Massive farmer relief package: a non-starter?

EDITORIAL: A 600 billion rupee rescue plan for the agriculture industry has been unveiled by Prime Minister Shehbaz Sharif. It includes: I a 10.6 billion rupee write-off of markup on small farmer loans.

Small farmers were not specifically defined, however it is unlikely that this move will help subsistence farmers who are forced to borrow from loan sharks because banks won’t grant them loans because they lack collateral;

In addition, 5 billion rupees have been set aside for the markup on loans to landless farmers, though it is still unknown what the haris (peasants) would use as collateral;

(ii) 50 billion rupees have been set aside for loans to young people looking for jobs in rural areas, which would incur a markup cost to the government of 6.40 billion rupees.

This assumes that young people would actively look for work in rural areas, despite demographics suggesting that young people are moving from rural to urban areas in search of employment; in addition, the government’s policy of assuming that all borrowers will succeed in their investments has repeatedly failed;

(iii) The price of DAP fertiliser will be reduced from 14,000 to 11,250; the industry and government agreed to this reduction, which would provide a 58 billion rupee relief;

(iv) 13.2 billion rupees will be paid for certified seeds with equal cost sharing with the farmers; this is another measure whose beneficiaries may be the wealthy farmers; and

(v) the remaining incentives will be provided through duty reduction and include the import of used tractors (IMF).

According to Finance Minister Ishaq Dar, there would be no cost associated with these actions because the last 200 billion rupees have already been budgeted and spent, likely by his predecessor Dr. Miftah Ismail, while the first 400 billion rupees are not revenue items but rather bank loans.

Even though the planned initiatives do not amount to 600 billion rupees, Dar’s reasoning is reminiscent of earlier governments’ declarations of agricultural policies, whose implementation did not come close to meeting their goals in terms of actual expenditure or associated benefits.

And the current finance minister’s reasoning makes me think of the 120 billion rupee package in 2020, whose architect Dr. Hafeez Sheikh claimed it would address the negative effects of COVID-19 on the general public,

with the majority of the amount already budgeted. However, at the time, the government did raise disbursements under the Benazir Income Support Programme, a strategy similar to the significant disbursements for the flood victims.

The 600 billion-rupee package is a non-starter because government support will be contingent on IMF approval, which is unlikely given the appalling state of the economy right now, and because commercial banks are unlikely to lend the money.

Such large relief packages, especially during an ongoing International Monetary Fund (IMF) programme, tend to suffer from even more implementation bottlenecks than are typical in this country.

With a public that is much more informed than it was five years ago, when the Pakistan Muslim League-Nawaz (PML-N) was in power, continuing with the same policies that have aided in the strengthening of elite capture in this nation and failed to make a dent in the problem of poverty is unlikely to win political points.

The current World Bank analysis, which compares output levels in similar places and around the globe, finds that wealthy farmers are operating at well below yields even in the highly-irrigated and lush soils of the Indus irrigation system.

The research also points out that the vast majority of fresh fruit is sold to customers through traditional marketing channels, which calls for immediate remedial action.

This would benefit the general public and the poor farmers considerably more than the Prime Minister’s promised assistance programme. How ironic that even in 2022, there is still no simple answer to the question of why our large farmers or those who still hold vast tracts of land do not wish to invest in agricultural technology and food innovation.