ECC ready to approve farm package

Food security ministry proposes fertiliser subsidy

Zafar Bhutta May 12, 2020

ISLAMABAD: The Economic Coordination Committee (ECC), which is scheduled to meet on Wednesday, is set to approve a Rs56-billion bailout package for the agriculture sector amid the growing impact of Covid-19 pandemic.

The government has already announced a stimulus package of over Rs1.2 trillion to cushion the impact of Covid-19. Out of this, Rs100 billion has been earmarked for giving relief to small and medium enterprises (SMEs) and the agriculture sector.

The Ministry of National Food Security and Research has prepared a package of incentives for farmers in various sub-sectors of the agriculture sector to help them to cope with the impact of Covid-19. The ministry has submitted its proposals for ECC’s consideration.

The food security ministry has proposed a subsidy of Rs925 per bag of di-ammonium phosphate (DAP) and other phosphoric fertilisers and Rs243 per bag of urea and other nitrogen fertilisers. Total subsidy cost will be Rs37 billion.

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The subsidy scheme will be implemented by the provinces and funds will be disbursed through the scratch card scheme, already being implemented by Punjab. The subsidy on fertilisers has been proposed for the Kharif crop (April-October).

At present, the government gives subsidy to fertiliser manufacturers on gas supply that is said to be not fully passed on to consumers. This time, the government has decided to give a direct subsidy to the farmers.

Mark-up subsidy

Farmers have been facing high-interest rates of up to 18.4% on bank loans. This has been a major problem that has caused losses to them over the past few years as they cannot add adequate inputs to crops.

Now, the government has decided to reduce the mark-up on loans. However, the proposed rate of interest is still high that the farmers may not be able to afford.

At present, the mark-up on agricultural loans provided by Zarai Taraqiati Bank Limited is 18.4%. A reduction to 10% has been proposed for 2020 for ECC’s approval. The mark-up subsidy will require Rs8.8 billion.

Subsidy on cottonseed

A subsidy of Rs150 per kg of cottonseed has been recommended for the Kharif 2020 crop season in Punjab and Sindh. This subsidy will require an amount of Rs2.3 billion.

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Another subsidy of Rs300 per bag of pesticides, meant for combating white fly, has been proposed. The subsidy will cover five million acres in Punjab and Sindh, which is around 80% of the cotton area. The total cost of the subsidy will be Rs6 billion.

Local tractors

The food security ministry has proposed 5% sales tax subsidy on locally manufactured tractors for one year. The total cost of the subsidy will be Rs2.5 billion. Sources said the finance ministry had endorsed the subsidy for the agriculture sector.

Published in The Express Tribune, May 12th, 2020.

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