20000108

'Resource constraints,

policy distortions root

cause of poor crops output'

ARSHAD AWAN

KARACHI: Pakistan's relative productivity of most crops was low and productivity growth had been slow, experts noted.

"Cotton, wheat and basmati rice production all have the domestic resource costs (DRCs) are slightly efficient. Coarse rice and sunflowers are marginally inefficient (DRCs near 1); sugarcane and yellow maize are highly inefficient, at least in some areas of Sindh and Punjab," Dr. Iqbal Yousaf, agro-economist, told Business Recorder.

Yousaf said sugarcane appears to be extremely uncompetitive and the gain in productivity from switching water use to more efficient crops would be considerable.

He said the past growth relied mainly on expansion of cultivable land, expansion that was no longer possible, fertilizer use was levelling off, suggesting that returns to further intensification are falling.

"Productivity growth through technological progress appears to have petered out once the green revolution technology was diffused widely throughout the country," Yousaf said.

Amin Qasim, agriculture researcher, said to arrest the down trend and boost productivity compared to present levels would require major changes in systems, policies, and institutions for agriculture over the next three to five years.

He was of the view that agriculture faces two sets of constraints in Pakistan: resource constraints and policy distortions.

Qasim stated that resource constraints fall into four categories: (a) the inappropriate use of land, causing soil corrosion and land degradation, caused partly by inappropriate incentive policy; (b) a pattern of land concentration that does not promote efficiency (many farms are either too large or to small) and the absence of secure tenure, which creates disincentive for investment in land; (c) a problem-plagued irrigation system; and (d) inadequate human resources and infrastructure.

As for policy constraints, he said, direct intervention by the government in agricultural markets has diminished in recent years but remains excessive.

Subsidisation of wheat imports, duty and period restrictions on cotton exports, and protection of sugarcane continue to distort incentives, nominal protection coefficients reveal a persistent policy has against cotton and wheat and in favour of sugarcane.

"Indirect intervention, through protection of industry, penalises agriculture through the impact on relative sectoral prices. Government policy also affects vital inputs (fertilizers and seeds) and the credit market," Qasim said.

Dr. Iqbal Yousaf added that the composition of public expenditure in agriculture is also distorted.

"Spending is dominated by subsidies that do not help farmers, either because of rent seeking and inefficiencies or because the subsidy is designed to help consumers at the expense of producers," Yousaf said.

Amin Qasim said growth rates achieved in the past can be sustained and even surpassed if major changes are made in systems and policies.

According to him the most important change was a redefinition of the role of government, which was limited to ensuring the smooth functioning of markets and promoting private sector activities.

"Investment and public expenditure in agriculture will have to be reshaped, with government spending focusing on public goods and market failures," Qasim said.