Pakistan’s Agriculture Sector-1(Crop Sector)

Challenges and Responses

Shahid Hussain RajaIndependent Consultant-Public Policy

SANO Consultants Ltd UKMay 10,2015

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Introduction Historical Evolution Where we stand - Time Series Where we stand - Cross Country Present scenario - SWOT Analysis Challenges Responses Conclusion

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Sequence

Despite its relative decline in formal economy in percentage terms, agriculture is still dominant sector in overall economic structure

Pakistan’s survival and growth are directly dependent on its agriculture due to its socio-political interconnectedness and its economic and financial linkages-backward and forward

Its performance still dictates all our macro indicators - GDP, Poverty, External Balance, Inflation etc

This presentation, after carrying out the SWOT analysis of Pakistan’s agriculture sector, describes the challenges it is facing and how to respond to them

Its article version will be soon available at my personal website

www.shahidhussainraja.com

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Introduction

The total area of Pakistan is approximately 80 million hectares out of which about 58 million hectares have been surveyed so far

The area under cultivation is 22 million hectares (38%) out of which nearly 19 million hectares is irrigated; the rest is rain fed

The area under forest is 4 million hectares (7%) and the balance surveyed area 8 million hectares can be classified as the cultivable waste

Coupled with suitable climate and availability of fairly good water resources, agriculture has been the major activity for centuries in this part of the world

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Pakistan Agriculture - Basic Facts

Agriculture sector of Pakistan comprises four sectors - livestock, crop, forest and fisheries

Livestock contributes 56% of the total agriculture production while crop sector adds 38% to it out of which the contribution of major crops is 25% and minor crops is 13%

Fisheries and forestry contributes 2% each

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Pakistan Agriculture - Basic Facts

During the 1950s, agriculture growth was sluggish due to less area under cultivation and low productivity

Low technological base, adverse agricultural terms of trade, patterns of landholding, inequitable tenurial relations were some of the causes

Main driver of growth became increase in cultivated area which increased from 11.6 m ha in 1948 to 15.3 m ha by 1960

Development of lands (particularly in the new barrage areas) had huge impact on production

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Historical Evolution - 1950s(Pre Green Revolution Era )

During the1960’ emphasis shifted towards vertical expansion - increase in yields through genetic breakthroughs in major crops (wheat, rice, cotton)

Land Reforms of 1959 devised a rational land tenure policy. Implementation facilitated creation of new social relationship conducive for agricultural growth

Rapid increase in tube wells contributed to more than a million ha cropped area in Punjab alone (100% increase in cropping intensity)

Agricultural sector grew at 3.8% pa with the production of all crops grew around 4.8% per year

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Historical Evolution - 1960s(Green Revolution Era )

Varieties evolved during the 1960s were adopted widely by farmers in the 1970s

Use of inputs (seeds, fertilizers, pesticides), controlled water, and access to subsidized electricity and credit on a large scale

Price and non-price measures resulted in higher use of modern inputs

Three rural reconstruction programs’ thrust to create more rural employment, facilitate flow of farm inputs and outputs and provide agri. services in small towns closer to farmers’ doorsteps

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Historical Background - 1970sGreen Revolution 2

Two successive food crises forced the policy makers to formulate comprehensive food security policy and realisation of rural transformation as a necessary precondition for economic growth

Induction of local bodies resulted in improvement of rural infrastructure

Foreign remittances resulted in rural private construction, rationalisation of the cost of land and realignment of rural political dynamics

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Historical Background -1980sRural Transformation

Better crop management and extension services played a major role in increasing the agricultural production

Input use efficiency and greater integration with the world markets are the prime reasons for boosting growth in agriculture sector

Fertilizer use and adoption of HYVs and the use of mechanical farm power exhibited rising trends

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Historical Background-1990sPost Green Revolution Consolidation

Food crises of 2007 reemphasized the crucial importance of agriculture as an engine of growth, price stabilizer and vehicle for poverty alleviation

Terms of trade became favourable for the agricultural sector after many decades

Introduction of Biotechnology by the private sector started the Gene Revolution in the country

Commercial farming started at large scale by enterprising farmers and business houses which boosted tunnel farming and farm mechanization

Environmental consideration, looming threat of climate change and water scarcity have forced the policy makers to go for inputs use efficiency and resource management

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Historical Background-2000/10sGene Revolution

Crop Decades Ago In Recent Years

1950-53 1960-63 2003-06 2007-10

Wheat 3.13 4.01 20.80 22.76

Rice 0.81 1.09 5.14 6.47

Maize 0.37 0.47 2.60 3.48

Sugarcane 6.09 14.52 48.44 54.45

Seed Cotton 0.82 0.99 5.87 6.18

Fruit N/A 2.54 6.49 7.06

Vegetable 0.63 0.86 3.07 3.13

Milk N/A N/A 37.27 38.05

Meat N/A N/A 2.31 2.84

Fish 0.055 0.089 0.59 0.69

Output of most crops increased by 6-10 fo ld

Crops Sector Performance(million metric tons; 3 year moving

average)

Wheat - From 4 MT in 1950s to 6MT in 1960s to 23 MT in 2010

Rice - From less than 1MT to 2 Mt in 1960s to more than 6.9 MT in 2010

Maize - from 0.5MT in 1950s to 1MT in 1960s to 3.3 MT in 2010

Cotton - From 0.8 MT in 1950s to 2 MT in 1960s to 12.9 MT 2010

Sugarcane - From 6MT in 1950s to 14MT in 1960s to 49.3 MT in 2010

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Where we Stand Now-Time Series

MT = Million Tonnes

Commodity Pakistan India USA China World

Wheat 28 27 26 48 28

Cotton 20 15 29 43 22

Rice 32 33 82 64 42

Sugarcane 516 734 785 871 717

Maize 33 22 96 55 50

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Global ComparisonMaunds (40 kg)/acre

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SWOT Analysis

With more than 22 million hectares of land under cultivation, agricultural land of Pakistan is 35% of the total area, sufficient not only for its food self-sufficiency but also its industrial and exports needs

Contributing one fifth of Pakistan’s total GDP, agriculture is the only source of income for 60 % population of Pakistan absorbing 47% of the total labor force

Agriculture being the main income activity of the people of the area for more than 6 millennia of recorded history, agriculture is the occupation by choice of the inhabitants. They have now more than 60 years of accumulated knowledge of modern agricultural practices.

Irrigation system of Pakistan is best irrigation agriculture sector

Pakistan is blessed with all four weathers, very helpful in increasing productivity of agricultural land.

Pakistan is fourth largest producer of cotton, dates, mangoes worldwide

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Strengths

Weak factor productivity, stagnant yields Preponderance of small farmers, low technology base Post harvest losses, inadequate supply chain

Infrastructure, inefficient and inadequate marketing Depleting soil fertility Deteriorating Irrigation and drainage system Ineffective Education, R&D and Extension linkages Poor skill development for modern agriculture Inappropriate use of natural resources

Rural Non-farm Sector performs below potential

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Weaknesses

Existence of productivity gaps - great scope for production enhancing

Worldwide interest in agriculture

Burgeoning population - need for food

Growing prosperity - demand for value added food products

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Opportunities

Climate change and environmental threat

Use of arable land for non-agricultural use

Low priority for agricultural development-urban bias

Sluggish economic growth-catch-22 position

Rural Governance issues

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Threats

How to improve the quality of life of the citizens of Pakistan by ensuring their food security and providing agricultural raw material to its industry at competitive rates by making agriculture an efficient, productive and profitable sector of the economy in a manner that its growth is sustainable and outputs are competitive?

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The Challenge

Increase productivity by increasing efficiency in all agricultural operations through public as well as private sector investment in R&D and Extension

Increase profitability by rationalizing input and output prices, reducing production and post production losses and selective public procurement intervention

Making agricultural produce competitive in the rapidly globalizing world by reducing cost of production, improving quality and ensuring Sanitary and phyto-sanitary (SPS) compliance

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The Response

Ensuring sustainability by promoting environment friendly good agricultural practices through ,appropriate legal framework, awareness campaigns and incentives and rewards

Equitable distribution of gains from enhanced productivity by making available public sector goods and services to all stakeholders without distinction

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The Response

A. Horizontal expansion - increasing the area under cultivation

B. Vertical expansion - increasing the productivity

C. Structural transformation - diversification and value addition

D. Cross Cutting Interventions - agrarian reforms

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Main Thrusts of Agriculture Policy

Bringing new areas under cultivation

Reclaiming degraded lands

Intercropping

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A. Horizontal Expansion

Bringing uncultivated area under cultivation by providing proper technical support, making available affordable technology and adequate water

Increasing availability of water by construction of new small and medium dams and popularizing rain harvesting techniques

Saving water by reducing water losses through proper water conveyance and efficient irrigation techniques

Economical management of ground water pumping

through incentives, legislation and awareness

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Horizontal Expansion(New areas cultivation)

Launch a sustained campaign for the use of gypsum in every acre and provide incentives

Forbid by law the burning stubs of wheat and

rice and encourage the farmers to plough them into the field

Encourage the sowing of humus making plants soon after the harvesting of wheat and plough them back into the lands

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Horizontal Expansion(Rehabilitating Degraded Lands)

Encourage eco-friendly inter-cropping practices as it increases the area under cultivation by cultivating vegetables in between the rows

Agro-forestry is another profitable option for the farmers and the country

However farmers must be given proper technical support for this practice to be cost effective and eco friendly

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Horizontal Expansion(Intercropping)

Agricultural Education and Research

Farm Mechanization

Inputs◦ Seeds◦ Chemicals◦ Water◦ Credit

Production Losses

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B. Vertical Expansion

Introducing need based agriculture education, creating effective inter and intra institutional linkages and collaboration with reputable foreign universities

Strengthening public sector Research and Development system, improving inter and intra institutional coordination among educational/research institutions and extension

Encouraging private sector investment in the field of R&D with focus on modern technology and facilitating their outreach

Capacity building of extension personnel of the provincial agricultural departments

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Vertical Expansion(Education, R&D, Training)

Intensification and diversification of farm mechanization by ensuring easy access of the farmers to essential farm machinery

Its efficient and optimal use by incentivizing the private

sector for opening farm machinery leasing/hiring outlets in villages

Expansion and modernization of local farm machinery manufacturing by providing them training, incentives and technical/financial support to produce agricultural implements as per international standards

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Vertical Expansion(Farm Mechanization)

Variety development and local production of good quality seeds by the private sector by providing them appropriate legal cover and technical/financial support

Providing legal framework for establishing partnerships

between bio-tech research institutes and private seed companies

Encouraging good practices among the farmers to increase the efficacy of farmers saved seeds

Incentivize the farmers to use drill system of sowing to save on fertilizer and for better seed germination

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Vertical Expansion - Inputs(Seeds)

Timely availability of fertilizers, un-adulterated pesticides & herbicides at reasonable prices to the nearest possible doorsteps of the farmers through rationalisation of prices, in time import and provision of subsidy when needed

Popularizing the efficient and judicious use of

chemical inputs for reducing production losses with minimum side effects

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Vertical Expansion - Inputs(Chemicals)

Provinces to rationalize their respective water-related legislations including local water usage rules and implementation of integrated water resource management

Encourage public-private partnerships on water saving techniques in cultivation of different water terrains, and other innovative designs of groundwater recharge dams and rainwater harvesting

Prioritizing planned investment in large storage infrastructure and groundwater use in light of macroeconomic instability due to public budget deficit and conflicting demand uses

Saving water by reducing water losses through proper water conveyance and efficient irrigation techniques

Economical management of ground water pumping through incentives, legislation and awareness

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Vertical Expansion - Inputs(Water)

Streamlining the traditional sources of farmer credit by integrating them with the formal banking system

Making financial products tailor-made to the needs of smallholders and of micro, small and medium non-farm rural enterprises to become efficiently linked to the agri-based supply chains

Increasing the volume and outreach of formal banking network for timely and easy access to credit by farming community

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Vertical Expansion - Inputs(Credit)

There are various estimates of production losses due to non-use of weedicides by the farmers

Ignorance, fear and costs of using are the general reasons for this neglect

There is need to create awareness among the farmers for judicious use of weedicides for reducing the production losses

There are eco friendly measures to reduce this loss for those who are excessively conscious of use of chemical inputs

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Vertical ExpansionReducing Production Losses

Reducing post production losses

Value addition

Marketing

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C. Structural Transformation

Reducing post-production losses through development of cool chain infrastructure including storage in the private sector

Establishing grain storage and handling system at all levels including on-farm, off-farm and points of entry/exit (sea/airports), and refurbishment of existing storage facilities

Enforcing grain quality standards and establishing reliable grain testing laboratories at delivery points

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Structural Transformation (Post Production Losses)

Making agricultural produce competitive in rapidly globalizing world by enforcing SPS standards and introducing international certifications

Encouraging quality consciousness among the farmers through awareness campaigns

Introducing and implementing grading standards and improving marketing system of agricultural produce

Establishing modern agricultural produce wholesale markets in public-private partnership with cold storages, pack houses, customs facilities etc.

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Structural Transformation (Value Addition)

Sustained growth of the rural economy lies in the development of efficient and effective agri-based supply chains that link the agriculture sector with their corresponding upstream and downstream links in the rural nonfarm to the national and international markets

Establishing modern agricultural produce wholesale markets in public-private partnership with cold storages, pack houses, customs facilities etc.

Encouraging processing and value addition of agricultural produce to fetch better value, and to reduce post-harvest losses

Introducing warehouse receipt system for easy realization of sale proceeds to farmers

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Structural Transformation (Marketing)

Formulation of comprehensive Land Use Policy

Improving Agricultural Terms of Trade

Improving Rural Infrastructure

Improving Rural Governance

Environmental Sustainability

Creating Linkages and promoting Investment

Gender Mainstreaming

Production Relations

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D. Cross Cutting Issues(Agrarian/Rural Reforms)

Developing a national land use policy for rational use of land resources is the need of the day as valuable arable land is being converted at alarming rates by the property developers and industrial concerns for commercial non farm uses

Infrastructural development, though necessary is also rendering fertile land to brick and mortar

Add to it the declining fertility of our agricultural lands due to non sustainable agricultural practices

Plus the degradation of our lands due to water logging and salinity going on for decades, a negative side effect of our irrigation practices

All these issues needed to be addressed by formulating a long term

comprehensive land use policy by the government

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Cross Cutting IssuesFormulation of Land Use Policy

Agricultural transformation demands restructuring, not merely fine-tuning, the political economy of the rural areas which are an integral subset of the overall economic structure of Pakistan

One of the ways to do so is to improve the terms of trade between agriculture and the other sectors of the economy so that the squeezing of the peasants going on for the last six decades can be reversed

Rationalize the prices of the inputs farmers use, provide subsidy on them and as well as those of commodities they produce

Improving the marketing infrastructure

Selective procurement when the prices of agricultural commodities crash Introduction of crop insurance scheme

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Cross Cutting IssuesImproving Agricultural Terms of Trade

Urban areas do need good public goods and services but so do the rural areas where the roads, schools, hospitals and other infrastructure are in deplorable condition

No doubt the government has invested a lot in farm to markets roads, construction of health facilities, schools and also rural electrification

However there are complaints of substandard workmanship and their fast wear and tear due to paucity of maintenance funds

Similarly there are complaints of shortage of staff to man these health and educational schools. 'Ghost Schools’ was a term not invented in the air; it has a solid evidence

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Cross Cutting IssuesImproving Rural Infrastructure

Sustained growth of the rural economy lies in the development of efficient and effective agri-based supply chains that link the agriculture sector with their corresponding upstream and downstream links in the rural non-farm (RNF) to the national and international markets

RNF provides 40-60% of incomes/jobs in rural areas, much of its activity occurs in the trading, services and processing sector having strong forward and backward linkages with agriculture

Informal and low capital using entities catering mostly to domestic markets, RNF presents opportunities for providing value addition to primary production at the farm level

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Cross Cutting IssuesImproving Rural Non-Farm Sector

RNF is hampered by the numerous middle level low capital using players who add little or no value to products and services

For creating linkages between non-farm rural enterprises with agri-

based supply chains, we have to establish modern agricultural produce wholesale markets in public-private partnership with cold storages, pack houses, customs facilities etc.

At the same time government should Introduce warehouse receipt system for easy realization of sale proceeds to farmers and encourage processing and value addition of agricultural produce to fetch better value, and to reduce post-harvest losses

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Cross Cutting IssuesImproving Rural Non-Farm Sector

It is not an easy task to dismantle centuries old rural governance structure and replace it with modern, formal contract based rural public management in a short period but can be done in long term

Start with education, literacy and skill formation which will shake the foundations of this feudalistic structure

Establish alternate dispute resolution mechanism to replace the informal system heavily dependent on big landlords, supported by the police and the patwari

Local bodies elections be held as per fixed schedule which will bring in the leadership interested in improving rural infrastructure, the best guarantee of their fast journey to urban culture

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Cross Cutting IssuesImproving Rural Governance

Creating awareness among the farmers about the looming threat of climate change and environmental degradation

Popularizing the good agricultural practices by synchronising the extension services of the provincial agricultural departments and marketing outlets of the private agro services providers

Promulgation of legislation for stopping of practices aggravating the threat of climate change

Allocation of resources for carrying out research to adjust the cropping pattern and fine-tuning the planting and harvesting schedules, practicing crop rotation and diversifying crop mix

developing more varieties responsive to climate change

adapting irrigation practices and fertilization regimes.

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Cross Cutting IssuesAdaptation to Climate Change

Although it is not possible to replace the centuries old production relations of land cultivation in the rural areas of Pakistan in the short term, efforts can be made to introduce the three modern forms of farming

Contract farming-encouraging agri-based processors to supply inputs & technology packages to farmers on deferred payment with buy-back of produce at guaranteed prices

Cooperative farming-piloting variations of successful coop-models (with refinements to traditional coops)

Corporate farming-promoting lease of commercially viable tracts of land to corporate level entrepreneurs who are willing to practice high-tech export oriented agriculture and share profits with the owners

However all the above three need comprehensive legislation about contract making/dispute resolution as well as their strict implementation through a specially created institutional infrastructure

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Cross Cutting IssuesImproving Production Relations

Rural women are under three pressures-nature, society and family, all treat them unfairly in terms of status, ownership of resources , job opportunities and empowerment

Improving healthcare and family planning facilities to relieve them of excessive child bearing burden should be the top priority

Launching of special rural female literacy and education campaign by offering attractive monetary rewards would help in their empowerment and reduce domestic violence

Ensuring women’s access to resources and assets, including ownership of land by creating awareness about their rights and strict enforcement of legal framework priority

Providing equitable opportunities to women by developing marketing

oriented skills and remunerative employment in the rural areas

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Cross Cutting IssuesGender Mainstreaming

Enhance the productivity of the agriculture by increasing efficiency in all agricultural operations through public as well as private sector investment in R&D, extension services, rural infrastructure, marketing, value addition etc.

Unfortunately, the flow of investment funds towards agriculture, which has recently picked up, is still far below the desired levels.

we need to make agricultural produce competitive in the rapidly globalizing world by reducing cost of production, improving its quality and meeting global food safety standards. raising the awareness of the opinion leaders and decision makers to enforce strict food safety standards.

Motivating domestic and foreign investors to invest in seed production, fruit and vegetable processing, agri-infrastructure development and encouraging development of commercially viable non-farm rural agriculture enterprises

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Cross Cutting IssuesPromoting Investment

Despite its declining importance, agriculture is a sector capable of accelerating growth, reducing poverty, containing inflation and improving the quality of life of its citizens. Due to its backward and forward linkages, small investment can bring substantial gains

Area needing urgent attention are inputs use efficiency, reducing production/post production losses, credit availability and bringing more areas under cultivation through intercropping and tunnel farming

Areas needing attention in the short term are rural infrastructure, agricultural terms of trade, promoting investment, formulating land use policy ,farm mechanisation and improving rural non-farm sector

Areas needing attention in the long term are agricultural education, rural governance ,gender mainstreaming, adapting to climate change threats and introducing modern forms of production relations

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CONCLUSION

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Thanks