Manaksha Memon is concerned about an important
Though Pakistan heavily depends upon Fertiliser problems faced by agriculture but this crucial sector has been singularly neglected by the official authorities dealing with it. The neglect has direct bearing on the food security of the country and this dangerous aspect has put the lives of the people of Pakistan in jeopardy. Pakistan that just a few years before had attained autarky in food is now heavily dependent upon import of food grains that has become a tremendous strain on the already strained foreign exchange reserves of the country. One of the reasons of poor agriculture performance of the country is the acute lack of provision of fertiliser to the crops that abjectly need it to increase yields of crops for meeting growing public needs.
In this context it is noted that, by and large, the policies followed by successive governments have remained production-centric and carry within their wake incentives for manufacturers and importers. This approach has proved detrimental to the interests and welfare of the farmers who have been deprived of a satisfactory method of ensuring provision of appropriate subsidies to them so that they can get timely supply of fertiliser for their crops. The current practice of erratic and irregular supply of fertiliser to the farmers impedes the high yields of crops and results in shortage of agricultural output envisaged by the official figures.
It is important to keep in view that fertiliser subsidies are essential due to multiple factors, including Pakistan’s soils deficiency in all three major crop nutrients i.e. nitrogen, phosphorous, potassium, lower crop productivity than the overall global averages, low fertiliser usage in terms of kilograms per acre as compared to the region and drastic price hike of fertiliser in the last year that has resulted in a significant decrease in off-take of phosphatic and potassic fertilisers. These factors have made it emphatically important for Pakistani agriculture to use fertilisers at every stage of crop production and it has become an essential feature of the practice and cannot be ignored by the policy makers as well as all the stakeholders.
The current situation is that the federal government is providing a subsidy on imported fertilisers along with extending indirect subsidies in the form of tax relief and gas subsidies to fertiliser manufacturers. It is estimated that the federal and provincial relief measures collectively amount to around Rs.200 billion given as subsidy in respect of fertiliser. It is also calculated that with an estimated cultivable area of 57.5 million acres and a cultivable intensity of 159 per cent this amount of subsidy is considered to be insufficient for the Pakistani agriculture to retain its former food autarky and to compete in globally competitive agriculture sector. There is a general perception in the agricultural circles that under the pressure of IMF the government is not increasing the subsidy amount for fertiliser that is proving harmful to the sector.
Many agricultural experts are of the view that the direct and indirect subsidies, reliefs and incentives provided to the agriculture sector are in no measure equal to the advantage that this sector is providing to the country as such. This appears to be a very valid argument as the prices of essential food commodities in Pakistan are certainly lower in comparison to global prices that are experiencing one of the highest food inflation in almost half a century. Despite such constraints Pakistani agriculture still keeps prices much under par and highly deserves all support in terms of subsidies by the government to keep the prices within manageable levels so that the already high level of inflation is kept under control.
Another problem in this respect is the delivery mechanism of the subsidiary whose various tiers are open to exploitation such as gas subsidy given to fertiliser manufacturers who are accused by farming circles of utilising it for urea smuggling along with increasing profits of manufacturers. They also point out that the subsidy that is focused on urea helps in promoting unbalanced use of fertilisers that again favours the manufacturers instead of the farmers. The farmers are of the view that the subsidy is required to be provided to the farmers directly with a clearly marked out procedure that is transparent and widely acceptable.
The most problematic aspect faced by the policy makers is that withdrawing subsidies to manufacturers may result in increase in fertiliser prices for the farmers and this is the weak point exploited by the manufacturers. It is a situation that government is required to guard against and design policies that reduce such friction to the maximum. It is certainly easier than done as the manufacturing lobby is very strong and may not be able to dislodge in the short term but once a decision in principle is arrived at then wider policy options could be worked out accordingly. There are many modules that could be designed and put in place employing the practice of give and take till some mutually acceptable formula is worked out. TW