Budget 2024-25: Farmers fearful as budget approaches – Business

Worry about potential deregulation of wheat trade and whether federal govt plans to fully devolve agriculture to provinces under 18th Amendment.

AS the budget announcement appro­a­ches, farmers are on edge, unsure of what the future holds. Clues, suggestions, discussions and debates in the run-up to the most important financial document for agriculture paint a confusing picture.

Two key issues dominate the conversation: the potential deregulation of the wheat trade, as seen in Punjab this season, and whether the federal government plans to fully devolve the agriculture sector to the provinces in line with the Eighteenth Amendment.

These two basic questions are being debated right now because early clues have started appearing on both accounts and can change the future course of the agricultural sector in the country.

Farmers have valid reasons for concern. They suffered significant financial losses on nearly all major crops last year.

Worry about potential deregulation of wheat trade and whether federal govt plans to fully devolve agriculture to provinces under 18th Amendment

Cotton prices, initially set at Rs8,500 per maund (or 40kg) by the government, fell to Rs6,000 after production, causing heavy losses. A similar situation occurred with maize, where prices dropped to half of their pre-sowing value, leaving farmers without substantial part of their hard-earned income.

Wheat drove another nail in the farmers’ coffin, with the commodity’s prices falling from the government-fixed Rs3,900 per maund to Rs2,500 in the market, resulting in an estimated Rs100 billion loss for farmers, according to their own calculations.

After such a devastating year, farmers were hoping for some kind of relief and handholding from the government. Instead, they now fear higher taxes (rising GST), uncertain support prices, and reduced federal involvement without assurances that provincial governments will adequately fill the gap.

‘Punjab govt led price crash’

Farmers seem particularly angry over the wheat situation. Abad Khan, a member of the Farmers Associates Pakistan (FAP), blames the Punjab government for a sudden price crash after initially setting a confident procurement policy.

“For cotton and maize losses, one can blame market forces as well. But in the case of wheat, the whole blame lies with the Punjab government,” Mr Khan says.

“After a series of steps that inspired confidence — like accepting the federally declared purchase price of Rs3,900, issuing a purchasing policy, going to banks for loans and activating the provincial food department (by distributing gunny bags) — in the run-up to procurement drive, it suddenly backed off and presided over a monstrous price crash. How can a government cheat people like that?” he says.

This behaviour of the Punjab government — a political extension of the federal government — has left farmers questioning whether wheat trade deregulation is now permanent. After all, the federal government has let its federating unit behave the way it did.

What makes the picture even murkier is the fact that lenders have been demanding deregulation for over a decade now and the government has already accepted many of their demands. Farmers fear the wheat trade is going to be deregulated next after the government has “tested the waters” this season.

Farmers also question what steps the federal government will take to ensure food security next year. They believe the government has put the wheat market upside down simply by withdrawing from it unannounced.

While the federal body Passco increased procurement targets, the provincial government, the largest wheat purchaser, disappeared from the market, causing confusion and uncertainty.

Ramzan Ahmad, a wheat trader from Sheikhupura, says the government is now “revelling in falling flour prices and trying to derive political mileage out of the situation”.

He laments: “This leaves the most important national staple in a policy lurch. This confusion needs to be clarified.” However, some believe the government was able to do so this year as it was carrying huge carryovers due to liberal imports and had a record crop because of expansion in the area and favourable climatic conditions. What if both these factors go missing the next year?

Agriculture in federal scheme

The upcoming budget will also address the broader role of agriculture in the federal scheme. The federal government appears to be offloading responsibilities to the provinces due to economic hardships and pressure from lenders. This shift is reminiscent of the significant cut in the Higher Education Commission’s budget, as education became a provincial subject under the Eighteenth Amendment.

Will the federation take the same policy option for agriculture as well? Policy planners have not hinted on it so far, but they have started pushing for it. If it happens, what would it mean for the sector? Policy clarity is missing so far.

“Things have already started moving in that direction,” claims an officer of Punjab’s agriculture department, adding that it has already instructed the province to finance subsidies on fertilisers and other inputs previously partially funded by the federal budget. Provincial schemes like the Kissan Card, Green Tractors and Kissan Bank reflect this shift.

Despite the relatively small financial contribution from the federal government, its role in setting policy through institutions like the Federal Committee on Agriculture (FCA) has been vital. Without federal financial support, it remains to be seen whether the federation can guide agriculture effectively, especially given political divisions and different political parties ruling the province with differing priorities.

Trade liberalisation, regulatory reforms

Some stakeholders believe that even with reduced federal involvement, opportunities exist to improve through trade liberalisation, regulatory reforms and better data collection.

Jawed Qureshi, head of a major agri-production house, says that physical federal contribution has never been significant beyond psychological reasons — it only spent Rs8.85 billion in last year’s PSDP, supporting 21 agriculture development schemes.

He suggests that the federation should focus on opening national markets to international trade and leveraging agreements, such as those for artificial intelligence with China, to benefit Pakistan’s agriculture.

Dr Iqrar A. Khan, vice chancellor of Agriculture University, argues on similar lines, urging the federal government to liberalise regional and global agri-commodities trade.

He argues that making such trade legal and transparent could generate government revenue and enhance efficiency through advanced technologies. It must work on the regulatory regime, such as whether GMO seeds should be allowed in other areas and how much space can be spared for multinationals.

Published in Dawn, June 9th, 2024

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