Paltry allocation for agriculture

By Ahmad Fraz Khan Dawn Economic & Business Review, June 22-28, 2009

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THE allocation for agriculture in the Punjab budget has been meagre. Of Rs175 billion annual development plan (ADP), the agriculture got only Rs3.2 billion. A mere 1.8 per cent of the overall development outlay has been made for a sector, which forms 22 per cent of the provincial GDP, provides around 45 per cent of employment and is professed priority area of national and provincial policy makers.

There is another way to look at importance of agriculture. The sector yielded some 2.7 million tons additional wheat this year, which, at current price is worth Rs62 billion. It produced 0.5 million tons extra rice – some 3.7 million tons against normal production of 3.2 million tons. These fours crops—wheat, rice, grain and maize–have benefited the economy by Rs113 billion during last six months.

Punjab has fiscal space for development during the coming year, which could have easily been diverted to development of farming had the agriculture department better capacity to deliver. Last year’s budgetary allocations and subsequent spending show where the departmental capacity stands: out of the total budget of Rs3 billion, it spent Rs1.6 billion. If the last year’s left over is carried forward, the new allocation would stand only at Rs1.8 billion.

Barring the importance of taking cotton to non-traditional areas and growing it on pressurised irrigation, which the department has advocated and got money for it, one can argue that all other major issues have been ignored.

Take the example of storage crisis which is essential for safe stocks (read food security). The province has 2.2 million tons of indoor, not modern or temperature controlled, storage capacity, whereas it needs at least seven million tons of such storage capacity to ensure regulated grain supply and buffer stocks. This year, it purchased six million tons of wheat, four million tons of which are lying in the open.

Given the changing weather pattern, with sudden and heavy showers becoming a routine, even if one million tons of wheat gets affected, it would cost the province a staggering Rs25 billion. The government has not spared any money for increasing storage capacity in the province. It is lamentable that a province, which owns 80 per cent national agriculture assets, has neither been able to build required storage capacity nor seems interested despite having fiscal space.

The government has taken all steps that bring immediate political mileage and ignored all long-term possibilities. It has spared Rs13 billion for food subsidy, Rs16 billion for food support plan and Rs7 billion for sasti roti (low price bread).

Though it may sound insensitive to differ on food subsidies given the level of poverty. But one can argue that had this amount (Rs36 billion) been spent on industrialisation (value addition) or manufacturing of agriculture inputs, the province could have benefited immensely..

The country is in perennial deficit of fertiliser. Had even half this amount been spent of setting up fertiliser factories, the rural poverty could have started dropping on sustained scale in next few years. But, the government seems interested in handing out fish to people rather than teaching them how to catch one. The budget seems focused on quick political gains rather than calm, cool, calculated planning, especially when it comes to agriculture.

Agriculture credit has always been a problem for farmers in Punjab. The provincial government has simply chosen to keep quiet on the issue despite owning two banks – the Bank of Punjab and Punjab Cooperative Bank. There has been no mention of the issue in the entire document.

Banking for agriculture is a commercial activity because it entails no subsidy on mark-up. But it contributes immensely to agricultural economy. Nor has the government been able to re-direct focus of the BoP towards agriculture.

Punjab has pathetic marketing infrastructure, which is out of the budget focus. No money has been spared for developing marketing network. Its premier agency – Punjab Agriculture Marketing Company (Pamco) – for developing such infrastructure has not been able to perform with three new heads in the last one year. It does not have even one project to its credit for the last five years, nor has it devel oped any alternative mechanism.

An allocation of Rs1.2 billion for research augurs well and one hopes that Punjab Agriculture Research Board, which has not been able to perform during the last two year, pulls its socks up this year. The government needs to ensure that its money is well spent.

The repeat of subsidised tractor scheme is also heart-warming for Punjab farmers. The government distributed 10,000 tractors last year and plans to distribute 10,000 this year at a cost of Rs2 billion. Its transparent distribution helped farm mechanisation..

Water management allocation (Rs10 billion), though less than Rs11.5 billion last year, is still a substantial amount and should he able to help better water distribution in Punjab. The government plans to spend 90 per cent of the amount on on-going projects but it would undertake eight new projects to improve efficiency. Some 200 small dams in upper parts of the province must be of great help at the local level.

In final analysis, the provincial budget seems to be “run of the mill document,” which tries to keep the momentum of on-going schemes rather than breaking new ground. Tragedy with the provincial agriculture, however, is that traditional methods would not solve problems. It needs innovative thinking, out of box solutions and sustained, long-term commitments. The proposed budget, however, fails on all these accounts.

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