PM’s Bailout Package for Farmers: Insufficient and Irrelevant

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On September 15, Prime Minister Nawaz Sharif proclaimed a bailout package worth Rs.341 billion for farmers at Kisan convention in Islamabad. On September 30, the Election Commission of Pakistan (ECP) suspended its certain provisions. The government has challenged this decision in the Islamabad High Court (IHC). Ostensibly, the relief package is intended to help out the farmers in different ways; however, a deep look into the package reveals that small and subsistence farmer’s actual demands have been deliberately left unnoticed.

The stated aim of the program is the revival of the agricultural sector by stimulating sluggish agricultural growth and providing relief to the farmers. The total worth of the package is Rs.341bn, which will be distributed in various forms and implemented in different phases. Of this, about Rs.140bn is allocated for grants and subsidy on agricultural inputs; while Rs.185bn for loan advances being disbursed this year onwards. Additionally, it includes reduction in import duty on farm machinery, cuts in GST on domestic and imported agricultural machinery, insurance premiums, tax breaks for dairy, poultry and fish farmers, and extension in pending loan payoffs.

After review, the ECP has deferred the immediate implementation of the certain provisions of the package that infringed the code of conduct of the commission for elections until December 3. The code of conduct restricts the government from unveiling any developmental projects in those areas where election schedule is announced. The secretary ECP, Babar Yaqoob, remarked that the package was a violation of the rules as it was announced at such a critical time that could decisively influence the potential voters. The commission’s decision is commendable as it ensures that a level playing field is there for all the contestants of the LG elections.

Following parts of the package are suspended by the ECP: direct cash payment of Rs.5000 per acre to the rice and cotton farmers; interest rate reduction; and, the provision of production index units for agricultural lands. The remaining parts of the package, however, may be implemented at any time.

After discussions, the federal government filed a petition on October 7 in IHC to suspend the ECP’s order arguing that there is no rational nexus between the Kisan package and LG elections. The IHC, on the other hand, rejected the request of the government to issue immediate stay order against the ECP; the bench said that it would create further complications. Instead, the bench issued a notice to the ECP seeking an explanation over its decision. The next hearing is scheduled on October 13.

The objective analysis of the relief package reveals that the government has knowingly overlooked the real demands of the farmers, although it claims that the package is announced after consultation with the farmers’ representatives.

The pronouncement of a suitable support price is the cardinal demand of the farmers; at current market prices, they are even unable to recover high production costs. They requested the government to fix the price of the major crops such as cotton, rice (Basmati), sugarcane and maize at Rs.4000, Rs.2500, Rs.250, and Rs.1800 per 40kg, respectively. After a careful analysis of the support package, the Institute of Policy Reforms (IPR) also recommended the addition of support prices in the package. The government’s reluctance to announce an acceptable support price could be attributed to the pressure by the influential millers and exporters.

A cash subsidy of Rs.5000 per acre to the rice and cotton farmers having 12.5 acres or less to address the issue of high production costs is insufficient and would hardly materialize. Given the rampant corruption in the system, many unintended persons would take the benefit. It is also ambiguous that how the disbursements of the cash payments would be made. Moreover, it excludes many farmers who are bearing the brunt of high input costs.

The second major requirement of the farmers is a substantial subsidy on agricultural inputs, particularly fertilizers. The current fertilizer prices of DAP (3600-4000) and urea (2000) are quite high and also limit their use by the marginalized farmers. The package doesn’t offer any considerable relief regarding this although the government has allocated about Rs.20bn for subsidy on fertilizers. The president of All Pakistan Kisan Itehad, Major Muhammad Tariq (retired) said that due to weak market regulatory mechanisms, these benefits would go to the industrialists and dealers rather than farmers. Interestingly, the government increased the price of gas a week before the disclosure of the package; owing to the price increase, the price of urea increased 200 per bag. Now, after negotiations, fertilizer manufacturers have agreed to observe a price cut of 105 per 50 kg bag given the reversal in recent gas price increase. Maybe farmers understand these dirty tactics; they have rather clamored for the removal of GST on fertilizers.

Other provisions of the package are also potentially advantageous for well-off farmers. A significant reduction in import duty on agricultural machinery and subsidy on solar tube-wells entirely serve the large landowners. The IPR has suggested that GST on light-diesel oil should be reduced from present 29.5% to 7% as more than 85% of the tube-wells are operating on diesel.

Overall, farmers seem unhappy with the Kisan package. Farmer-based organizations like Pakistan Kisan Itehad, Kisan Board, Kisan Raj Party, All Pakistan Kisan Itehad and Pakistan Agriculture Forum have expressed their concerns. However, Kisan Welfare Association and Kisan Bachao Tahreek lauded the PM’s relief package and urged the government to implement it in a transparent manner.

In sum, the so-called relief package doesn’t appreciate the problems of the farming community at hand; therefore, it is useless for them. If the incumbent regime is genuinely interested in reinvigorating this vital sector of the economy and making the farming a sustainably profitable enterprise for resource-poor farmers, it must come up with a comprehensive agricultural policy and potent measures taking all the provinces on board.

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is Research Associate at King Saud University Saudi Arabia and like to write about current affairs of global importance and social issue that influence the general masses.

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