. People would try harder if they find it gainful,’ he points out.

His views are reconfirmed by scores of reports on agriculture performance by national and international outfits including ADB and World Bank that the rural economy has been underperforming even when its output was at its best. A country where nearly half the population is engaged in agriculture and hardworking farmers fetch two and more crops a year capitalising on natural advantage of fertile alluvial plains and the most extensive irrigation network has still not been able to feed its own population. Basic commodities are imported every year to cover demand supply gap. The current import of sugar and import of wheat last year reflects on the mismanagement of relevant ministry.

Almost half of perishable crops go waste while one third of the population is malnourished. The fourth biggest producer of milk in the world with an annual production of 13 billion litres, Pakistan, spends a substantial amount on import of formula milk and almost half of the child population suffer from deficiencies for less than required intake of milk.

It cannot be a mere accident that gigantic set-up of two dozen departments and innumerable associated bodies under the federal ministry of food and agriculture thrive on public expense while the government has not much to show on the agriculture front. Comparatively, less fertile East Punjab, the most prosperous state of next door neighbour performs several times better on the strength of higher yields and better market management.

While other commodity producing countries reaped the windfall of unprecedented price hike in the international market, Pakistan actually took a beating. It was forced to import over-priced wheat to avoid food riots in addition to very expensive oil, resulting in a high import bill eating into development spending in a tight liquidity situation. It contributed to worsening of the country’s trade balance.

‘It goes to the credit of Pakistan Peoples Party’s government that it has allowed space to enthusiasts in different ministries to initiate the process of policy formulation. Whether the policy drafted/approved will actually be implemented would depend on a variety of factors, some beyond the control of the government,’ said a sympathetic expert while defending the government effort.

Cultivation of BT cotton likely from next year

Post Source: (DAWN) By Parvaiz Ishfaq Rana Saturday, 22 Aug, 2009

KARACHI: Federal minister for textile industry Rana Mohammad Farooq Saeed Khan has assured that from next year the country would start cultivating BT cotton to meet its growing domestic raw cotton demand, and there would be no further delay.

 

A presidential ordinance would also be issued to give permission for cultivating BT cotton through organised sector, the minister said while speaking to leaders of the Council of All-Pakistan Textile Associations, a representative body of 12 textile bodies at a dinner on Thursday.

 

The minister said that cultivation of BT cotton has started in lower Sindh on a small scale and has produced good results.

 

Therefore, time has come that it should be taken at official level so that it is handled properly through organised sector to get the desired results.

 

The minister hoped that cotton production would double and the country would be exporting surplus cotton.

 

Rana Mohammad Farooq Saeed Khan said that the Finance Minister Shaukat Tareen has assured that once textile exports pick up, another Rs10 to Rs20 billion would be given to meet other objectives of the textile policy.

 

He said that around 23 different provincial and federal departments keep visiting industrial units and most of the industries have to maintain separate departments to deal with them which also adds to their cost.

 

The minister said that a committee would be formed to sort out this thorny issue to find a way out so that the industry could be spared from unnecessary harassment and wastage of time.

 

The minister assured that the textile policy would be implemented and there should be no doubt that any part of the policy might not be honored. He, however, said that his ministry was still open to accommodate more suggestions and there would always be government’s full support to achieve higher growth in exports.

 

The minister was critical of fertiliser industry and said even after taking cross-subsidy on gas, the industry was not passing on the benefit to growers as cost of fertilizers was very high in the domestic market.

 

He said why textile or any other industry should take the burden of cross-subsidy given to fertiliser industry.  

CAPTA chairman and advisor to Sindh chief minister Zubair Motiwala and said a country like Bangladesh is giving cheap power and gas to its textile industry and has recorded positive growth of 12 per cent in its textile exports.

Farmers tend to their cotton field. - Photo from APP/File

Post Source: Daily Aajkal – Lahore

Daily Aajkal Urdu Newspaper

Post Source: Daily Aajkal – Lahore

Daily Aajkal – Urdu Newspaper

Post Source: Daily Aajkal – Lahore

Daily Aajkal – Urdu Newspaper

Group formed to help farmers get loans

Post Source: The News Correspondent
Friday, August 21, 2009

LAHORE: The Punjab government has constituted a Working Group for Agricultural Credit to facilitate farmers to get credit for agriculture and livestock through a simple procedure.

The group will comprise the senior bankers of the State Bank, Zarai Taraqiati Bank (ltd) and other commercials banks, besides representatives of agriculture, livestock and cooperatives departments.

This was decided in a meeting which was chaired by Punjab Minister for Agriculture Malik Ahmad Ali Aulakh and held at the Punjab Agricultural Research Board, Lahore.

The meeting was attended by Punjab Agriculture secretary Arif Nadeem, the Livestock secretary, the Cooperatives secretary, the representatives of State Bank, Faysal Bank, Muslim Commercial Bank, Allied Bank, Askari Bank, Prime Bank, National Bank, Soneri Bank and Zari Taraqiati Bank Limited.

The minister underlined the importance of reducing mark up on agricultural loans advanced to small farmers. It was informed that during 2008-09, Rs.233 billion were advanced as agricultural loan against the allocation of Rs.250 billions. The bankers told that the number of borrowers in agricultural sector had increased and small farmers were benefiting from this facility substantially. It was proposed in the meeting that the banks should look into new venues and opportunities to advance loans to the farmers, for example, Tunnel Farming, Solar Energy, Drip / Sprinkler Irrigation System, Modern Livestock Farming, etc. It was also told in the meeting that presently 16,000 acres had been brought under Tunnel Farming whereas Drip / Sprinkler Irrigation System had been installed on 5,000 acres of land. The meeting said farmers should be educated to benefit from the facility of agricultural credit being advanced by ZTBL and other scheduled banks for making profit through value addition in agriculture and modern livestock farming.

Sugar crisis was expected after a poor cane crop

Post Source: The News International Friday, August 21, 2009

By By Farhan Zaheer

KARACHI: The government has failed to maintain sugar prices despite clear expectations of a bad sugarcane crop right from the beginning of this year.

With all the known facts, nothing was done on the part of the government to save the two parties that have been on the losing end — cane farmers and sugar consumers, Ishaq Khakwani, former Minister of State for IT and Telecom told The News.

Amid the worst sugar crisis in the history of the country, consumers are compelled to buy sugar at highest-ever prices from Rs50 to Rs55 in different parts of the country.

The cane procurement season starts in December and ends in March every year. This year sugar millers got cane at Rs80 to Rs100 per maund from farmers and the millers had finalised their end-product at Rs25 per kg, including all expenses and profits, he said, adding that this was the same rate on which the millers provide sugar to the Trading Corporation of Pakistan (TCP).

What is shocking is that the TCP is now providing that same sugar at Rs38 per kg to the Utility Stores Corporation (USC) all over Pakistan and says that the government is providing subsidy on sugar; conversely the government is earning Rs13 per kg, he added.

Saeed Ahmed Khan, TCP Chairman talking to The News said “we purchased sugar at Rs34 per kg from millers in January 2009 and not at Rs25 per kg, the prices reached Rs37 per kg in July 2009 and we are now providing the commodity at Rs38 per kg as per the government’s decision.

He said: “TCP bought sugar at different rates from different mills; what had actually increased the prices were the mark-up rates on loans with which we buy the commodity. TCP has to repay bank loans on time to get sanctioned other loans and this is an ongoing process, which also pushed the prices up.”

What is pertinent to note that why government did not take notice of the rising sugar prices in the early stages.

It was evident from December 2008 that the sugarcane crop would be affected this year. With this entire hike in prices that is from Rs25 per kg to Rs55 per kg, there is also the profit shares for farmers who sold their crop to the millers at Rs80 to Rs100 per mound, Khakwani observed.

Khakwani also said that in March-April 2009, white sugar price was Rs42 per kg and despite the indication of Ministry of Food Agriculture and Livestock (MINFAL) government did not import sugar.

TCP says that it has no role in sugar crisis owing to fact that TCP orders sugar import as per the government instructions.

Millers say that federal government and TCP were responsible for the crisis by not importing sugar at the right time despite their demands, especially TCP should have maintained a 700,000 tons of sugar buffer stock to overcome any challenge.

Despite all the government claims sugarcane cultivation area and per area yield in Pakistan is virtually standstill.

Millers claim that their cost of production has been increased in last couple of months and this year farmers provided cane at high rate that is Rs100 to Rs140 because they knew that the crop was bad and hence they earned more on these rates.

But, Khakwani declined the miller claim saying that millers have been earning over 135 per cent profit on one kg of sugar. Present retail sugar price is Rs55 per kg compared to Rs25 per kg, the production cost including profit on which millers buy cane from farmers this year.

President for increase in land allotment for female farmers

Post Source: DailyTimes

Kaira says 45,000 acres of land to be distributed among landless farmers

KARACHI: President Asif Ali Zardari has advised the Sindh government to increase the limit of land allotment – from 16 acres to 25 acres – for landless farmers, and directed that priority be given to female farmers in the programme, according to the APP news agency.

The directive came at a meeting to review progress in the distribution of state land among landless farmers under the ‘Women’s Emancipation Programme’.

Briefing the media on the meeting, presidential spokesman Farhatullah Babar said 45,000 acres of land had already been distributed among poor and landless farmers since the programme was launched in November last year. He said 70 percent of those who had been allotted land were women, and the same ratio would persist.

Briefing the media on the meeting, Information Minister Qamar Zaman Kaira said around 45,000 acres of barren land would be distributed among 4,196 farmers.

He said that all these landowners could acquire fertilisers and seeds through Benazir cards, to be issued in the name of female members of families.

About a meeting between the president and a Muttahida Qaumi Movement (MQM) delegation, Kaira said the future of the local government system would be decided in consultation with the government’s coalition partners, including the MQM.

The minister said the local government system was a provincial subject, and provincial administrations had to decide about its future.

Kaira said the president had local government powers until December 25, and “these are being shifted to provinces”.

Kaira said Zardari also presided over a meeting on low-cost housing schemes in Sindh.

About a trial for former president Pervez Musharraf, he said the government would follow court orders.

Zardari also announced a development package for Lyari. app/staff report