Breadbasket in distress: Mounting problems farmers face as threat of food security looms

Lack of credit, inputs and technology pose a threat to their crops, incomes.

FAISALABAD:

Lack of access to credit lines coupled with weak credit worthiness of small landholders, shortage of inputs and dearth of advanced technology have dealt a blow to the earnings of farmers besides increasing the threat of food insecurity in Pakistan, which is primarily an agrarian economy.

The agriculture sector, which contributes about 23% to the overall economy and provides jobs for about 45% of the employed workforce, both formal and informal, got just Rs221 billion in loans from banks in 2012-13. This was only 2.4% of the total loans of Rs9.4 trillion that the banking sector advanced in the year, according to SBP data.

Compared to the preceding year, the sector’s share in total credit dropped. In 2011-12, it had borrowed Rs198.5 billion, which was 2.5% of the total loans of Rs7.8 trillion disbursed in the year.

Of the Rs221 billion, banks gave Rs161 billion for planting crops and Rs24.3 billion for purchasing machinery and equipment. Farmers complain that most of the loans were given to big landholders, though they were small in number. In contrast, the manufacturing industry got loans worth Rs1.5 trillion, accounting for over 10% of total credit. According to market players, the manufacturing sector won more loans on the back of better credit worthiness and banks’ trust in the well-educated industrial class.



Small landholdings

Small landholdings up to five acres of land comprise 80% of land in the country, but owners of such small pieces of land cannot take big loans, according to the farmers. This leads to delay in purchase of inputs like fertilisers, seeds and diesel for tube wells due to power outages.

Farmers are put at the mercy of middlemen for getting funds or inputs on credit. The middlemen exploit the situation, take commission and make sure that crops are sold to them as soon as they are harvested to recover the borrowed money.

Despite these bottlenecks, the government has fixed ambitious targets for all major crops, but the problems of farmers remain unresolved. This season, the country is importing wheat as the crop has been affected by shortage of inputs, farmers say.

Farmers miss the most favourable time of sowing every season and cultivate crops late in the season, leading to a sharp fall of 30% to 40% in productivity, according to agricultural experts.

They argue that farmers should be given financial assistance on easy terms to help them buy inputs on time. Fertiliser subsidy should also reach growers, who should be shielded from market manipulation, they say.



Price crash

The weakest area so far has been the market mechanism in which poor farmers suffer from regular price crashes. For instance, small farmers are unable to get wheat sacks from the food department and they have no way out but to sell the produce at rates lower than government-set support price in the local grain market.

In case of sugarcane, millers buy cane from growers on credit – many mills have not paid the outstanding amount for the last two to three years. This also delays sowing of the next crop.

Farmers complain that expensive and counterfeit pesticides also damage major crops, blaming the government for the absence of a mechanism to control the black market. During the peak sowing period, farmers are also forced to buy fertilisers at higher prices.

Black market

Talking to The Express Tribune, the district officer of Punjab Agriculture Department Faisalabad, Hameed Chaudhry, says urea price was set at Rs1,750 per bag and di-ammonium phosphate (DAP) at Rs3,895 per bag. However, according to farmers, in local markets, urea was being sold at Rs1,900 and DAP at over Rs4,000.



“We are trying to eliminate the black market, the provincial agriculture department has registered FIRs against the dealers who are selling fertilisers in the black market,” Chaudhry says.

Arshad Chatta, a farmer in Faisalabad, cites unavailability of loans as one of the major reasons for late sowing. Banks give on average Rs40,000 per acre – not enough to purchase even expensive inputs. Big farmers mostly get the loans, he says.

Interest rates are also unbearable for the farmers. According to Chatta, interest rates for agriculture loans, which stood at 9% two years ago, have been increased to 14% after the government withdrew subsidies on loans.

Agriculture banks and private banks are demanding more than that, setting the rates at 18% to 20%, he says. Furthermore, procedures for acquiring loans are also cumbersome.

“The agriculture sector has long been ignored and the government should give priority to it to make the country food secure,” suggests Ali Raza, an agriculture expert.

In order to strengthen the sector, development of water resources, expansion of research work, state-of-the-art technology and improved market mechanism were necessary, he says.

Supply of fertilisers at subsidised rates, certified and high-yielding seeds and improved government policies will also help farmers to address their problems.

Published in The Express Tribune, August 19^th, 2013.

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