April 16, 2024

Pakistan`s Agriculture Sector

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dr.moeenuddin

dr.moeenuddin
 April 16, 2024

2 Agriculture Sector

• Agriculture is not confined to cultivation of the land, growing and

harvesting seasonal crops.

• Agriculture includes:

• Livestock breeding 49.1% of value added in agriculture and 11.

4% of GDP. 30-35 million rural population engaged in livestock
raising.
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3 Agriculture Sector

• Fish farming. Although small contribution in GDP, still earns

foreign exchange through export. Good nutritional value of fish
with protein content of 15 to 20 percent. Important source of
livelihood for coastal inhabitants.

In 2021-22, $185.922 million was earned from export of fish

and fishery products.
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4 Agriculture Sector

• Poultry farming has emerged as good substitute of beef and

mutton with 356 million chicks` production, 4850 million eggs
and 303 ‘000’ tons of poultry meat in 2003-04

• Forestry. 4.8 of total land is under forest, recommended level is

20-25%, bad environmental conditions
 April 16, 2024

5 Two Leading Successes of Pakistani Agriculture

• Green Revolution in the late 1960s

What is Green Revolution:

• “The Green Revolution means introduction of new technology in

agriculture sector, in order to increase its production through
different measures .”
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6 Two Leading Successes of Pakistani Agriculture

• Many of the world’s countries made diversified efforts through following

measures:

• i. Introduction of new high yield varieties of wheat, rice, and maize

• ii. Improvement in per acre yield through quality fertilizers to
compensate for land deficiencies in many less developed countries.
• iii. Pesticides and insecticides have expanded the acreage a single
farmer can tend by reducing the time required to disinfect the crop.
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7
iv. Irrigation has made double cropping feasible in many countries
where formerly one harvest a year was standard.

v. New methods of rotating crops were developed which increased

land productivity.

vi. New shorter plants have been discovered that are more
responsive to fertilizer. Similarly, some sturdier (firmly built) types are
more disease-resistant.

vii. Botanists have been able to breed the photosensitive genes out of
plants. Making planting possible at any time of the year.
 April 16, 2024

8 Impact of Green Revolution:

Impact of Green Revolution Green Revolution had impact on

Production, Consumption Overall Societal Development, leading to a
tangible increase in production of agricultural produce, and its easy
and cheaper supply to the consumer.

Sources: Pakistan Economic Survey, Ministry of Finance, (Various Issues)

 April 16, 2024

9 Impact on Agricultural Production:

Impact on Agricultural Production Growth Plan Growth Rate of Agri.

Sector First 1.8% Second 3.8% Third 6.0% Which indicates that due to
green revolution the average annual growth rate has doubled. Wheat
Production Year Million Tons 1959-60 3.7 1968-69 6.8

Sources: Pakistan Economic Survey, Ministry of Finance, (Various Issues)

 April 16, 2024

10 Benefits of Green Revolution:

Benefits of Green Revolution General Factors High yield varieties

were introduced, which gave more production.

Progress in fertilizer manufacturing was observed.

Better quality pesticides and insecticides increased acreage of land.

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11 Benefits of Green Revolution:

Better management of human resource was made through optimal

utilization of already available farm labor and induction of newly
trained laborers.

An effective utilization of non-human resources was made.

Water availability was ensured, keeping in view its quantity required.
 April 16, 2024

12 Impact on Employment:

Impact on Employment The introduction of the new high yielding

wheat and rice technology has resulted in an increase in the demand
for labor.

The net effect of the increase in demand for labor lead to a significant
rise in real wages.

The increase in labor use has been due to greater labor utilization per
unit of cropped area, and in some cases to high cropping intensity.
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13 Impact on Employment:

Even mechanized forms typically were utilizing increased labor

inputs per hectare although simulation results conducted by
some researchers indicate that labor inputs per hectare might be
expected to decline substantially under fully mechanized
techniques combined with adoptions of the HYV technology

• Tripling in cotton production over the 1980s due to the use of

quality seed and proper incentives to the sector
 April 16, 2024

14 Agriculture Sector

• 1947- Agriculture accounted for 53% of GDP. 2005- 23% of GDP, 21%
of GDP in 2011.

• Pakistan ranks 5th in Muslim World & 20th worldwide in farm output.

• Pakistan is world’s 5th largest milk producer.

• In 2005 Wheat production was 21.591 million metric tons- more than
all of Africa and nearly as much as all South America. (FAO)
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15 Agriculture Sector

• Livestock sector contributes half of the value added in agriculture

sector amounting to nearly 11% of GDP- more than the crop sector.

• Pakistan is Asia’s largest camel market, Second largest apricot and

ghee market, third largest Cotton, Onion and Oil market.

• Fisheries provide direct employment to 400,000 and indirect

employment to 500,000 people. It contributes approximately $ 120
million to exports.
 April 16, 2024

16 Agriculture Sector

• Agricultural crops such as cotton and sugar cane provide raw

material for two of the most imp industries in Pak i.e textile and
sugar.

• Pak’s unsatisfactory agricultural performance is mainly due to

traditional methods of cultivation, illiterate ad uninformed rural
population.
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17 Agriculture Sector

• Total supply of Agri credit has increased from Rs. 87 million in

1959-60 to Rs 47.93 billion in 2004.

• Supply for other inputs has been increased i.e., tractors imported
and locally manufactured, fertilizers, seeds, irrigation.

• Despite of this increased input, the output has not been increased
accordingly.
• There is a decreasing returns to scale in agricultural sector.
 April 16, 2024

18 Recent Performance

• The agriculture has lost significant growth momentum as its growth

slowed down to 2.7 % in 2000s as against 4.4 & in 1990s and 5.4% in
1980s.
• The structural problem and lack of mechanization remained main
impediment to growth.
• Major crops remained the victim of natural calamities during the last
few years and three out of last four years witnessed negative growth
in the major crop sector. It causes declining trend of agriculture sector
contribution in GDP.
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19 Agriculture Growth

Year Agriculture Major Minor Livestock Fishery Forestry

Crops Crops

2004-05 6.5 17.7 1.5 2.3 0.6 -32.4

2005-06 6.3 -3.9 0.4 2.8 20.8 -1.1
2006-07 4.1 7.7 -1.0 15.8 15.4 -5.1
2007-08 1.0 -6.4 10.9 4.2 9.2 -13.0
2008-09 4.0 7.8 -1.2 3.1 2.3 -3.0
2009-10 0.6 -2.4 -7.8 4.3 1.3 2.2
2010-11 1.2 -4.0 4.8 3.7 1.9 -0.4
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20 Salient Features

• Agriculture employs 44% of the work force in the country.

• 93% of those engaged in agriculture are small farmers.

• Total geographical area 79.6 million hectares. 27% of this area under
cultivation.
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21 Salient Features

• 80% of this area irrigated, but approx. 20% of area in Irrigation

Canal. Most of the area is affected by water logging and salinity. An
additional area of 2.8 million ha. affected by solidity.

• No subsidies, high cost of inputs, crop and livestock insurance, lack

of veterinary services, lack of mechanization, primitive management
and use of modern techniques, lack of education and training, seed
quality, research and dissemination of knowledge.
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22 Salient Features

• Undocumented economy
• Lack of investment
• Lack of delivery mechanism
• Lack of land reforms
• Lack of organized markets hence fair value assessment
• Lack of reliable statistics
• Institutional Arrangements
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23 Major & Minor Crops

• Cotton: 8.2% of value added in agriculture and about 2% to GDP.

• Rice: it earns substantial amount of foreign exchange. 5.4% of value

added in agriculture and 1.3% to GDP.

• Sugar cane: 4.2% of value added in agriculture and about 1% to GDP.

• Wheat: 13.4% of value added in agriculture and about 3.4 to GDP.

 April 16, 2024

24 Major & Minor Crops

• Other major crops are tobacco, mustard and rapeseed, maize and
barley.
• Minor crops are major oil seed crops i.e., cottonseed,
rapeseed/mustard, sunflower, canola.
• Most of these crops are imported which is about 70.85 % of total
availability and remaining 29.15% is made available through farming.
• Most of the pulses, tomato, potato, onion are other minor crops.
 April 16, 2024

25 Series of Major Problems

• Firstly, despite the policy makers stress on crop diversification,

the economy is dependent on cotton for more than half of
its export earnings. This strong dependence is dangerous
given the climatic and viral-induced setbacks that cotton
production has historically experienced throughout
Pakistan’s history.
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26 Series of Major Problems

• Secondly, the avowed objective of food security, which should have

been possible given the favorable resource endowment of
the country __ one of the largest irrigation systems in the
world__ has not been achieved so far.

• Thirdly, the rapid increase in population, with the growth rate

estimated at 3 percent has substantially reduced the per
capita agricultural production rate.
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27 Series of Major Problems

• Fourthly, growth in the most recent decade has come from more
extensive, and not intensive, agriculture.

• Fifthly, productivity growth in agriculture has been small

according to the indicators___ output per hectare,
output per unit of a single factor, yield gaps between
average and best farmer yields, and total factor
productivity.
 April 16, 2024

28 Series of Major Problems

• Sixthly, the government price system has been criticized for
inducing several distortions and incorrectly trying to
remedy the situation through a series of input subsidies.

• Finally, erratic and inconsistent policies and poor planning and

management, for example of the irrigation system,
deficiency in providing fertilizer, lack of quality control
on pesticides, inadequate investment in rural
infrastructure, and improper research and extension
services, have all played havoc with Pakistan’s agriculture.
 April 16, 2024

29 Agriculture Credit

• ZTBL, Commercial Banks, Cooperatives and other private domestic banks

are the main providers of credit to the farmers.

• In 2003-04, loans extended to the farming community was in the form of:
• Production and Development Loans. Rs.47.9 billion were disbursed in 2003-04
through ZTBL as compared to Rs. 37.6 billion in 2002.
• Purpose-wise disbursement of loans. Short term/seasonal loans.
• Credit to Women Program.
• Microcredit Scheme. Rs. 25,000 can be advanced to both men and women against
security. Loans are recoverable within 18 months.
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Major Issues in Agri. Credit

• High cost of borrowing - Cost of borrowing vis-a-vis rate of

interest?
• Perceived high risk associated with agriculture lending.
• Hassles in credit delivery
• complex documentation, collateral requirement, delays, under
financing
• Limited access to credit to tenant farmers/ oral
lessees/sharecroppers.
• Provision of adequate & timely credit
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31 Phases of agricultural growth

• Phase 1. Lasted up to 1960, period of agricultural neglect, resulting in

low annual growth of 1.5%.

• Phase 2. Between 1960-65 trend was reversed, growth rate was 3.9%

• Phase 3. 7.78% between1965-70, period of Green Revolution

 April 16, 2024

32 Phases of agricultural growth

• Phase 4. between 1970-77 growth rate declined to 1.67% due to

number of exogenous and policy related features.

• In terms of dependent population. 82% in 1951, 77.5% in 1961, 74.3%

in 1972, 71.72% in 1981 and 79% in 1991.
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33 Agri-Pricing Policy

• The pricing policy of agricultural input and output determine

direction of agricultural productivity and income distribution of small
farmers also.
• A good Agri-pricing policy can be defined as the one where prices act
as an incentive to produce certain goods in required quantities.
• National Commission of Agri (NCA) analyzed the issues in the
pricing policy of the first two decades.
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34 Agri-Pricing Policy

• Govt fixed the consumer retail prices of agricultural goods at low

levels which depressed the market prices for producers.
• Heavy export duties were imposed on cotton to facilitate local
industry.
• Inter district and inter province restrictions on movement were
imposed.
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35 Agri-Pricing Policy

• For a decade after independence, no systematic attempt was taken to

develop agricultural sector.

• Industrial sector was highly protected at the cost of agricultural sector.

• Barter trade was a common feature where agricultural products were

exchanged for industrial machinery and input.
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36 Agri-Pricing Policy

• Due to these policies agricultural sector was taken as a medium to

protect industrial sector. NCA argued that the main objective of the
pricing policy of 1960-65 was to provide low-cost food to urban
population, to provide cheap raw material for agricultural production,
to keep the wages of agricultural workers low.

• First step govt took to encourage agricultural output was to subsidize

agricultural inputs which cover seeds, fertilizers, tube wells, plant
protection and agricultural machinery.
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37 Agri-Pricing Policy

• But this policy was biased towards large farmers.

• Argument was raised to look beyond the input subsidizing policy.

• Concept of min price support program was introduced to protect

farmers from fluctuations in international prices.
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38 Agri-Income Tax

• There are arguments on whether agri-income should be taxed or not.

• NCA is against this argument and says that agri-holdings are too small
to generate taxable income.

• Agri is a risky business and heavily depends on natural factors which

creates uncertainty in final output.
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39 Agri-Income Tax
• No proper insurance of agri output.

• Agri sector pays the largest percentage of indirect taxes i.e., 42% of all
indirect taxes, so it should not be taxed more.

• On the other hand, National Taxation Reforms Commission (NTRC)

has evaluated policies of imposing a tax on agriculture.

• There is a group of landowners who reside in urban areas and made

investment in real estate with income from their agri-business.
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40 Agri Income Tax

• Since they pay no tax, so they are questioned by traders and

salaried class to pay tax.

• Many traders have purchased agricultural land with an intent to

escape from income tax.

• Many large farmers are earning handsome amount of money from

agriculture.
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41
Recommended Books

• Ishrat Husain, “Pakistan: The economy of an elitist state”, Oxford

University Press.
• Zaidi, S. Akbar,(1999), “Issues in Pakistan Economy”, Oxford
University Press.
• Saeed, K. Amjad,(2007) “Economy of Pakistan, Institute of Business
Management, Lahore.

• Economics Survey of Pakistan (Latest Issues),

Economic Advisor’s Wing, Ministry of Finance, Government of Pakistan

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THANKS
dr.moeenuddin