Govt looks to cash in by supporting agriculture sector

Announces various incentives for farmers to promote growth

KARACHI: A popular move for most governments in Pakistan is to announce support for the agriculture sector, given that a majority of its vote bank comes from the rural areas.

The PML-N government also looked to appease the farmer community.

It enhanced the target of agriculture credit to Rs1,001 billion for fiscal year 2017-18 from last year’s target of Rs700 billion in 2016-17, an increase of 43%.



The target is exactly equal to the amount the government has allocated for the federal Public Sector Development Programme (PSDP) for 2017-18. Finance Minister Ishaq Dar, in his budget speech on Friday, said that the current mark-up rates are in the range of 14% to 15%, but from July 1, 2017, Zarai Taraqiati Bank Limited (ZTBL) and National Bank of Pakistan (NBP) will launch a new scheme for small farmers with holdings of up to 12.5 acres at a reduced rate of 9.9%.

Other such schemes include small loans of up to Rs50, 000 per farmer. ZTBL, NBP and other banks will disburse 2 million loans, said Dar, adding that the State Bank of Pakistan will monitor the implementation of this new scheme.

Analysts say the agriculture sector would get a further boost due to the incentives announced in the budget 2017-18.



Review

The agriculture sector bounced back strongly in fiscal year 2016-17 by posting a growth of 3.46% - its highest in the last five years, which greatly helped the government in achieving the overall economic growth of 5.3%.

The government’s support to the fertiliser sector is also expected to help the agriculture sector.

In order to create ease of disbursement of subsidy on Di-ammonium Phosphate (DAP), the government has decided to fix general sales tax (GST) on DAP. As a result, GST is being reduced from Rs400 to Rs100.

Dar said that this will have a subsidy impact of Rs13.8 billion. The reduction in tax rates and subsidy provided for a bag of urea shall be maintained at Rs1,400 in fiscal year 2017-18, which will have a subsidy impact of Rs11.6 billion.

The finance minister said that there is a growing trend of using combined harvesters in the country. However, the combined harvesters currently being imported are 20 to 30 years old, and many of them have been reduced to almost junk.

Due to the use of old machinery, harvesting losses can be as high as 10%, he said, adding that to reduce these losses, the government has decided to encourage the import of newer agriculture machinery.

He said that it has been decided to reduce the customs duty and sales tax at the import stage to 0% for five years on new and up to five years old combined harvesters machinery.

The agriculture sector met its growth target of 3.5% mainly due to the increase in disbursement of agriculture credit in 2016-17. During July to March 2016-17, the disbursement was observed to be 23% higher compared to the previous year.

“These developments, along with the Prime Minister’s Kisan Package together with other relief measures, have started yielding positive results,” stated the Pakistan Economic Survey 2016-2017 released on Thursday.

Increased production of important crops - wheat, rice, sugarcane, maize and cotton that have a share of 23.85% in the overall agriculture sector - massively supported the growth of the sector in 2016-17.



“This was made possible by better harvesting of major crops through greater availability of agriculture inputs like water, agriculture credit and intensive fertilisers off-take,” the survey noted.

The growth in crops was registered at 3.02% against negative growth of 4.97% during the same period last year.

This growth is also highest in the last five years, pointing to an important aspect that the agriculture growth is mainly dependent on the performance of crops because the performance of livestock - a sector that contributes 58% in the agriculture sector - has remained quite stable in the last five years.

Published in The Express Tribune, May 27^th, 2017.

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