AGRICULTURE POLICY IN PAKISTAN

Evolution of Agriculture Sector

Agriculture is the lifeline of Pakistan economy
accounting for 18.5 percent of the gross
domestic product, employing 38.5 percent of the
labor force and providing raw material for several
value-added sectors (PES, 2018-19).
Mission
Contribute to
 Food security
 Poverty reduction
 Environment protection
 Import Control
by fostering sustainable enhancement in sustainable
productivity of agricultural production resources through
farm machinery
 Development/adaptation
 Testing & standardization
 Commercialization
Composition of Agriculture Sector

 Major Crops
 Cotton
 Sugarcane
 Rice
 Wheat
 Maize
 Minor Crops
 Oil seeds
 Pulses
 Livestock
 Fisheries
 Forestry
 Fruits and vegetables
Farm Inputs

 Fertilizers
 Irrigation
 Improved Seeds
 Mechanization
 Agricultural Credit
 Live Stock
Crops
Agriculture Policy

Structural
 Green Revolution
 Mechanization
Non-structural
 Input and output pricing policy
 Credit policy
 Taxation policy
 Land Reforms
The Flat Fifties

Policy Actions
 Two Sector Development model
 Import Controls
 Low Prices of Agricultural Products
 Poor Public Investment
The Flat Fifties

Policy Actions
 Two Sector Development model
 Import Controls
 Low Prices of Agricultural Products
 Poor Public Investment
The Golden Sixties

Policy Actions
 Green Revolution
 Overvaluation, Low Interest Rate,
Reduced Import Duties and Taxes
Green Revolution

 HYV of wheat and rice

 Quality fertilizers
 Pesticides and insecticides
 Rotating crops
 Photosensitive genes
Impact of Green Revolution

 The Issue of Tube wells

 Tractorization
 Regional and Income Disparities
 Elite Farmer Strategy and Capitalist Development
 Social and Political Effect
Policy and Green Revolution

 New Canals and Dams.

 Incentives Prices
 Favorable ToT.
 Private Investments
Policy Weakness
 Uneven distribution of Credits
 Marketing Facilities
 Storage Facilities
 Agro Based Industries
 Stability in Agriculture Prices
Future Policy
 Use of HYVs of different crops.
 Availability of advanced technology on cheaper cost.
 Reduction in the prices of inputs.
 Attention on research and development
 Strengthening the agriculture extension services through demonstration at the spot
 Strengthening the media and information process [use of IT]
 Improving the marketing facilitating
Future Policy
Cntd . . .
 Provision of infrastructure such as roads, electricity etc.
 Provision of storage and credit facilities especially to small farmers.
 Provision of government subsidies to agriculture inputs.
 Improvement/provision of food processing units in rural areas.
 Increase in export of surplus food.
 Improvement in early disposal of food grain and other agriculture produce.
The Socialist Seventies

Policy Actions
 State Intervention
 Biased Credit Policy
Other than policy factors
Revival in Eighties and Nineties

Policy Actions
 Technological Breakthrough
 Liberalizing the market
 Changes in Domestic Purchase
Prices
Land Reforms
Cntd . . .
YEAR REFORM KEY FEATURE AND RECOMMENDATIONS

1959 Land and Tenancy Ceiling on landholdings : 500 acres

Reforms –Material Law irrigated , 1000 acres unirrigated additional
Regulation 64 , 64A, land allowed to bring landholding to
and 64B equivalent 36000 PIUs ; resumed land to be
sold first to tenants and then to small
farmers; abolition of jigirs ; occupancy
tenants made owners ; all tenants , haris and
tenants –at-will given legal protection rents
to be paid in kind and all charges other than
crop share abolished.
1972 Land and Tenancy Ceiling on landholdings : 150 acres irrigated , 300 acres
unirrigated or equivalent of 12000 PIUs + 2000 PIUs for
Reforms –Material Law
tractor and tubewel owners ; no compensation to
Regulation 115 and
landowners , land redistributed without charge to
amendments
landless tenants cultivating resumed land ; untenanted
resumed land redistribution without charge to small
owners/ tenants with holdings below subsistence ; share
system remains unchanged ; land revenue , water rates ,
and seed costs borne by landlords and cost of fertilizer
and pesticides to be shared equally ; tenant eviction
decided by revenue courts if tenants failed tp pay rent,
failed to cultivate land , sublet tenancy or rendered land
unfit for cultivation.
1977 Land Reforms Act Landholdings : 100 acres irrigated , 200
acres unirrigated or 8000 PIUs equivilants
; compensation to landowners on resumed
land at Rs30 per PIU; redistribution as in
1972.
This act was complete ignored by the
military government after july 1977.
Mechanization

Aims at
 Increasing productivity of land and labor
 Bringing in more area under cultivation
 Conserving energy and resources
 Sustaining agricultural production
 Improving operators' comfort and safety
 Protecting environment
 Increasing farm profits
Farm Mechanization
National Perspective
 Practicing selective mechanization
 Mechanized operation for which there
was shortage of labor, power or both
 Popular forms of mechanization are:
 Bulldozers
 Power rigs
 Tractors with cultivator, wheat thresher &
sprayer
 Tube wells
Agro-based Processing

‘Globalization’
 Enhanced capacity building
 Human resource development
 Industrial base diversification
Agro Agro-Processing Industries
 Food industry 13.8%
 Beverages man. 1.6%
 Tobacco man. 7.4%
Mechanization
Constraints
 Tractor sales depend on institutional credit.
 Limited use of farm implements.
 Poor quality of locally produced farm equipment.
 High initial and maintenance cost of the pressurize
irrigation system and inadequate knowledge/skills at farm
to operate the system.
 Tilling machinery is mainly limited to cultivators, the
continuous use of which creates hard pans.
 Inadequate renting services for the agricultural machinery.
 Insufficient/non-availability of rice transplanting and
cotton picking machinery.
Processing Industries

 Lack of standardization & certification

 Lack of innovation in product
development
 Un Un-even standards and quality control
 High packaging and input costs
 Phytosanitary, hygiene, health and safety
Policy Proposals

 In order to encourage investment in

tractor industry, minimum 30% deletion
as benchmark for new entrants is
suggested.
 Import of second hand machinery
 Skimming wells
 Zero duties to implement manufacturing
sector
 Standards & product quality improvement
 New products development
Agricultural Pricing Policy

Objectives
 Production incentives
 Maintain equitable terms of trade
 Maintain stable prices for consumer
 Enhance competitiveness
 Enhance investment
 Enhance agriculture productivity
Support Price System
 During the post harvest season, most of
the farmers dispose off their
commodities because of liquidity
crunch. As a result the prices sharply
crash causing a loss to the farming
community. This vulnerable community
is therefore required to be protected
during the post harvest season.
Support Price System
Cntd . . .
 The agro-based mills/factories as well as
village/town commission agents usually
form cartels, hurting interests of growers in
various ways. In times of glut they reduce
demand and create price instability.
 Because of huge agricultural subsidies
provided by the industrial nations to their
farmers, Pakistani farmers are generally at
a
Support Price System
Cntd . . .
disadvantage to compete based on
free market economy. Some
protection needs to be given for a
level playing field.
 Demand for most agricultural
commodities is inelastic; therefore,
slight changes in supplies affect the
prices considerably.
Agriculture Pricing Policy in Pakistan

 Fixed Retail consumer prices of food grains at low

levels
 Export duties on cotton
 Inter-district and inter province restrictions of
movements
 Prices of vegetable ghee were kept low
Agriculture Suffered
Policy Change by introducing minimum price
support program and input subsidization.
Future Policy and Action Plan
 The support prices for four major crops i.e.
wheat, cotton, rice and sugarcane will continue
to be ensured to the growers. However, the
support prices will be re-named as rescue prices
so that misconception about the support prices is
removed. These rescue prices will be
implemented through PASSCO (for wheat and
rice), TCP (for cotton) and sugar mills (for
sugarcane).
Future Policy and Action Plan
Cntd . . .
 Agricultural Prices Commission will continue
to be the recommendatory body for the rescue
prices. While recommending the support
prices, APCom would keep in view the cost of
production, domestic and world prices,
domestic and international demand and
supply situation, comparative economics of
competing crops, real prices, profitability of
input use, impact of rescue price on other
sections of the economy .
Future Policy and Action Plan
Cntd . . .
 The concept of rescue prices will be promoted
in the farming community. The provincial
agricultural departments will educate the
farmers that support price is not a
commercial price but it is a rescue price.
Moreover, the implementing agencies will
have to ensure the effective implementation of
these prices in case of need. There will be,
however, no compulsory procurement of any
agricultural commodity.
Credit Policy
 Production loan and development loans
 Formal and informal sources
Current facilities
 Lease financing facilitates for tube wells and tractors
 Finance for Agricultural produce by farmers/marketing companies
against raw cotton, cotton yarn, mutton and beef, wool and animal
hair, food stuff for animals.
 Micro credit institution, recognized NGOs and Rural Support
Organization for onward lending to farmers/growers/borrowers.
 Agriculture finance against mortgage of Saving Certificates gold
and silver ornaments.
 Security of land through the Pass Book System on the basis of
realizable value/forced sale value.
 Reduction in markup rates from 14 % to 11%
Measures to be taken

 Lease financing facilities to the farmers under the scheme

for tube wells, tractors and harvesters
 Equity participation by banks in corporate agricultural
farm units.
 Financing by the banks for export of agricultural products
 Non-fund based facilities extended by banks for corporate
farming.
 The credit that is disbursed by banks for processing of
crops other than major crops and polishing and grading of
fruits.
 The commercial banks’ lending to micro credit institutions,
recognized NGOs and rural support organizations.
 Inter bank lending (participating banks) for onward
financing for agricultural purposes as defined in the
scheme.
 No restriction on the banks to provide agricultural loans to
the farmers, having/below subsistence holding
 Credit should be provided by banks to seed processing
units for processing of high quality seeds.
 The financing by banks for preparation and installation of
steel/metal capsules for storage of all agricultural produce.
Fishiries

Policy Goals
 Economic Growth
 Poverty alleviation
 Food Security
Policy Action
Increase national fish supply based sustainable
production & improved market of aquatic
products
livestock

Policy Actions
 Animal Health
 Improvement in productivity
 Improvement in animal nutrition
 Post harvest management
 Export of livestock
 Improving livestock marketing
 Strengthening extension services
WATER - Irrigation
 Total irrigated area increased by 80 percent between
1960 and todate, from 10.4 to 18.8 million hectares,
mainly due to an expansion in tube well irrigation.
 Nearly 80 percent of Pakistan’s cropped area is
irrigated.
– 37 percent of irrigated land was irrigated solely with
canal water
– 41 percent with canal and tube well water
– 18 percent solely with tube well water (2004-05 data).
– About 60 percent of irrigated water available at farm
head is provided by canal water; 40 percent is supplied
by groundwater.
 Current patterns of water use are resulting in
significant environmental degradation
– Losses of soil fertility due to soil salinity and erosion are
estimated at Rs 70 bn/year (1.5% of GDP; 6.8% of
agricultural GDP)
 Inefficiencies in water allocation reduce
crop productivity at both head end (due
to over-use of water and water logging)
and tail end (due to water shortages)
 Total availability of water in the Indus
river basin has declined
– Additional storage could help increase
availability of water in dry season (rabi),
but will not be available for at least ten
years
Improving Water Use Efficiency
 Improved water delivery and increased efficiency of
water use are the most promising approaches in the
short- to medium- term
– Better water management through establishment of
water users’ associations or other institutional
mechanisms
– Canal lining
– Adoption of water saving technology at farm level
 Changing current crop mix can improve water use
efficiency
– Rationalizing water charges could facilitate these
changes
– But Programs may be needed to ease the transition of
farmers and processors
Causes:

 1) Distortions in global agricultural trade → led to

volatile and uncertain international commodity prices

 2) Structural constraints of Pakistan’s agricultural

sector and certain domestic factors→ resulted in:
a) decrease in public investment for rural development;
b) cut in subsidies; c) increase in input prices; d)
inadequacy of the agricultural knowledge system; e)
ineffective land reforms; f) poor recovery of institutional
credit; g) inadequate performance of agricultural
insurance system; g) inefficient water management;
h) and ineffective markets
CONCERNS OF PAKISTAN WITH RESPECT TO WTO RULES
RELATED TO AGRICULTURAL TRADE

Difficult for Pakistani policymakers to align domestic

concerns with the international pressure for further
trade liberalization

1. Agreement on Agriculture (AOA)

1. Trade-related Intellectual Property Rights (TRIPS)

Agreement

2. Technical Barriers to Trade (TBT) and Sanitary and

Phitosanitary (SPS) Agreements
Agreement on Agriculture (AOA)

 AOA → one of the most promised agreements to benefit

developing countries by eliminating market distortions and
allowing greater market access

 Although rich countries have decreased the subsidies to

farms, as agreed under the AOA→ however by a clever use of
rules they have in fact increased agricultural sector
support.

 Developed countries have also reduced the market access →

tariff peaks, tariff escalation, tariff rate quotas etc.

 Special Products (SPs) and Special Safeguard Mechanism

(SSM) → collapse of July 2008 mini-ministerial meeting
Trade-related Intellectual Property Rights (TRIPS) Agreement

 Balance in benefits→ historically, technology imitation

 Cost of technology transfer↑ → difficult to adopt

modern technology for human development.

 Technological development has not been compatible

with geographic requirements.

 Enhanced the cost of seeds and cultivations

 Reduced biodiversity as a result of the use of

genetically modified (GM) technologies, promotion of
uniform varieties and neglect of preservation of plant
varieties
Technical Barriers to Trade (TBT) and Sanitary and
Phitosanitary (SPS) Agreements

 Required to base standards/regulations a/c to international standards

 Easy for developed countries but difficult for developing countries

→served as non-tariff barriers

 Pakistan is unable to meet the requirements of these agreements

due to:

a) shortage of financial resources and technical support needed to

upgrade the quality and standard of agricultural sector
b) limited technical, legal and scientific resources to challenge such rules

Developed countries promise to support developing countries by

providing US$1 billion per annum
IMPACT ON HUMAN DEVELOPMENT

 During the Uruguay Round, expectation was→ poverty

and food insecurity↓

 However, disappointment → (food security)FS ↓ →

vulnerability of people in rural areas↑

 Opening up of markets → exposed the landless,

marginalized and poor farmers →threatened the FS and
livelihoods of subsistence farming → the most
vulnerable are women farmers

1) Impact on poverty
2) Impact on food security
IMPACT ON POVERTY

 Agricultural trade liberalization (without institutional

reforms)→ rural poverty↑

 It has affected labour market in two ways:

a) replacing labour-intensive crop production by

subsidized cheap imports
→ cost of inputs↑ + subsidies↓
→EU and US support to farmers ↑ TOT↓ → rural
livelihoods ↓

b) introduction of capital-intensive practices

→ consolidation of farms↑ → vulnerability of farmers↑ →
labour requirement↓
IMPACT ON FOOD SECURITY

 In 2009, 48 per cent people were food

insecure.
 In 2009, consumption of wheat in Pakistan
has fallen 10%
Causes of food insecurity:

a. high level of trade dependence

b. and exposure to international market
volatility
POLICY RECOMMENDATIONS

From domestic policy perspective:

1. Governance is the main issue for negative impact of agricultural trade openness in
Pakistan.
2. need for a Food Security Strategy to address the issue of food insecurity.
3. Land reforms → a) transfer of tenancy rights into either ownership or permanent
tenancy, b) computerization of land records to ensure proper taxation, c) and
transfer of uncultivated and state owned land to the poor, marginalized and
landless farmers
4. Improvement in the provision of agricultural credit and agricultural insurance
systems to benefit the small farmers
5. correct inequities in access to water and improve water management
6. Agricultural marketing system must be run more efficiently to reduce post-harvest
losses and price differentials
7. Establish a strong link b/w agricultural education, R&D and extension services.
System of public and private partnership is needed to resolve financial constraints
in the agricultural knowledge system
From the perspective of international trade rules:

1. TRIPS Agreement should focus on spreading the benefits of agricultural

innovations as widely as possible. The role of international agricultural research
centres be strengthened for providing quality seeds to farmers. They should be
supported to offer financial, technical and scientific support to upgrade the quality
and standard of agricultural products.
2. Pakistan has its own home grown system of property rights. It needs to be
strengthened more.
3. South Asia needs to harmonize the standards of commodities within the region.
4. The Doha Round → gaps between applied and bound tariff rates ↓ → policy
flexibility↓ → (in presence of domestic constraints + international volatility of
commodity prices) vulnerability of agricultural sector ↑. Pakistan needs to have
access to instruments like SSM and SPs.
5. Should be careful in further liberalizing → not a commercial activity but a way to
secure subsistence and livelihood for farmers
6. need for a Food Security Strategy to address the issue of food insecurity.
China Pakistan Economic
Corridor(CPEC)
 CPEC will go a long way in the
enhancement of agribusiness benefits
by tapping value-added product
innovation and supply chain.
Performance of
Agricultural Sector
Agriculture Crops Live stocks Forestry Fishery

2009-10 0.23 -4.16 3.80 -0.07 1.40

2010-11 1.96 0.99 3.39 4.76 -15.20

2011-12 3.62 3.22 3.99 1.79 3.77

2012-13 2.68 1.53 3.45 6.58 0.65

2013-14 2.50 2.64 2.48 1.88 0.98

2014-15(F) 2.13 0.16 3.99 -12.45 5.75

2015-16(R) 0.27 -4.97 3.36 14.31 3.25

2016-17(p) 3.46 3.02 3.43 14.49 1.23