Why prospects for agri growth growing dimmer?
We claim to be an agricultural economy but successive governments' agriculture policies are one example which have proven to be futile in providing incentives to growers to cultivate international crops with higher international product price and demand. A simple comparative analysis of the two major Pakistani crops that are cotton and sugarcane is ample to substantiate that governments have been playing with policy tools to the advantage of a select few while the economy of Pakistan and the general public suffer.
Cotton has a status of an asset for the country, earning billions of dollars for Pakistan in the form of exports: raw cotton, cotton yarn and made up cotton textile products. This crop is also described as 'white gold' but unfortunately Pakistani farmer is moving away from cotton due to lower cotton yields, low profitability margin owing to higher cost of cotton crop, and poor seed quality etc. The result has been a consistent fall in the cotton production area while almost a similar increase in sugarcane crop production area.
On the other hand, sugarcane crop is subsidized through regulated prices and a 40% customs duty on the import of sugarcane by the government. This crop has assumed the status of a "political good" like wheat in the last decade, regardless of its economic comparative disadvantage.Wealthy politicians who represent federal and provincial governments own the majority of sugar mills in Pakistan. This cartel of powerful elite can be termed synonymous to powerful sugar mafia dominated by political heavyweights who were capable to gobble up subsidies worth Rs.45 billion (US$407 million) during last crushing season of the previous government, while declining to buy sugarcane from poor growers even at state notified prices.
This year, we have already produced a surplus of 45 percent of sugarcane over domestic reported demand of 5.5 million tons in MY18, total supply of white sugar exceeded 8 million tons when the government finally yielded with an exorbitant budgeted subsidy calculated Rs21 billion MY18 (Oct 17-Sep 18) to top 10 sugar exporting mills with a subsidy of Rs10.70 per kg. This subsidization and immoral incentivization of sugarcane crop isat the cost of lower GDP, lower growth, lower exports, irrigation water inefficient use and suffering domestic consumer of sugar.
Huge subsidies to sugar mills do not benefit the poor growers or even the consumers but only the powerful elite that export their surpluses with the help of subsidies.This tantamount to a direct transfer of wealth from the general public to the 21 sugar mill owners.
Looking at the input side, Pakistan is a water-stressed country with scarce availability of irrigation water which is even dwindling day by day. Pakistan has no option but to cautiously move towards putting water usage to its best value.
Average water usage for cotton is 714 mmwhile sugarcane water usage is 1512 mm which is higher than any other cropmeaning cotton crop water usage is almost 40 to 50% low as compared to other crops. Our country is facing a severe water shortage and under these circumstances country's obsession with growing sugarcane is nothing less than disastrous.
Comparing the socio-economic costs of the two crops - cotton and sugarcane - cotton crop takes around 4-6 months to grow, which means in a year two crops - cotton and another staple crop like wheat - can be grown along with short time duration crops like pulses and vegetables. Whereas, if sugarcane is sown, its time duration spreads over almost a year leaving no room to grow food crops that are essential for national food security.
While if we look at the value chain of the two agricultural raw materials, cotton is the foundation of the largest export sector that is "Textiles" accounting for average 60 percent of country's total exports. Pakistan has a complete textile sector value chain earning billions of dollar, textile exports were $ 13.53 billion in the FY 2017-18 out of $ 23.22 billion overall exports for the same time period. Furthermore, sugarcane has no value chain, rather it requires billions of subsidy to export surpluses produced.
Due to political mingling in agricultural production and lopsided policies, Pakistan has become a net importer of cotton for nearly two decades. In the current 2018-19 season, Pakistan is expected to face a shortfall of 4-5 million bales with production estimated at 10.738 million bales against the initial target of 14.37 million bales.
If the government stops meddling in the agricultural economy, coupled with strict prohibition of sugarcane crop cultivationin the cotton growing area, the target of 15 million bales of cotton could easilybe achieved. This will not only provide the raw material for country's largest manufacturing sector but will also lead to higher economic output, higher employment and increased foreign exchange earnings.
According to the PBS Economic Survey 2016-17, cotton contributes 1 percent to the GDP per annum, sugarcane crop adds 0.7 percent to the GDP and wheat, which is a staple food and ensures national food security, adds 1.9 percent to GDP.
The land under sugarcane cultivation is 1217,000 hectares while under cotton it is 2489,000 hectares; wheat is produced on 9052,000 hectares. If we revert even half area (608,000 hectares) under sugarcane production with the help of corrective measures of the government which restrict its cultivation area, this area with cotton cultivation will add an additional 0.25 percent to GDP, along with minimum 1.273% of additional wheat contribution to GDP. This in short means that 1.523 percent (0.25%+1.273%) to GDP per annum can be added while letting go of 0.35 percent (half of sugarcane contribution with current area under cultivation) of sugarcane production contribution.
Analyzing the facts, limiting sugarcane production to even half its current cultivation area will give a fantastic 1.173 percent boost to the GDP. At the moment, the PTI government aims to reform and restructure the economy in the best interest of the country, for them this is a low hanging out of the box solution which will not only add to GDP, but will also reduce billions spent on cotton imports due to demand supply gap, increase textile exports due to availability of abundant raw material, and thus will help reduce trade deficit along with higher employment, prosperity of farmers and sugar consumers of the country which we are all.
It is the time for the government to take bold and broad decisions which can really make an impact.
============================================================== Crop Crop water requirements Averaga (CWR) range (mm) CWR (mm) North (temperate) - South (arid) ============================================================== 1 Wheat 290 - 520 402 2 Cotton 587 - 1000 714 3 Sugarcane 1000 - 1900 1512 4 Rice 540 - 1156 931 5 Maize 244 - 450 435 6 Fruit 900 - 2200 1120 7 Sorghum 370 - 530 332 8 Fruit 700 - 2200 1120 9 Pulses/oil seeds 300 - 500 332 10 Vegetables/fodder 450 - 650 530 ==============================================================