Making agriculture work for Pakistan

For decades, formal and organised agriculture sector worked for Pakistan. I use the term “organise and formal” to differentiate it from subsistence agriculture. The latter only produces enough output to sustain those who work on the land. No surpluses reach the market. But for a century and a half agriculture in Pakistan was able to provide food for the people living in distant areas that were food-deficit. It also provided cotton for the rapidly growing textile sector. As we point out in the 9th annual report of the Lahore-based Burki Institute of Public Policy, agriculture growth averaged well over four per cent a year during 1960-2000, a record matched by  few countries over such a long period of time. For two years, the rate of growth was well over six per cent. It was 6.5 per cent in 2004-05 and 6.3 per cent a year later.

This remarkable performance was the consequence of a combination of factors. The most important of these were a three-fold increase in the supply of irrigation water over the period 1960-1990, a speedy adoption of new high-yielding seed technologies, rapid use of fertilisers and a major breakthrough in cotton productivity in the second half of 1980s. Of these the first, a sharp increase in the supply of irrigation water, was by far the most important contributor.

There are few parallels in world history to Pakistan’s performance in increasing the availability of irrigation water from 50 million acre feet in 1960 to 125 million acre feet in 1990. Assured supply of water resulted in increasing the amount of area under crops; it went up from 10.5 million hectares in 1970 to 15.4 million hectares three decades later. But this performance was not sustained.

Agricultural growth slowed down sharply in the last decade. It was only two per cent a year in this period, one-half of that achieved earlier. In 2015-2016, the rate of increase in agricultural output was -0.2 per cent. This was first negative growth rate ever in Pakistan’s history. What was the reason for this slowdown? According to the World Bank, history caught up with the sector. “There is also evidence of long-term deterioration in water and soil quality. Reduced effectiveness of agricultural research and extension services also played a role. But it must be added that limited growth in agricultural productivity also reflects the fact that, over time, there has not been much diversification to higher value crops partly because the government’s policies have been preoccupied with major crops, especially wheat.”

What can be done to address the situation? One important answer is to carefully redefine the role of the state in managing agriculture. As I wrote in the article published in this space last week, the Pakistani state has been intrusive. Initially its role was positive. For decades it invested heavily in making more water available to farms, increasing the supply of fertiliser and insecticides, and picking up output surpluses so that in the years of plenty price-drops did not hurt the farming community. Over time, however, this intrusion began to weigh heavily on the sector, slowing bringing down significantly the rate of growth in agricultural value added. If we want agriculture to play the role it could and should, the state has to get out of the way and let the farmers take the decisions that are good for them. Aggregated, they will be good for the country. In this context the state needs to do two things: properly price water and let the markets work freely.

The farming community pays practically nothing for the water it uses. If it had to pay to cover the full cost of getting this important input to their farms, they will use it in the way that maximises the return from what they are paying for it. That alone will bring about a fundamental change in the pattern of framing. The farmers will grow the crops that are less water-intensive. I once visited a large farm in an arid part of Brazil. When I got there by helicopter sent by the owner to fetch me, he told me that he did some research on Pakistan in order to prepare himself for discussion with me. He said he was surprised to learn that Pakistan had the largest contiguous irrigated area in the world and yet was still dependent on food imports. His farm of several thousand acres had only a trickle of water flowing through in a small stream. He had Israeli engineers install an intricate system of drip irrigation. He was now producing large quantities of fruits, vegetables and flowers. A 747 plane landed every day on his strip and carted away his surplus to Florida in the United States. “If I can do it with such limited resources, Pakistan could do it on a massive scale,” he told me. Pakistan, he said, should be the orchard of the Middle East.

The other major decision the state in Pakistan needs to take is to get out of the business of agriculture marketing. Let the markets set the price for various agricultural products and let traders handle all produce. The government should neither procure, nor store, nor sell. Once the market gains efficiency it too will affect the pattern of farming in favour of high-value crops.

Some pain will be caused by these policy changes. These could be handled by the state easing the process of transition by instituting some form of insurance. The net result will be enormously positive and agriculture will begin to play the role in pushing forward the economy.

Published in The Express Tribune, April 10^th, 2017.

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