In this special report, the Dawn Business and Finance team attempts to scratch the surface in a search of compelling stories to highlight aspects that fail to get the attention they deserve. Are we food-secure? By: Afshan Subohi A democratic Pakistan can certainly better cater to the nutritional needs of its citizens. “No famine has ever taken place in the history of the world in a functioning democracy,” wrote Amartya Sen, an economist and a Nobel Laureate. Pakistan is blessed with cultivable land and a sizeable peasant population. The information explosion and ease of connectivity have instilled high economic aspirations in the rural populace. But if the implementation effort of successive governments has tapped only half the potential of the agriculture sector, is it perhaps the lack of a cohesive policy? Three decades ago the Agriculture Commission of Pakistan, in a report, blamed the underlying rural power structure, which wields disproportional representation in the federal and provincial assemblies, for the underperformance of the sector. Abusing the decisive power vested in the state to manage the economy these elements, it was found, colluded to evade taxes and divert subsidies and concessional bank credits to serve its narrow interests. The expert’s report, however, overlooked the growing role and influences of the reckless trading community; particularly those involved in import and marketing of seeds, pesticides and livestock. The National Food Security Policy, launched by the PML-N government last May, two days before its term ended, recognises food security as a key challenge. It did not draw on the findings of the Agriculture Commission Report. Instead, it attributed the slow pace of agriculture development and lack of food security to the following: high population growth, rapid urbanisation, low purchasing power, high price fluctuations, erratic food production and inefficient food distribution systems. The policy hinted at power dynamics when it stated that the benefits of whatever agriculture growth has been achieved have not been equitably shared in the rural economy. For some reason the said policy document clubbed wheat, a key crop in context of food security, with water intensive rice and sugar cane. It stated that the latter two have been given ‘more attention’ in the previous related policies. Ignoring the key factor — the political clout of the self-serving landed aristocracy — it listed slow technological innovation, problems with the quality, quantity and timeliness of input supply, inadequate extension services and technology transfer as factors responsible for the situation. As the share of urban-based manufacturing and the services sector expanded, to around 80.5pc of GDP collectively, the share of the agriculture sector in GDP narrowed by almost half; to 19.5pc in 2018 from close to 40pc in the mid-1960s. The hold of the landed elite might be loosening owing to growing economic strength in urban areas. But, so far, they have managed to guard and promote their interests using political structures and by blocking any move in the federal and provincial assemblies that may hurt them. As the country adopted market-based policies of deregulation, privatisation and liberalisation in the 1990s, the landed elite expanded its commercial interests in companies in the agriculture input market. In a water scarce country, the story of the sugar industry’s growth and expansion in the water-intensive sugar cane crop, and the subsidy managed for its market disposal, is a classic case that sheds light on the mindset and machinations employed by this class. There is a lack of proper planning that magnifies natural disasters or emergencies as is highlighted by the unusual rainfall and windstorms last week that, farmers fear, have caused ‘irreparable damage’ to the local variety of wheat crops. The issue of agriculture income tax is another example where the landed elite have been able to prevail under all governments, before and after the 18th Amendment. All the talk of expanding the tax base to improve revenue generation remains just that — talk, when it comes to taxing agriculture income. This income is not even reported judiciously while businesspersons and petty salaried workers are made to contribute to the national exchequer. The corporate sector in contrast to big farm owners is routinely called on to pay extra, in the form of super taxes, to limit the resource gap. The role of the influential rural elite in water consumption is yet another area where abuse of power is rampant. The diversion of water to farms owned by politicians and their lackeys is rampant in the southern Sindh. There are several instances where the course of canals have been diverted, or dikes constructed or destroyed, in an attempt to benefit some at the cost of many. The neglect of the key sector by successive governments — which continues to employ 42pc of the labour force, provides livelihood to 62pc of the population and constitutes 65pc of export earnings — becomes almost criminal when it comes to biosecurity. The unsupervised commercialisation and audit-free import of seeds, pesticides and livestock is said to be responsible for new crop and livestock diseases. These diseases have compromised the local soil quality and agriculture ecosystem and have a far-reaching, negative, impact on the health of consumers and on export prospects. There is no dearth of organisations, mostly public but some foreign-funded, active in the sector. According to information available on the website of the federal Ministry of National Food Security and Research, there are 18 fairly big departments manned by several hundred officers and staff. A stopover at several research and extension service centres during a flying visit across rural Punjab in 2017 depressed the writer. Most of these deserted buildings wore a haunted appearance. Their directors blamed low budgets for the lack of capacity and seemed more focused on survival than in meeting organisational targets. “Besides the country, it is the grower and the end consumer of commodities who are at the losing end of the agriculture equation in Pakistan,” commented an expert associated with the government. Click on the tabs below to explore the series. Published in Dawn, The Business and Finance Weekly, April 22nd, 2019

'The goal is to curb import bill' Sahibzada Muhammad Sultan, federal minister for the Ministry of National Food Security and Research, talked to Dawn from his home town Jhung in Southern Punjab. He expressed confidence that the PTI government will resolve the long standing issues of the farming community that have held agriculture growth potential hostage for so long. The minister was preoccupied with attending to the post-stormy weather situation that damaged the standing crop in several areas of the country. Perturbed by losses incurred by growers across the country owing to harsh rains, he was working on a strategy to contain losses and ensure that the affected growers get the support they deserve from the government. “I intend to go to affected areas for a realistic damage assessment to put up a case for a relief package for those who lost their crop and incurred unsustainable losses,” he said. The three time MNA, following in his father’s footsteps, entered parliamentary politics in 2002 by winning a national assembly seat on the PML-Q ticket. In 2008, despite PPP groundswell after Benazir Bhutto’s assassination, he won again from the same platform. He lost the election in 2013 when he contested on the PML-N ticket but made a comeback with a bang in the National Assembly on a PTI ticket in 2018. Many consider him to be a key politician who turned Jhung into a PTI stronghold by bagging all national and provincial assembly seats. The minister, with a landed background, was confident that the full potential of the rural economy can be realised by implementing the food security policy with the active support of the provinces. Earlier a set of questions were mailed to the Ministry of National Food Security and Research seeking the minister’s views. Citing the pressing current situation and a close deadline, the responses to three out of five questions were mailed back that are reproduced below: Is Pakistan food secure? Do we have sufficient stocks of essentials to brave a sudden drop in production in case of some calamity? SMMS: Yes, Pakistan is food secure. We do have sufficient stocks of essentials in case of any challenge. For major crops like wheat, sugar cane, maize and rice, Pakistan is not only self-sufficient, it produces a surplus. Do you have a plan to reduce dependence on imports of edibles, particularly oil and pulses? SMMS: Yes, the ministry is working with the provinces to launch various projects in the agriculture sector for its betterment. One of the goals is to reduce the import bill of oil and pulses. We want to produce indigenous oilseeds to achieve self-sufficiency. Post-18th Amendment, how effectively is your ministry working with the provinces to achieve food security? SMMS: For the first time since the devolution, the ministry is working in collaboration with the provinces to launch projects worth Rs290 billion of which the federal contribution is around Rs90bn. These projects will be spread over the next four years. —AS Click on the tabs below to explore the series. Published in Dawn, The Business and Finance Weekly, April 22nd, 2019

Tackling poverty via higher agri lending By: Mohiuddin Aazim The central bank, in addition to microfinance banks, is also involving microfinance institutions and rural support programmes for lending Banks have increased their agricultural lending; but whether higher lending has had any impact on rural poverty remains debatable. The percentage of those suffering from undernourishment, between 2000 and 2016, slipped from 23 to 21, according to the Food and Agriculture Organisation. However, according to the World Bank, people living below the poverty line of $1.9 a day fell from 29 per cent in 2001 to 4pc in 2015. These readings show whereas overall poverty rate is declining fast, extreme poverty as measured through undernourishment or hunger is not. Agriculture lending can, and does, help in hunger eradication and poverty reduction if it is backed by the right set of government policies and sociopolitical attitudes. Changes in absolute numbers of agricultural lending can be of little help in analysing how helpful this lending is. But the quality of the lending and even its outreach can tell us where we are heading. The problem with Pakistan’s agriculture lending is, it is still directed mostly towards the big and powerful agriculturists’ lobbies. Further, this lending is injudiciously centred in Punjab. Also, banks tend to lend more for agri-production and less for agriculture development. The State Bank of Pakistan (SBP) has tried to address all three issues by encouraging banks to lend more to small farmers, keep an eye over district-wise agri-credit disbursement and accommodate requests for agri-development borrowing more passionately than before. For many years the central bank has been assigning indicative targets of agri lending to Islamic and microfinance banks. But we have a long way to go. Just consider this: 17,998 big landlords got agricultural credit worth Rs129.5 billion in FY17. Against this, 1.64 million small farmers got just Rs158.4bn. A little more than 116,464 midsized landowners received Rs67.9bn, according to revised date by the SBP. Statistics for FY18 have not yet been released. Also consider this: As per SBP data, during July-Dec 2018, 84.8pc of the total credit offered by banks went to Punjab; 12pc went to Sindh; 2.4pc to Khyber Pukhtunkhwa; 0.3pc to Azad Jammu and Kashmir; and 0.2pc each to Balochistan and Gilgit Baltistan. More recent stats are awaited. And now, look at this: During July-Dec 2018, banks’ agri lending for development purpose was just 8.6pc of overall lending to the agriculture sector (Rs76.6bn against the total of Rs819bn). Agriculture lending via microfinance banks is growing rapidly and has the potential to make a positive impact on the lives of smaller farmers, thus helping in poverty control and hunger eradication. But owing to the nature of operations of these banks and their rules of business, including per party lending limits; volumetric gains in their lending makes a small percentage of the total agri lending. Between July-Dec 2018, microfinance banks offered Rs81.5bn, or 15.5pc, of the entire banking sector’s agricultural lending of Rs527.3bn. Going forward there is a need to assign larger agri lending targets to these banks and make necessary changes in their rules of business to meet those targets. Also, there is a need to monitor banks’ agri lending at district levels more closely, incentivise those that meet their district-wise targets and penalise the ones that don’t. It is good to see that the central bank, in addition to microfinance banks, is also involving microfinance institution and rural support programmes in agricultural lending programmes. And surprisingly, despite limitations in their scope of business, they are doing pretty well. Between July-Dec 2018, all such institutions and programmes lent Rs16.7bn to the farming community. That was equal to 3.2pc of the total agri lending. In addition to addressing the technical aspects of agriculture lending, the political aspect also needs to be addressed with wisdom. Unless the federal and provincial governments develop a more harmonious relationship and join hands in poverty minimisation, no instrument can become effective. Not even higher, micro- level targeted lending. Legal framework necessary but not sufficient By: Afshan Subohi The agriculture tax ordinance was enacted in 1997 and amended in2001. The post-Amendment law obligates farmers with a landholding of 50acres or more of irrigated land, and 100 acres of Barani land, to submit adeclaration of agriculture income on a prescribed form. They have to paytax on land ownership or income basis, whichever is higher.Post-18th Amendment, agriculture was transferred to the provinces. Currently, the legal framework and the administrative set-up to levy andcollect agriculture income tax exist in all four provinces. Despite having anadequate record of landholdings, the lack of political will, a weak infrastructureand the skill to assess income render the exerciseworthless. The revenue generation under this head isbetter in Punjab but it still continues to be a tinyfraction of the actual potential. Click on the tabs below to explore the series. Published in Dawn, The Business and Finance Weekly, April 22nd, 2019

Report from the stock market By: Dilawar Hussain Most of agri companies are engaged in fruit, citrus, milk and meat production, which are essentially the healthiest ingredients of a balanced diet Unlike their counterparts in banking and oil and gas exploration sectors, agriculture-related companies do not enjoy a commanding position in the Pakistan Stock Exchange (PSX). Agriculture-related companies are part of fertiliser, food, textile and sugar sectors. Market capitalisation of the fertiliser sector is Rs554.3 billion, representing 7.27 per cent of the aggregate market capitalisation of all listed companies that amounts to Rs7.64 trillion. Fourteen listed companies are directly or indirectly related to the food segment. Most of them make juices, milk, ketchup, jam and jellies. They rely on agriculture that generates basic raw materials. Major companies include Mitchell’s Fruit Farms, Shezan International, National Foods, Nestle Pakistan, Unilever Foods, Rafhan Maize and Fauji Foods. There is gruelling competition among producers to acquire cheaper orchards from farmers. Many companies offer assistance to farmers to grow better-quality fruits. Most of these companies are engaged in fruit, citrus, milk and meat production, which are essentially the healthiest ingredients of a balanced diet. Although most companies cultivate their own orchards, the wastage is still colossal. “Citrus, which can be easily converted into a healthy diet, rolls down the river and ends up as wastage,” said an entrepreneur who set up a food processing plant along the Jhelum River but closed it down soon due to losses beyond his control. According to a recent article in Herald, Pakistan is the world’s 10th largest producer of citrus. But we are not as good at exporting — or even consuming — our produce as we are at growing it. Farmers believe the government has done no research on the subject. Also, the government hesitates to share with farmers whatever little research it has done, they say. They also claim that agricultural subsidies — a norm in similar economies — are minimal in Pakistan. A big landowner claims that the Indian government generously supports its farmers through subsidised electricity for tube wells. Similarly, citrus trees in Japan produce fruit until they are 70 years old, thanks to research. But such trees dry up in only 20-25 years in Pakistan, he says. Milk and meat processing companies also complain about the poor availability of the main raw material. The quality of milk and meat is often compromised, thanks to the fierce market competition. The big four fertiliser producers are Dawood Hercules Corporation, Engro Fertilisers, Fauji Fertiliser, Fauji Bin Qasim and Fatima Fertiliser. Analysts projected that the tight supply of urea in 2019 would keep the pricing power with major players. They believed that urea prices would remain elevated given the lower probability of subsidised gas availability, reduced urea imports and the government’s intention of selling imported urea at market prices. Directors of Engro Fertilisers stated in their forward-looking statement in the latest annual report that 2018 was the year of record profitability for the company. The Engro directors expected that local urea demand for 2019 would remain stable at current levels due to the price inelasticity of urea. Its production for 2019 was expected to be 5.6m tonnes. International diammonium phosphate (DAP) prices were expected to remain at the level of last year. In the two dozen sugar and allied companies listed on the PSX, prominent ones are JDW Sugar, Al-Abbas Sugar, Al-Noor Sugar, Baba Farid Sugar, Faran Sugar, Mirpurkhas Sugar, Mehran Sugar; Premier Sugar, Shahtaj Sugar, Shahmurad and Shakarganj Ltd. Production and profitability of sugar mills depend on the quantity, pricing and quality of sugar cane. Listed companies in the textile sector are divided in three groups: spinning, weaving and composite (which includes both spinning and weaving). Textile mills in the composite segment remain under the shareholders’ glare as such entities usually post higher sales and profitability that translate into dividends. Prominent among composite textile mills are Nishat Mills, Nishat (Chunian) Ltd, Bhanero Textile Mills, Masood Textile Mills, Sapphire Fibres, Blessed Textile, Faisal Spinning and Gul Ahmed Textile Mills. Click on the tabs below to explore the series. Published in Dawn, The Business and Finance Weekly, April 22nd, 2019

Outdated techniques in the modern world By: Mohammad Hussain Khan The crop-mapping or zoning strategy for Sindh’s agriculture sector was based on parameters established long ago. Sadly, things are different today. A major shift is seen in crop cultivation as the government, both provincial and federal, has turned a blind eye to it. Sindh's first sugar factory was established in Tando Mohammad Khan — then part of Hyderabad district — some time in the early sixties. It was situated on the left bank of the Indus. Cotton cultivation was allowed on the left bank while rice cultivation has been banned in this area, at least on paper. The right bank areas, however, were to produce rice as a matter of policy. And all this land was fed by the colonial era Sukkur barrage, built in 1932. The crop-mapping or zoning strategy for Sindh’s agriculture sector was based on parameters established long ago. Sadly, things are different today. A major shift is seen in crop cultivation as the government, both provincial and federal, has turned a blind eye to it. Crop zoning regulates the farm sector. It determines how and where a particular crop or is to be cultivated so as to achieve the greatest yield. Such zones are defined in view of weather conditions, available water flows, drainage system and soil fertility etc of that area. This method helps ensure efficient utilisation of resources. Sindh and Punjab are both bearing the brunt of adverse implications of this change. Punjab’s southern parts are home to sugar cane cultivation thanks to the unusual growth of the sugar industry in water deficient areas that do not suit the crop. Sugar cane is considered Pakistan’s political crop commanding patronage of all bigwigs. Pakistan’s National Food Security Policy was approved for the first time in 72 years by the outgoing PML-N government. Punjab and Sindh — Pakistan’s two main grain producing provinces — have also framed their own agriculture policies. Besides these two provinces, Balochistan contributes towards the paddy crop while Khyber Pakhtunkhwa focuses on tobacco, although it also has a lot of potential for maize production. The national food security policy, coupled with the two provincial agriculture policies, cover all policy areas for sustainable agriculture growth. However, to ensure sustainability, what appears to be missing is synchronisation at federal and provincial levels. “The government needs to share information-based knowledge to convince growers about which crop should be sown in a given season. This culture needs to be developed if we aim to achieve sustainability in our farm sector which has a huge potential for growth,” contended Dr Yusuf Zafar, former chairman Pakistan Agricultural Research Council. Water, a precious commodity, is becoming scarce. The government often uses the public’s purse to provide subsidies to first produce a certain crop, such as sugarcane, and then export the sweetener with rebate, without benefitting either genuine farmers or consumers. Farmers don’t get the desired price for their produce while consumers get expensive sugar thanks to institutional lacunas at the implementation stage. It is owing to a missing zoning system that Pakistan often has a bumper sugarcane crop coupled with sugar surpluses, all at the cost of declining cotton acreage and looming water scarcity. The country has a huge potential for cotton production and a large textile industry. To borrow from a Punjab-based agriculture analyst, Ibrahim Mughal, Pakistan is spending Rs600-700 billion on import of various agro-commodities especially cotton, edible oil and pulses. “We can easily produce [these commodities] by ensuring proper zoning to protect our ecosystem. But we have to protect the natural habitat of our crops and we must stop tinkering with the natural ecosystem or be ready to face the consequences,” he observed. If the country earns foreign exchange on rice exports, it also spends a huge amount to import edible oil and pulses. And both crops can be grown domestically, as evident from the experience gained in the 2010 super floods when sunflower cultivation boomed. The West Pakistan Rice (Restriction on Cultivation) Ordinance 1959 is often invoked in command (left bank) areas of Ghotki Feeder canal (Guddu barrage), Nara and Rohri canals (Sukkur barrage) to ban sowing of paddy. This mirrors the zoning system. But due to weak governmental writ these rules are not strictly enforced, thus paddy surpluses are seen in banned areas. Pakistan exports a freshwater resource when rice is exported, says former chairman Pakistan Council of Research in Water Resources Dr Mohammad Ashraf. Out of 8.6 million tonnes of rice produced in 2015-16, 4.2m tonnes (worth Rs194bn) were exported. These exports required 6.8MAF of freshwater amounting to Rs8.4bn (at Rs1,233 per acre foot of water) Due to nonexistent zoning, high delta crops are grown in areas where surface water is insufficient and groundwater is deep or saline. Edible oil crops should be introduced which require less water and don’t affect foreign exchange. Dr Ashraf underscored the need for crop zoning given depleting water resources. The focus should be on water conservation and maximization of per acre productivity to lessen the usage of surface freshwater resources. Abstraction of groundwater, another important resource, is going unchecked and is another burden on the ecosystem. Over the years Pakistan has become largely dependent on cotton import thanks to declining domestic production of cotton bales. The textile industry needs around 15m cotton bales while domestic production hovers around 10m, resulting in imports. The area under cultivation for cotton faces massive encroachment in Sindh and Punjab by the sugar cane crop which continues to be politically patronised regardless of which party is in power. This has lead to an unnatural growth of the sugar industry. Click on the tabs below to explore the series. Published in Dawn, The Business and Finance Weekly, April 22nd, 2019

Machiavellian middlemen By: Kazim Alam Syed Hasan Ali had a foolproof business plan last year when he decided to grow vegetables on a 20-acre leased farm in Dhabeji, a small town 60 kilometres away from Karachi. But his hopes came crashing down when his produce fetched a surprisingly low price in the wholesale market. His revenue did not even cover his expenses. “Every business has a mafia. In agriculture, that mafia is the middleman,” says the 45-year-old grower. Commonly known as Arthis, these middlemen buy produce from growers — sometimes through their local contractors — and sell to wholesalers and retailers in major fruit and vegetable markets for a cut of 6-10 per cent. “I have no idea about the rate my brinjal was sold at in Sabzi Mandi. Wholesale prices of perishables have a high intraday volatility. There’s no mechanism to stop the Arthi from lying to growers,” he says. “The grower has no seat at the table.” Trading is just one part of the crucial role that these middlemen play in the supply chain. What makes them indispensible, however, is their status as informal moneylenders. Banks shy away from lending funds to small growers citing lack of collateral as many of them work on rented farms of less than 25 acres. Hence, Arthis provide growers with funds at a mark-up that the latter use to buy seeds, fertilisers and chemicals. In some cases, Arthis buy entire crops at the beginning of the season while in others they conduct auctions and charge a fee from both sellers and buyers. According to Asif Ahmed, one of the prominent Arthis who also serves as vice chairman of the market committee that manages Karachi Sabzi Mandi, criticism of middlemen is uncalled for. “Arthis take risks, growers don’t. It’s our money that’s at stake. We extend financing to growers when banks look the other way,” Mr Ahmed says. He denied that Arthis charge ‘exorbitant’ interest rates, although a study published by the State Bank of Pakistan (SBP) in 2014 found out that growers pay a mark-up of almost 50pc on funds they borrow from informal lenders. This mark-up is in addition to their 6-10pc fee that they charge for trading about 90pc of the entire produce that comes to the market. Muhammad Kashif, a Karachi-based wholesaler, says growers are ‘captive customers’ of Arthis. “Sabzi Mandi is off-limits to independent growers. They can’t bring their produce inside the Mandi without involving an Arthi. The only way for growers to cut out the Arthi is to become one by setting up shop,” he says. Middlemen defend this rule, claiming that gatekeepers exist in every line of business. “You can’t trade shares in the stock market without a broker. Why should that not be the case in Sabzi Mandi?” says one Arthi, requesting anonymity. But the issue becomes thornier whenever a grower tries to change Arthis without any ‘fair reason’. In such a dispute, market committee members convene a Jirga to settle the issue. Both the grower and the new Arthi are fined for causing a loss of business to the original middleman. So how exactly do these Arthis make money? Most of them maintain informal credit lines with suppliers of farm inputs like seeds and fertilisers. Arthis provide growers with inputs at a higher than actual price that is adjusted at the end of the season along with the standard commission. For example, the SBP study found that a bag of urea selling for Rs1,800 in the cash market was sold for Rs2,400 in credit. This translates into 33.3pc mark-up for a four-month crop cycle or 100pc mark-up on an annual basis. “The credit extended through Arthis is without any guarantees. Arthis have a dual advantage in getting commission on produce sold through them in the wholesale markets,” it said. Lending and recovery methods of these middlemen are not subject to any regulatory oversight. Except for a small ‘market fee’ on the total traded value, they operate mostly out of the tax net. Growers believe the banking regulator should simplify procedures for agriculture financing. They say the regulators should promote ‘group lending’ on personal guarantees for agricultural inputs through growers’ representative bodies. “Arthis exist because growers have no one else to borrow from. Making banks extend credit at market rates will wipe out informal lenders,” says Mr Kashif. “The provincial government should set up farmers’ markets across major cities where growers can bring and sell their produce without engaging any middlemen,” he adds. After his loss in the last crop cycle, Mr Ali of Dhabeji is now growing animal feed on his leased farm. One of the reasons for his decision to switch from vegetables to animal feed is the upcoming Baqra Eid. “I can bypass the Arthi of the Cattle Market and set up a retail stall anywhere in the city. I’ll save money by not paying the middleman. At least I’ll know for sure the actual selling price of my produce.” Click on the tabs below to explore the series. Published in Dawn, The Business and Finance Weekly, April 22nd, 2019

Deadly pesticides for profit By: Nasir Jamil Although the elimination or reduction of the use of synthetic chemicals remains on top of the priority list of most countries across the world, in Pakistan we continue to try to swim against the global current. Globally, policymakers and researchers are trying to find solutions that can help farmers move away from, or at least cut, the use of chemicals — harmful for human and animal health, the environment and biodiversity — to a sustainable level without affecting their livelihoods and ability to feed a growing population. Although the elimination or reduction of the use of fertilisers, pesticides and other synthetic chemicals on major and minor crops is just one of the several sustainability goals, it remains on top of the priority list of most countries across the world. However, in Pakistan, we continue to try to swim against the global current at the cost of human health, water contamination, soil erosion, decreasing soil fertility and yields. The indiscriminate and unbalanced application of chemicals has been on the increase as farmers, particularly small landholders, continue to try to cope with rising insect and disease attacks on their crops. Ironically, the abuse of chemicals has increased the requirement for fertilisers to improve soil fertility and made insects more resistant to the pesticides. Farmers from across Punjab, for example, say their use of soil nutrients is increasing by the season to maintain their productivity levels. Similarly, they are forced to spray their crops four to five times, instead of the two to three times required a few years back, to fight insect attacks and plant diseases. “Many of the problems our farmers are facing today are the result of an imbalanced use of fertilisers and excessive spray of pesticides,” Dr Sagheer Ahmed, the director of the Cotton Research Institute (CRI), Multan, tells Dawn. “Fertilisers should be used only after a lab analysis of the soil, and insecticides must not be sprayed on crops unless the pest or disease attack crosses the minimum threshold. “But our farmers do not care about these requirements and resort to an indiscriminate use of chemicals to ‘protect’ their crops, mainly because a vast majority of them are smallholders and cannot afford losses,” he says. Dr Sagheer Ahmed argues that the entire agriculture land in Punjab is massively deficient in three major nutrients — nitrogen, phosphorus and Potassium. “Since chemicals containing phosphorus and potassium are expensive, the growers choose to use just urea — and that too in excessive quantities. Likewise, the farmers start spraying the crop on the first hint of disease or insect attack. “Our farmers lack awareness, education and cash, and the crop protection companies take advantage of them and misguide them to meet their sale targets,” the director concludes. According to Punjab agriculture department officials, less than a fifth of the farmers across the province have ever received basic training on how to handle and use pesticides. “Most pesticides used to protect crops are hazardous or moderately hazardous to human and animal health and the environment. Over-reliance on pesticides for better yields, and lack of knowledge to properly handle their use, mean high risk of pesticide exposure and pesticide residues on crops, especially on vegetables and fruit,” a senior official, who refused to speak on record, insists. Dr Javed Ahmed, the director of the Ayub Agriculture Research Institute, thinks the solution to sustainable agriculture lies in adopting Integrated Pest Management systems shifting towards new seed technology with inbuilt pest resistance. “The world is moving away from chemical sprays on crops and fertilisers, and new seeds with higher resistance to pest and disease attacks, water scarcity and drought conditions are being developed. We need to bring in such new seed varieties that will reduce the need for chemical sprays,” he says. Integrated pest management, according to experts, means the use of plant protection products and other forms of intervention at levels that are economically and ecologically justified. They minimise the risk to human health and the environment. But many farmers disagree. “The concept of integrated pest management as a crop protection system has failed to deliver its promise. Take the example of Bt cotton. The use of Bt cotton has increased the frequency of pesticide sprays in every country it is being grown in, including India,” asserts a progressive farmer from Bahawalnagar, Ijaz Ahmed Rao. “Now the farmers are turning back to the crop rotation method — the practice of growing a series of different types of crops in the same field so that the soil is not used for only one set of nutrients and build-up of pests is mitigated. This is to control pests, protect soil fertility, obtain higher yields and minimise damage to human and animal life and the environment. We must return to nature for sustainable agricultural practices,” he concludes. Click on the tabs below to explore the series. Published in Dawn, The Business and Finance Weekly, April 22nd, 2019

No walls on our borders By: Fatima S Attarwala While countries have advanced systems to detect food items entering their borders, in Pakistan there is no checking, especially at points such as Torkham and Chamman. Despite being an agri-based economy, with an import bill of $6 billion in 2018, Pakistan is hardly food sufficient. Though we produce enough rice, dates, wheat, and potatoes for our needs, staples such as edible oil — used to make ghee — and pulses are imported. And what is grown within the country is not protected from imported pests. The composition of food imports as a percentage of total imports has averaged at 11 per cent since 2003, with edible oils taking the lion’s share, according to Trade Map data. While in absolute terms, edible oil imports, mostly palm oil, has increased over the years, its share has declined from 53pc to 36pc over a decade and a half. The decrease in share of edible oil as a percentage of overall imports is in part because of an increase in oilseeds, namely soybeans. Most oilseeds are mainly crushed for oil, however soybean seeds are crushed for protein and used in poultry feed. Increase in soybean imports actually contributes towards food security, says Shakil Ashfaq, chairman of the All Pakistan Seed Extractors Association and CEO of Shujabad Agro. Soybean formulation of poultry feed was introduced by Charoen Pokphand Group, a Thai company, in 2013. Incorporating soybean in poultry diet has decreased their Feed Conversion Ratio (FCR). The FCR indicates the amount of feed that needs to be given to get one kilogram of meat. Typically, the FCR in Pakistan used to be 2.5kg but with the introduction of soybean it has been reduced to 1.6kg because of which the cost of poultry has come down. Simply put, more nutrition is now packed in a small amount of feed. While soybean imports may be good news, the volumetric rise in palm oil imports is not. The key ingredient in making vegetable ghee is palm oil. Palm oil is also the preferred choice in the confectionary, baking and frying industries. An increasing population and the rise of the fast food culture and snack industry has increased the consumption of palm oil and made it a staple of the country’s import bill. At 2.96 million tonnes, as per Trade Map data, 2018 saw the highest quantum of palm oil import to date. Import substitution in the form of cultivation of oilseeds leaves a lot to be desired. Over the last decade, area under oilseed has decreased from 8.47m hectares to 7.6m hectares despite the country’s growing population, and hence, need for edible oil. Other than edible oil, oilseeds, and tea, pulses are a top food import. Though we grow a variety of pulses, including gram, lentil, moong bean, mash, red gram, and cowpea, production is not enough to satisfy domestic demand. At nearly a billion dollars, 2017 saw the highest import of pulses in the country’s history. Import dependency aside, lack of sanitary and phytosanitary (SPS) standards for food imports opens a whole different can of worms. A senior official of the Ministry of National Food Security and Research lamented the lack of agri-protection from pests, including insects, diseases, bacteria, and viruses. “Around 60-65pc of pests that infect our crops are imported because we do not have regulatory checks or a holistic set of SPS standards,” he said. Due to insects and disease, production decreases while production costs increase. In 2012, Pakistan consumed pesticides in the range of Rs25-30bn. Today this number has increased to stand at Rs75bn. The official indicated that the existence of infections and pests in our crops prevents access to high value markets. He narrated the example of dirt accompanying potato seeds imported from Holland that was infected with Golden Nematode. This is one of the world’s most damaging potato pest and can remain present, dormant in the soil, for up to 30 years. As a result of this infection, Russia stopped importing all agri-products from Pakistan for a while. Another example he narrated was of the weed Parthenium that was imported through food substance from Australia. This weed is not only capable of destroying 60-80pc of the country’s crop but can also prove to be deadly to cattle. While countries have advanced systems to detect food items entering their borders, in Pakistan there is no checking, especially at points such as the Torkham and Chamman border. Not only is the country vulnerable due to import dependency of certain staples, its lack of biosecurity is a threat to domestic cultivation as well. Click on the tabs below to explore the series. Published in Dawn, The Business and Finance Weekly, April 22nd, 2019

Stories From The Field 'Technology all the way' Abad Khan, Member of the Farmers Associate Pakistan and President Guava Association Abad Khan owns three different farms in as many ecological zones in Punjab. He believes that instead of flashy and grandiose ideas, the government should help farmers with technology adoption at the ground level. For example, incubation centres should be set up where farmers can go and learn about the latest technologies for specific crops. This way they can return and use their knowledge to tackle problems that they face. The government should also try to reach out to farmers individually. “The soil textures of all of my three farms differ, even within one farm, and usage of fertiliser is linked with this texture. I should be able to upload soil texture and get specific requirements for my farm,” he says. “This was started by the previous government but stopped by the present one. It needs to be restarted. Help for farmers should be GPS enabled rather than based on lengthy paperwork as is done currently,” he added. 'No place for food' Chaudhry Maqsood Jutt, President Potato, Vegetable and Fruit Growers Cooperative Society Storage capacity is a subject of confusion rather than planning asserts Chaudhry Maqsood Jutt. The government does not have credible figures of different crop area, crop production or storage. For example, the provincial government has been insisting that potato production is at 4.3 million tonnes. The figure could be well over 10m tonnes. Similarly, there are no accurate storage figures available. Okara district, the main potato producing area, has over 2.5m tonnes of storage capacity, which fills to the brim every season. In the last few years, new storage was built by investors from Sargodha. While the capacity is sufficient there are operational issues. Firstly, the cost of storage has become a deterrent. Storage owners charge Rs450 per bag for a season. Cost of a bag is Rs200 and labour charges add another Rs100. This adds Rs6.5 per kg to the cost. With exports slowing down, for the last two years no farmer has been able to recoup this cost, said Mr Jutt. Storage charges are prohibitive because initial investment has been massive at around Rs2,000 per bag. This added up to Rs60m, excluding cost of land. Cost of running storage is exorbitant as well, mainly due to electricity. To make matters worse, storage owners do not take responsibility for potatoes rotting in case of electricity failure. There is no insurance system in place. Entire stores of produce have gone to waste due to this. At Rs3,000 per bag, potato seeds are costly. If 100 bags of seed rot, famers suffer irreparable losses. Thus, instead of building storage capacity, the regularisation of existing capacity is needed. 'Taxation ─ discriminatory and arbitrary' Sarfraz Ahmad Khan, Vice President of Kissan Board Pakistan A practising farmer and former member of the Federal Board of Revenue, Sarfraz Ahmad Khan says that the current taxation system is discriminatory, arbitrary and loaded against farmers. For example, let’s take the case of exemption. For non-agricultural income the first Rs400,000 earned is tax-free whereas the corresponding amount for the farmer is only Rs80,000 — five times less than that of businesspersons. Similarly the progressive rates work against the farmer’s interest. For a slab of Rs100,000, farmers have to pay five per cent of the income. Similarly, for agricultural income up to Rs200,000, farmers have to pay Rs5,000 plus 7.5pc on over Rs100,000. Going further up the slabs, at Rs300,000 of agricultural income, farmers are charged Rs22,500 plus 15pc on income above Rs300,000. On the other hand, non-agricultural income is not taxed for any of these slabs. The disparity is further evident when the tax rate for non-agricultural income is analysed. For the slab of Rs400,000-800,0000 tax is only a lump sum rate of Rs1,000. For the next slab, above Rs800,000-1,200,000, those with non-agricultural income must pay only Rs2,000. This is indicative of how the dice is loaded against farmers. What complicates the issue is the income assessment mechanism. Farmers’ income varies from region to region, season to season and crop to crop. The revenue bureaucracy is simply not trained in such assessment mechanism, resulting in discrimination and arbitrariness. A system of progressive per acre taxes should be put in place instead. 'A woman at the farm' Batool Kauser, farmer Batool Kauser was rushed to the civil hospital when she fell unconscious due to heat, the fumes rising from the chemical fertiliser she was applying, and weak health. Taking care of the family’s five acres of land since the death of her husband a couple of years ago, Ms Kauser is amongst the 68 per cent illiterate female farm workers. Even before her husband’s death, she had been working in the fields shoulder to shoulder to save labour costs. A mother of three, she says fainting is not the only hazard at the farm. Without day care centres, babysitters, or a joint family system, children have to be carried to the fields. Proximity to hazardous agricultural chemicals, snake bites, and stray dogs are all threats to children as well as their mothers. Harassment at the hands of male workers and landlords is common due to the women’s subservient position. Unlike industrial or commercial sectors, there is no help at hand in the form of nearby colleagues, she narrates. During her husband’s lifetime, she knew little about micro-credit facilities. After his death, fear of getting trapped in the vicious cycle of interest made her depend on loans from friends and family. Furthermore, a social restriction on women’s mobility prevents her from attending meetings and signing (thumb impression) required documents to obtain formal loans. She admits that she had little control over decision making during her husband’s lifetime. Similar to other women workers, she was involved in ‘manual’ tasks such as digging, stacking of bales, sowing seed, plucking vegetables, and peeling sugar cane. Her husband would do the ‘heavier’ and somewhat more technical work, such as ploughing, watering, tractor driving, and dealing with heavy agricultural machinery. 'The country’s step-children' Mahr Ikramullah Lak, farmer “Forget funds and other facilities, we (the farmers) do not even receive guidance or technical support from the government,” bemoans Mahr Ikramullah Lak. Agricultural extension services provide knowledge of scientific research and application through farmer education. “Extension services men rarely visit us. If we approach them ourselves to seek guidance, they just direct us to certain dealers for pesticides. But the way the government talks, it appears that all state resources have been put at our disposal,” he laments. Mr Lak asserts that farmers get poor returns because of lack of storage capacity. The government provides storage for strategic wheat stocks only, while talk of building storage for other crops remains just talk. There are also no markets where farmers can sell their produce directly without paying [commission] to the middlemen. Farmers have to sell their produce at the earliest to pay for farm inputs bought on deferred payment of the crop. Investors take advantage of this fact and purchase at low rates to sell at exorbitant prices during the season. Poor training and lack of technology lead to losses before and after production. Absence of crop insurance results in heavier losses when the weather turns hostile. “We face up to 30 per cent production wastage on normal days. This figure goes up to 50pc in case of rain and thunderstorm, and as high as 70pc in case of hail,” he says. Yet promises of the crop insurance scheme have yet to be fulfilled. Farm labour is another factor which Mr Lak believes will hit the farm sector hard in days to come. Previously, workers would themselves approach a grower a month before harvesting of wheat against 80kg per acre. But now they are not available at double the rate as most have left for urban centres in search of better opportunities, he adds. 'Common sense cultivation' Dr Anjum Ali, Director General of Punjab Agriculture Department (Extension) Grow food not plants and plant only those trees that bear fruit. This is the best option to ensure food security with available resources, believes agricultural scientist Dr Anjum Ali. Referring to the prime minister’s one billion tree plantation target, he says the programme should not just take care of lungs but also people’s stomachs. In an agrarian society, while availability of food is not an issue, nutrition and affordability are. Efforts such as soil analysis are being undertaken by the public sector for natural fortification of grains. When completed, it would allow application of micro-nutrients like zinc in soil found deficient of it. To increase affordability, Dr Ali calls for focus on enhanced crop yields, diversification and value addition so that cost of production may be reduced. He believes that nutrition standards should be set in accordance with local tastes and consumer behaviour instead of blindly following international standards. For example, while people here do not consume as much meat as they do in developed countries, ghee consumption, which is also a source of animal fat, is higher in Pakistan. Forcing consumers to adopt world standards will not improve the nutritious value of their food. Click on the tabs below to explore the series. Published in Dawn, The Business and Finance Weekly, April 22nd, 2019

Prelude to a drought By: Khaleeq Kiani Changing demand patterns may increase demand for water outside agriculture. Within a few decades, growth in agricultural consumption of water may be limited. This will require reforms and investments that dramatically reduce water losses. The country’s precarious water situation has become one of its most well-known facts. Per capita water availability has declined from 5,260 cubic metres in 1951 to less than 1,000 cubic metres at present. A more painful reality to accept is that since Mangla (1967) and Tarbela (1976), the country has failed to build one-dam-a-decade as required under the development plans of the Indus Water Treaty of 1960. While the share of agriculture in the country’s GDP is declining, the population is growing at an annual rate of 2.4 per cent. Water scarcity has raised food security concerns given Pakistan’s overwhelming economic dependence on agriculture. Importantly, irrigated agriculture is the backbone of the country’s economy and consumes around 95pc of the nation’s water resources, according to the Ministry of Water Resources. “With a rapidly growing population, Pakistan is heading towards a situation of water shortage and by corollary, a threat of food insecurity,” the ministry’s National Water Policy stated. The main challenge is that water per capita availability is estimated to further drop to about 860 cubic meters by 2025, marking our transition from a “water stressed” to a “water scarce” country. Hence, there is a need for rapid development and management of the country’s water resources forthwith; to ensure food security on a sustainable basis. It was in this background that the country’s first national water policy was unanimously approved in April 2018. The centre and four provinces agreed to increase the allocation for water sector projects to at least 20pc of the Public Sector Development Programme (PSDP) next year, from about 9.6pc at present. Subsequently the allocation is to be increased to 30pc by 2025. The allocations used to be 17.6pc of total PSDP in 2003-04 and dropped to a meagre 3-4pc before it was increased to 9.6pc in recent years. This was with the induction of Diamer-Basha and Mohmand dams in the development portfolio. Another sustainability challenge is unregulated groundwater extraction across the country. The water resources ministry estimates that more than 1.3 million tube wells operate without any monitoring or regulation, putting unprecedented stress on the water table. The centre has prepared a pilot project for Islamabad to start formal registration and licensing of groundwater extractors. An annual fee will be charged for higher than licensed quantities consumed. This model would then be replicated in the provinces to ensure sustainable groundwater extraction. The World Bank (WB) agrees that the National Water Policy provides a sound basis for reform, but provincial water policies need more attention. Furthermore, the underpinning legal framework is incomplete and needs strengthening. In a WB report “Pakistan: Getting More from Water,” the bank noted irrigation water use could increase to meet growing food demand if efficiency improvements were made. As wealth increases, changes in diet will have significant impact on commodity demands and crop choices. While irrigation dominates water use in the country, the four major crops (rice, wheat, sugar cane and cotton) use 80pc of the water while contributing only 5pc to GDP. Poor water management, conservatively estimated, costs the country 4pc of GDP or around $12 billion per year, the WB noted. Changing demand patterns may increase demand for water outside agriculture. This means that within a few decades, growth in agricultural consumption of water may be limited. This will require reforms and investments that dramatically reduce water losses. It is argued that to ensure continued food security and contribution to accelerated economic growth, the productivity of water in agriculture must be greatly increased. Reforming distorted agricultural policies that support wheat and sugar cane will help move water toward high value crops. Changes in diet — already apparent as incomes rise — will further change patterns of food consumption. If production of low-value cereals declines in response to falling demand, more water may shift to growing cotton for export. Cotton, and the associated textile industry, generate considerable export income for Pakistan and should remain economically attractive over the long term, especially if greater value addition post-harvest is achieved. These benefits can only accrue, however, if major reductions in water losses can be achieved. Assuming optimistic rates of economic growth, modelling suggests Pakistan can reach upper-middle income status (GDP of $6,000 per capita) by 2047, ensure adequate food supply, improve environmental sustainability, and deliver better municipal and industrial water security; even in the context of a rapidly warming climate. However, this will not be easy and will require action on many fronts. Click on the tabs below to explore the series. Published in Dawn, The Business and Finance Weekly, April 22nd, 2019