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Value addition in agriculture

Published on 27th Jan, Edition 4, 2014

 

It is often said that share of agriculture in Pakistan’s GDP has reduced to less than one-fourth, which is partly right and partly wrong. The key reason is that the country has failed in achieving higher value additions in the sector. With the reduction in average income of rural population there has been huge migration to urban areas, which has its own repercussions. Therefore, there is a need to redefine policies governing agriculture sector, the sooner the most appropriate policies are introduced the better it will be for the Pakistan. Not only that the country will achieve food security but billions of dollars would be earned through export of value added products.

The first step in this direction is to save the 40% produce that goes stale before reaching the market. This happens due to absence of farm-to-market roads and highly inadequate transport and storage facilities. Even if half of this quantity is saved not only income of growers will increase substantially but more importantly export of surplus quantities can help in earning billions of dollars. Export of mango and kinnow has remained far below its potential because the fruits could not be processed according to the requirements of importing countries. Added to this is the failure of national carrier to ensure adequate space during peak export season.

It is known to all and sundry that agricultural products can only be produced in a particular season but their consumption continue throughout the year. Mango and kinnow are produced in huge quantities and even after export substantial quantities are leftover. One of the best approaches could be to produce pulp and concentrated juices of these fruits, pack these and ensure availability throughout the year. Packing of juices in tetra packs will not only improve their shelf life but offer an opportunity to earn extra foreign exchange by exporting pulp and concentrated juices. Let one point be kept in mind that higher demand for produce will encourage growers to improve production and yield.

It is not a secret that average yield of different crops in Pakistan is nearly half of the yield achieved globally. The key reasons for this poor yield are: 1) deficiency of nutrients in cultivable land, 2) inadequate supply of irrigation water and 3) bad crop management. Nutrient contents of land can be improved through crop rotation as well as applying balanced use of fertilizers. It is necessary to remind the policy planners that persistent and substantial increase in gas tariff applicable on fertilizer units has been solely responsible for the hike in urea and DAP in the country. Since fertilizer companies don’t get pipeline quality gas the tariff must be capped and gas from Mari and other fields producing low BTU gas should only be used for urea production.

 

While there are ample opportunities to substantially increase production of almost all the crops in the country, focus on two cash crops i.e. cotton and sugarcane can help in doubling country’s GDP. At an average Pakistan produces around 12.5 million cotton bales. Experts say that with little effort, output can be doubled. However, the growers get jittery whenever there is a bumper crop because cotton prices come down substantially. This is only because local spinners have failed in undertaking BMR of the existing facilities. The record shows that bulk of yarn production is confined in coarse counts, which fetch very low unit price.

Similarly, weaving is done on outdated power looms. While the demand for six feet and above width is on the rise, Pakistani entrepreneurs have failed in adding shuttleless and airjet looms. On top of all weavers prefer to export unprocessed cloth because of outdated processing facilities available in the country. While sponsors of spinners have remained the biggest beneficiary of the banks, their diversion of funds to cement, fertilizer and other industry shows lack of focus on textiles and clothing industry. It is on record that that borrowing of textile and cement units is colossal, only because the funds are being deployed in other industrial concerns.

If the government is serious in boosting export of textiles and clothing it has to make a few policy decisions: 1) impose quantitative restriction on export of raw cotton, yarn and unprocessed cloth, 2) stop offering refinance on export of these exports, 3) facilitate installation of shuttleless and airjet looms in the country, 4) ask the central bank to facilitate commercial banks in extending loans on concessional terms to the manufacturers of garments and made ups and 5) complete textile/garment cities being constructed in various cities on war footings. Ensuring additional gas to textile units alone can’t help in exploiting real benefit from GSP Plus scheme approved by the European Union.

Sugar industry is the driving engine of rural economy. Till today the focus has remained on producing sugar but the situation demands increasing production of ethanol in the country. Ethanol is added in motor gasoline to produce E-10, a bio fuel. The advantage of using E-10 is that no additional gadgetry has to be installed in cars using motor gasoline and the fuel can be dispensed through existing petrol pumps. This project should be undertaken as ‘test project’ in Sindh because climatic and soil conditions of the province are highly favorable for the cultivation of sugarcane. The added advantage is that most of the mills have attacked refineries that are already producing and exporting ethanol. Sugar mills operating throughout the country are also capable of delivering minimum 3,000MW electricity to the national. The beauty is that mills will not be using gas or furnace oil but bagasse produced in huge quantities. Not only that cost of electricity generation will be low but country’s oil import bill will also be reduced substantially.

Pakistan has hardworking farmers and offering right impetus can help in boosting production and saving whatever is going stale at present. While the SBP has increased availability of funds to farmers the time has come to allocate specific amounts for construction of modern warehouses and specialized transport fleets.

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