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Tuesday March 19, 2024

Budget gives a little leg-up to agriculture sector

By Munawar Hasan
May 27, 2017

LAHORE: Farming community on Friday expressed dissatisfaction over agriculture sector measures announced in the federal budget 2017/18, regretting Islamabad police’s brutal crackdown on growers, who had flocked outside parliament house to demand incentives for themselves. 

A bird’s eye view of the budgetary measures announced by finance minister on Friday, shows the government has given a number of incentives to poultry industry. These include reduction of duty from 11 percent to three percent and removal of five percent regulatory duty (RD) on grandparent and parent stock of chicken, and reduction of duty on import of hatching eggs from 11 percent to three percent.

Enforced through Finance Bill, 2017, effective from 01.07.2017, the federal government also proposed to reduce the rate of sales tax on poultry machinery. Sales tax on import of seven types of poultry machinery is proposed to be reduced to 7 per cent. Such steps, according to experts, would largely benefit the poultry industry.

As far as other measures for agriculture sector are concerned, federal government has exempted combined harvesters of sales tax. Presently, combined harvesters are subject to sales tax at 7 percent ad valorem under Eighth Schedule. A complete exemption of sales tax for combined harvesters up to five years old has also been proposed --by inserting an entry in the Sixth Schedule.

Agriculture diesel engines (from 3 to 36 HP) have also been given exemption from sales tax.

The finance minister also announced steps for reduction of sales tax on fertilisers to replace subsidy. Due to complications in the payment of subsidy to fertiliser manufacturers and importers, the subsidy is proposed to be substituted with reduction in sales tax rates on various fertilisers. Instead of ad valorem rates, specific rates have been proposed. However, the rate on urea will remain unchanged at 5 percent

According to another announcement, imported oil seeds are subject to sales tax at 5 percent under Eighth Schedule presently. Exemption from payment of sales tax is being provided on import of sunflower and canola hybrid seeds meant for sowing. Similarly, imports of ostriches have been exempted from 3 percent custom duty.

Moreover, the government also announced an increase financing arrangements for farmers. In a major step, interest rate for growers has been reduced to a single digit. Besides, allocations have been announced for various projects of dams and other infrastructure.

Commenting on the federal budget, Ibrahim Mughal of Agri-Forum Pakistan (AFP) said, currently KIBOR is hovering about 5.5 percent, so maximum interest rate for farm loans should not exceed 7.7 percent.

“Agriculture financing proved immensely beneficial for the development of the sector, so this move is a step in the right direction,” Mughal said while hailing increase in overall financing for agriculture sector. 

He also called for exempting all agriculture input from sales tax. “It is sheer injustice that farmers have to pay huge amount on basic function of farming,” Mughal said. The AFP official also expressed hope that imported fertiliser would become cheaper following exemption from sales tax. 

Ayub May, a representative of Pakistan Mutahidda Kissan Mehaz, stated the government has failed in allocating a reasonable amount for the construction of water reservoir projects having a total capacity of 12 MAF. “The farmers are not happy with the government for its incompetence and indifference to the water shortage issue, which was seriously impacting agricultural output in the country,” May said. 

Stressing for incentives on drip, sprinkle, and solar tube-wells, May said the government should have announced support price for cotton in the budget as farmers found no incentive for sowing cotton due to huge losses in the recent years. 

Kissan Board Pakistan (KBP) slammed the federal government for badly manhandling protesting farmers in in federal capital. 

“The farmers gathered there for demanding relief for agriculture sector but the government turned a blind eye to their plight,” a KBP spokesman said and stressed the need for incentivising farming community, terming it indispensable for the development of whole country.

Ahmad Jawad, regional chairman on horticulture exports’ committee of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) said the budget allocations and reliefs announced for agriculture sector for the fiscal year of 2017/18 are more or less same as the previous year.

“We were expecting some concrete reliefs,” said Jawad, in a statement, however, appreciated the government’s decision to cut the markup rate to 9.9 percent for up to 12.5 acres of land.

Jawad further said the announcements of two percent customs duty for livestock, poultry feeding and fish farming and zero percent duty on sea food are not directly linked with agriculture sector’s growth.

He said no incentives were allocated to promote horticulture exports in the 2017/18 budget despite that the sector requires attention. Share of Pakistan’s horticulture exports in international market is only 0.3 percent, he said.

“We expected from the government that it would give due incentives in the budget to establish value-addition infrastructure in order to increase exports of fresh fruits and vegetables under public-private partnership,” he added. “Some share out of Rs1 trillion in PSDP should be given to nontraditional products i.e. horticulture.”

The Federation of Pakistan Chambers of Commerce and Industry official said government should understand that Pakistan’s horticulture sector has a potential to make maximum contributions to export sector if it provides some budgetary relief.

He said no special announcement was made in the budget to reduce the import and export gap, “which seems that next year our export performance would be more or less the same rather than be improved.”  

He added that the proposal to increase withholding tax rate on non-filers would affect the country’s trades.