Govt proposed legal amendments to boost farm credit

ISLAMABAD: Minister for Finance and Revenue Hafeez Shaikh on Monday called for action plan to boost farm credit after recommendations of legal amendments related to foreclosures and approval procedures.

Shaikh urged all concerned to come up with clear action plan along with timelines and responsibility matrix to finalize different proposals presented during a meeting on agriculture transformation plan at the Finance Division, according to a news statement.

The finance minister constituted a five-member committee comprising of secretaries law and justice division and food security ministry, State Bank of Pakistan (SBP) Governor and other senior officials of the relevant institutions and ministries to complete the task.

The finance minister reiterated the firm commitment of the government for promoting agriculture sector through effective and speedy implementation of agriculture transformation plan.

The meeting was recommended to make Loan for Agriculture, Commercial & Industrial Purposes Act 1973 more effective by bringing amendments in areas of foreclosure and simultaneously streamlining procedures for swift processing of agriculture loans. It was also emphasised that judges against vacant positions in Banking Courts need to be appointed on priority.

The meeting reviewed the progress on the directions of the Prime Minister to enhance agriculture credit for the farming sector. While the weighted average lending rate on agriculture loans fell subsequently, the disbursement of agriculture credit during Q1FY21 remained lower than the comparable quarter last year, the SBP said in a report. From a sectoral perspective, the drag emanated from the non-farm sector, as disbursements to the livestock, dairy, and poultry segments declined. This could be reconciled with the Covid related restrictions on marriage halls and restaurants, which continued to suppress the demand for segments like poultry during the quarter. Within the farm sector credit, disbursement of development loans remained subdued. In particular, disbursements for tractor purchases were lower compared to the same period last year, despite an extension of subsidy on sales tax of locally manufactured tractors for a period of one year.

The government formulated an agriculture package as part of its broader Rs1.2 trillion COVID relief package. This agriculture package, amounting to Rs50 billion, had four main focus areas: fertilizers; agriculture loans, tractors, and cotton seeds. The bulk of the package was earmarked for subsidies on fertiliser purchase for fertilisers account for nearly 10 to 15 percent of the cost of production for major crops, and the subsidy would make the input more affordable for farmers.

“While tractor production and sales rose during Q1FY21, bank financing did not pick up in a commensurate manner. There is a possibility that higher remittance inflows during Q1-FY21 relative to the comparable quarter last year facilitated a greater amount of cash purchases of tractors during the review period. By contrast, production-related borrowing in the farm sector was on the higher side during Q1FY21 compared to the same period last year, suggesting that better crop outcomes created demand for working capital loans,” said the SBP.