Higher bank credit limit for farmers

It will help increase per-acre yield, overall output of major, minor crops

KARACHI:

There is good news for wheat and sugarcane farmers and congratulations to the top politicians who control – and leverage as per their requirement – wheat and sugarcane cultivation. Banks will now offer 50% more agricultural credit to the eligible wheat farmers and about 44% more to the sugarcane growers. What has made this possible is the recent upward revision in the per-acre credit limits for these two politically sensitive crops along with many others.

The central bank has asked banks and development finance institutions (DFIs) to treat as legitimate the borrowing requirements of wheat farmers at the rate of Rs60,000 per acre. It has also advised them to offer agri-loans of Rs105,000 per acre to the sugarcane growers. The central bank has taken this step to ensure that the money borrowed from banks and DFIs by the wheat and sugarcane growers doesn’t fall short of their actual requirement and they don’t encounter hurdles to planting these crops and consider doing something else.

The upward revision in per-acre credit limits for all other major and minor crops including cotton, rice, potato and pulses has been made on the same premise. Since wheat flour and sugar crises hit Pakistan repeatedly, any step taken to ensure enough supply of wheat and sugarcane to the market is commendable – if it meets the intended purpose. And, obviously the intended purpose behind ramping up the agri-loan limits for wheat and sugarcane growers is to incentivise them to continue to produce these crops so that no wheat flour and sugar crisis emerges in future because of lower-than-normal supplies. But to avert such a crisis, the federal as well as provincial governments also need to root out corruption and depoliticise the business of wheat flour and sugar manufacturing.

Will they do this? And, if so when? Nobody knows! That said, the increased per-acre credit limits will hopefully benefit the growers of all other food crops including rice, maize and minor crops of pulses, oilseeds, fruits, vegetables and conundrums. The dynamics of rice and maize crops, and of all other minor crops, remain much less politicised than wheat, sugarcane and cotton. So, one can rightly expect that if growers of these crops get more of bank financing in accordance with the size of the land, they will hopefully produce more.

This will help meet growing domestic needs and create fresh, or additional, export surpluses. Food security is becoming an increasingly threatening challenge in the 21st century and all sovereign states, including those currently having domestic surpluses of food, are making efforts to ensure sustainability of food supplies. Pakistan has also devised the National Food Security Policy. Sadly, though, very little is being done to meet the objectives of the policy. The policy, rolled out four years ago, stated that the country would boost productivity of all major crops and bridge the yield gaps. Four years on, we don’t see any appreciable rise in peracre production of major food crops, ie wheat, rice, maize and sugarcane.

The per-hectare yield of wheat, for example, remains close to 3 tons – the level already achieved several years ago. Wheat yield in Pakistan surpassed 2.5 tons per hectare for the first time in 2005, but has since oscillated between 2.5 tons and 3 tons with little yearly variations, data obtained from the annual economic surveys reveals. The story of sugarcane yield is different, though. Its per-hectare yield, which stood at 62 tons in 2018, initially dipped to 60 tons, but then increased to 63.8 tons in 2020 and finally jumped to 69.5 tons in 2021. With the upward revision in agricultural credit limits, one must hope that it will go a long way in boosting both output and yield of all major and minor crops where cultivation politics doesn’t play as big a role as in the case of wheat and sugarcane.

Take the example of potato. The SBP has revised upwards the credit limit for potato growers from the existing Rs77,000 per acre to Rs120,000 per acre. This 56% increase in credit limit is enough incentive for the potato growers. Pakistan is among the top 20 potato producers in the world and its annual output averages no less than 4 million tons. Domestic consumption is below 3 million tons. Exports of the remaining 1 million tons can bring huge foreign exchange to Pakistan. But exports of potatoes are on the decline as growers are not heard in policymaking for minor crops, complains the Potato Growers Association (PGA).

By increasing the credit limit for potato growers, the central bank has set the stage for increase in both the per-acre yield as well as in total output. But this objective can be met only if the Ministry of Commerce seeks feedback from the potato growers on how exports can be increased and what specific incentives in addition to the higher credit limit the growers need. PGA President Mian Muhammad Siddique and Vice President Chaudhry Maqsood Ahmad Jatt recently told a local newspaper that Pakistan could earn $2 billion from potato exports if the Ministry of Commerce frames a proper export policy with input from the PGA. Their estimate of export gains seems “too optimistic” but their suggestions must be heard.

THE WRITER IS AN ELECTRONIC ENGINEER AND PURSUING MASTER’S DEGREE