Major challenges confronting the agriculture sector

[THe SiLenT KiLLeR]

Major challenges confronting the agriculture sector
Agriculture sector is the backbone of the economy. It contributes 21.0 per cent towards GDP growth and employs more than 45.0 per cent of the workforce in rural areas. The sector is hardly geting the attention it deserves from the economic managers, with the result that the sectors growth in past six years averages to 3.7 per cent per annum, which is much less than its potential of almost 6 to 7 per cent

By M. S. Qazi

Two major developments have occurred in the past few weeks that are directly related to production of agricultural commodities and their marketing. Firstly, the government decided not to export surplus wheat stock of two million tons because of fall in wheat prices in the international market. This would have had sustained huge losses for which it was not prepared. Earlier in Punjab, soon after harvesting of wheat crop in March/April, wheat price crashed to Rs750 per 40 kg in open market against governments support price of Rs950.0 per 40 kg. The Punjab government should have placed itself in the market well before intervention of the private sector to procure wheat at the official price. But, it was seriously constrained due to fiscal crunch with the result that small farmers suffered substantially at the hands of market exploiters.

Secondly, like the previous year, sugar crisis is once again taking shape before Ramadhan. Price of sugar has surged by Rs7.0 to Rs70 per kg within a few weeks. It is likely to escalate further because of shortage in production last year. It registered 3.1 million tons against consumption of 4.3 million tons with a deficit of 1.2 million tons. Last year, sugarcane supply was 46 million tons but mill owners kept the production low to keep the commoditys price high in the market.

The government is in the process of importing sugar. Sugar crisis, basically artificial and created by powerful cartels to make profits at the cost of consumers, can be averted in case the government succeeds to import sugar well before commencement of Ramadhan. Nevertheless, wheat price crash and the likely increase in sugar prices raise many questions about the production and marketing policies of the government and private sectors desire for huge profits.

Agriculture sector is the backbone of the economy. It contributes 21.0 per cent towards GDP growth and employs more than 45.0 per cent of the workforce in rural areas. Despite this the sector hardly gets the attention it deserves from the economic managers, with the result that growth in the sector in past six years averages to 3.7 per cent per annum, which is much less than its potential of almost 6 to 7 per cent. During the last fiscal year the sector grew by 2.0 per cent against the set target of 3.8 per cent.

The agriculture sector suffers from a few core problems at different stages of producing major and minor crops. These include shortage of irrigation water, non-availability of quality seeds and pesticides, insufficient credit facilities to farmers, poor execution of support prices, high cost of inputs and irregular weather conditions. The overall result is low per acre yield of crops. According to the economic survey, major crops that account for 32.8 per cent of value-added products registered a negative growth of 0.2 per cent against robust growth of 7.3 per cent during FY-10. Minor crops that contribute 11.1 per cent to the overall agricultural produce also registered a negative growth of 1.2 per cent.

This means that growth volatility in agriculture sector is high and can be rectified by addressing the core issues faced by the sector on a priority basis and with full commitment. The farming community looks to the government to support it through subsidies on fertilizers and electricity. The government, on the contrary, faces difficulty to help the community because it is committed to the IMF to withdraw all sorts of subsidies. Subsidy for the agriculture sector has been either withdrawn or reduced. It has made agricultural products expensive. On the other hand, the government announces yearly support prices and it counts a lot to induce farmers to opt for higher agricultural produce, in case they are to get reasonable prices. The government, soon after coming into power in 2008, increased the support price of wheat to Rs950 per 40 kg, with the aim of discouraging its smuggling to India and Afghanistan and meeting the demands of the farming community that resented the high cost of inputs. Due to the quantum jump in the price of wheat, food inflation prevailed.

Furthermore, there are a number of problems related to effective marketing of agricultural products. It is quite common for the middlemen or sugar mill owners to withhold stocks to create scarcity to earn huge profits. The food departments of the provinces are responsible for making markets vulnerable to profit making by constricting the marketing of ready stocks through bureaucratic red tapism.

The price-hike in sugar, a year earlier, from around Rs30 per kg was manipulated by creating an artificial shortage by mill owners and market dealers. They successfully adopted a defiant posture against the orders of higher judiciary to sell sugar at Rs40.0 per kg. Since then the sugar prices have been moving upward. The brewing of sugar crisis at present would once again provide them an opportunity to make easy money by exploiting the market and keeping the government on the sidelines because most of the sugar barons have access to the corridors of power. According to an estimate in the previous sugar crisis, market exploiters and mill owners made around $1.0 billion. It clearly brings out the necessity of improving governance and monitoring the market so that market players are held accountable for their misdeeds.

The government adopts measures such as selling commodities like sugar at comparatively lower prices at utility stores, but this is also not without problems for the consumers. Utility stores can not cater to the large number of consumers that throng to the stores and return with a lot of disappointment. The government needs to streamline marketing of raw and value-added agricultural products. It should focus on improving the production of food items by improving supply of irrigation water, reducing cost of inputs and providing reasonable support prices to farmers that should not fuel inflation. At the same time, it should monitor the market players, mill owners and dealers. It should take punitive action against profiteers and hoarders. Unless concrete measures are taken in this regard, the agriculture sector would continue to under perform and consequently, this would obstruct the food security.