Punjab agri reforms to improve food quality, farmers’ incomes

LAHORE: Punjab plans to reorient part of the Rs55 billion annual spending on un-targeted and expensive subsidies towards “smart” and efficient spending targeted at small farmers for increasing productivity and incomes coupled with financial support to agribusinesses and improvements in irrigation management.

In an event organised by Programme Implementation Unit of the Planning and Development Department on Monday, Muhammad Mahmood, provincial agriculture secretary informed about the $300 million World Bank-funded Strengthening Markets for Agriculture and Rural Transformation (SMART) project. It would be completed in five years (2018-2022).

“In the last three decades, agriculture in Punjab showed an average annual growth of less than three percent with high input costs and low yield leading to low incomes and low-quality expensive food, the secretary said. An important reason why agricultural growth is erratic and low is outdated policies which have hardly changed in the last 50 years, he added.

The SMART project aims to modernise agriculture for farmers, consumers, and the province. A comprehensive package of reforms, supported through SMART project, is expected to add $2.2 billion to the economic value of farming, create 350,000 jobs, and lift 1.7 million people out of poverty over a period of five years. The programme also pledges to reduce inequality and expand opportunities for women and youth.

The SMART reform package has five main components including making farm subsidies work, allowing the private sector to set up agricultural markets by dismantling present market committees along with stimulating production, he maintained.

Talking about food subsidies, Mahmood said wheat pricing was not prudent while subsidies were not being utilised in an efficient manner. The price of wheat in Punjab has risen by 300 percent in the last 10 years while the global price has decreased by 50 percent over the same period, he said.

Punjab spends Rs135 billion/year to procure wheat and another Rs20 billion a year on other agricultural subsidies. Virtually none of these subsidies reach the small farmer or most of the consumers, the secretary added.

Mahmood said Punjab had successfully, with the help of correct policies and incentives, become a wheat production hub; however, the cost of the commodity was too high. He reminded that demand had shifted from wheat to meat, milk and vegetables, which meant that a smaller volume of wheat would now he enough to ensure food security.

Under such a situation, the government should also shift its prevailing spending habits, he said, and added that an annual public investment of Rs22 billion was poorly allocated.

This amount largely focuses on crops for which per capita demand is declining, such as wheat and rice, at the expense of products for which the demand is growing, such as those of horticulture and livestock. Concurrently, the provincial government is spending a whopping Rs55 billion on subsidies that are poorly targeted, benefitting neither small farmers nor poor consumers – a social stratum that is a substantial part of the total population.

Talking about the roadmap of the reform program, Mahmood said, “The government will provide support for them (farmers) to start growing more profitable crops and selling them under improved marketing conditions. Wheat flour prices will decrease to benefit both rural and urban consumers.”

He also said removing price caps on meat and raw milk would stimulate livestock production and weaken incentives to sell low quality milk, so consumers would have more choice of safer food products.

The secretary said the spending on agriculture research and development was the lowest in the region and the world. “Subsidy will now be given directly to farmers. We have started this process and fertiliser subsidy is being given to small farmers through vouchers,” he informed.

The implementation of the project would start with gradual phasing out of government role from wheat procurement business. Wheat reserves to be curtailed to not more than 2 million in 2021 while budgetary allocation for high value crops would be increased from 3.5 percent to 15 percent of ADP for FY23. Agriculture innovation fund is being established to gradually award matching grants to 500 agribusinesses in FY22, he said.

Punjab Agriculture Marketing and Regulation Act (PAMRA Act) was being approved by Punjab Assembly and notified in gazette in 2018. PAMRA Act would be fully operational in 2021. Aggregated budgetary allocation for research would increase from 0.1 percent to 0.4 percent of Agriculture GDP by 2022. The Punjab Agriculture Research Board (PARB) would be reconstituted with private sector majority in 2019, Mahmood said.