Agriculture Input Policies (Overview) – PakistanInitiative on The Role of Fertilizer and Seeds in Transforming Agriculture in Asia

Sohail Jehangir Malik PhDChairman

Innovative Development Strategies (Pvt) Ltdand

Visiting Senior Research Fellow IFPRI

Presented byProfessor Stephen Davies

Program Leader Pakistan Strategy Support Program

ReSAKSS-Asia Program

A Technical Consultative Workshop September 25-26, 2013

Cambodia

Pakistan Today: An Economy under stress

• Inequitable Distribution of Resources - especially Land• Rapidly growing population – majority with little or no

education, skills or access to productive resources• Energy Crises – Fully Blown• Debt Crisis - Burgeoning• Water Crises – Looming around the corner• Poor Governance

– Inadequate Policy Analyses, Poor Quality Data, Diminishing Domestic Capacity to formulate or Implement Reform

– Increasing Reliance on Donors for analyses and support

• Circumstances out of Pakistan’s control– War on terror – domestic terrorism– Earthquakes – Floods

These Constraints have severely affected availability of resources –

And Agriculture struggles as a step child within this crippling

environment

Agriculture in Pakistan’s Economy

Agriculture Sector

Industrial Sector Services

Sector

Real GDP

-5.5

-3.5

-1.5

0.5

2.5

4.5

6.5

8.5

FY-06 FY-07 FY-08 FY-09 FY-10 FY-11 FY-12 FY-13

Pe

rce

nta

ge (

%)

Years

Growth Rates of GDP and its Subsectors –Variable and Declining

Source: Economic Survey 2012-13

Agriculture

Major Crops

Livestock

5.0

10.0

15.0

20.0

25.0

19

99

-00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

11

-12

20

12

-13

Pe

rce

nta

ge (

%)

Years

Share of Agriculture, Major Crops & Livestock in GDP

Agriculture in Pakistan’s Economy

0

5

10

15

20

25

30

35

40

45

50

FY-00 FY-06 FY-09 FY-10 FY-11 FY-12

Pe

rce

nta

ge o

ut

of

Tota

l (%

)

Years

Share of Agriculture in GDP declining and Percent of Total Labor Force in Agriculture large and

almost constant esp. since FY09

Source: Economic Survey 2012-13

Wheat

Rice

Cotton

500

1,000

1,500

2,000

2,500

3,000

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

11

-12

20

12

-13

P

Yie

ld (

kg/h

ect

are

)

Years

Yield (kg/hectare) of Three Major Crops

Labor Force Agriculture

The emphasis on Four Major Crops

Rice

Wheat

Cotton

Sugarcane

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

19

94

-95

19

95

-96

19

96

-97

19

97

-98

19

98

-99

19

99

-00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

11

-12

20

12

-13

Pe

rce

nta

ge (

%)

Years

Share of Imp Crops in Value Add of major Crops

Rice

Wheat

Cotton

Sugarcane

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

19

94

-95

19

95

-96

19

96

-97

19

97

-98

19

98

-99

19

99

-00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

11

-12

20

12

-13

Pe

rce

nta

ge(%

)

Years

Share of Imp Crops in Real GDP

Source: Economic Survey 2012-13

Agriculture in Pakistan’s Economy

• Agricultural production is

– Critical to Pakistan’s food security and relieving malnutrition

– A major source of employment and income for the majority of the population - Pakistan’s rural poor

– The source of raw material for the textile industry that generates most of the foreign exchange earnings

• But Agriculture Growth has not matched Potential

Substantial yield gaps

ton

s/h

ect

are

20

18

16

14

12

10

Potential Achievable (progressive farmers' yields) National average

Source: PARC, 2011.

Political Economy of AgricultureThe Challenges to agricultural growth have been well known for several decades

1. flat (low) yields and large yield gap;

2. low productivity of water;

3. non-reliability of water services;

4. under-performance of rural factor and input markets;

5. Rapidly declining investment - especially public investment - serious under-investment in research and technology development and dissemination/extension

Many factors hinder Pakistan’s agricultural growth

(and hence employment and rural poverty reduction)

– Unequal land distribution – and resultant skewed distribution of power and policy biases

– Inefficient allocation and use of irrigation water

– government intervention in markets

– Step motherly attitude to agriculture in all policy decision making and resource allocation except decisions that lead to elite capture

– Serious disconnects between the center and the provinces in decision making and implementation – one size fits all policies - overly focused on Wheat and fixated on 4 crops only (wheat, cotton, sugarcane and rice)

– Regulatory environment that discourages investment and reduces market efficiency

These Challenges and Factors are well documented in all the official Agriculture Policy Documents since the late 1980s

1. Report of the National Commission on Agriculture (NCA) 1988 highlighted the neglect of agriculture and provided a Grand Overall vision to the year 2000 with agriculture in the center.

2. The National Agricultural Policy 1991 lamented the continued neglect of agriculture and repeated the recommendations of the NCA

3. The Agricultural Perspective and Policy of 2004 (NOT OFFICIALLY ENDORSED) repeated the challenges and recommendations of the NCA with minor changes

4. The (UNOFFICIAL) Draft National Agricultural Policy 2013 (NOT OFFICIALLY ENDORSED) repeats verbatim the challenges and recommendations of the earlier Documents

Pakistan’s Overall Policy Making – largely driven the Federal Planning Commission - Does Not give Agriculture its due

role or required resources• Long Term Plans and Policy Visions

– Five Year Plans – started in 1955 – intermittent – currently start of 11th

Five Year Plan (starts 2014)

– Poverty Reduction Strategy Papers – (Ministry of Finance in late 1990s). PRSP 2 formulated in mid 2000s - discontinued

– Vision 2010, Vision 2030 and now Vision 2025 (starts 2014)

• Previous Plans lacked sectoral integration and paid only lip service to agriculture– Agriculture is NOT seen as the engine of growth and employment

generation – inadequate focus on the growth linkages of agriculture.

• ONE SIZE FITS ALL APPROACH despite diverse resources, requirements and capacities at the subnational (Provincial and District) Levels where implementation has to take place.

• Absence of M&E – few lessons to replicate and upscale

The Development Policy Process in Pakistan

Where is the Policy Research??

Routine Resource Allocation mechanism under current resource constraints gives NO

priority to Agriculture

• Preparation of approach paper

• Formulation of technical working groups in all sectors

• Preparation of sectoral chapters by working groups and their presentation before Planning Commission

Consultations with all Federal Ministries for input

Consultations with all Provincial Govts. for input

Sent to all Federal Ministries and Dev. Partners for comments and input

Sent to all Provincial Govts.

for comments and inputt

Finance Division

(Resource Availability)

Economic Affairs Division

(Foreign aid availability)

Finalization of draft plan by Planning Commission and its presentation before President/Prime Minister

Submission to National Economic Council (NEC)

Circulation of approved plan to all Provincial Govts. And Federal Ministries for implementation

Transformation of plan into viable projects/programs

EconomicPlan

Requirements, programming and negotiations for external

economic assistance

External debt management

Inadequate Supply Driven Policy Research

Weak of Absent Linkages to Policy

Source: Birner and Malik (2010)

Some Key Agricultural Input Policy Issues

Seed

• High yield, disease free certified seed to meet huge yield gap

• Adherence to safe seed replacement cycles

• Certified and improved seed

• Unregulated burgeoning seed Industry with little or no R&D capacity – IPR issues

• Breeders Act, Seed Act, Seed Policy

• Public private-partnerships

Fertilizer

• Adverse impact on fertilizer use due to price hikes incl. gas

• Nutrient mix unbalanced– Farmers lack of awareness in

optimal use and traditional preference for nitrogenous

– Distorted relative prices– Limited or no soil testing

• Adulteration and Timely Availability

• Increasing subsidies since 2009-2010– Rs 500 per 50 kg potash– Rs 1400 per 50 kg on urea– Total Rs. 14.5 bln– Plus 50 % subsidy on price of

gas

Some Key Agricultural Input Policy Issues (contd.)

Farm Mechanization

• Traditional bias against mechanization as labor displacing etc.

• Credit and capital constraints

• 2011 estimate 0.9 hp per ha as against FAO recommendation of 1.4 hp

• Subsidy - elite capture and political misuse

• Developing market for mechanization services

Water • Fluctuating availability from surface and

ground water sources between 122 MAF in 1998 and 138 MAF in 2010

• Seasonal variation and climate change– Water reservoirs deplete to

minimal levels in December to February when water requirements for wheat otherwise a low delta crop are largest

• Policy Distortions and biases towards high delta crops – sugarcane, rice and maize

• System losses, water delivery efficiency and on farm water use efficiency

• Low O&M, political interference, theft and corruption

• Increasing non-farm water use• Pricing, distribution, maintenance and

water users• Rain fed Areas Issues

Some Key Agricultural Input Policy Issues (contd.)

Research and Extension

• Investment levels very low –private sector almost absent

• Inefficient use of available public resources – bulk on establishment charges –operational research only about 3 to 4 percent of total

• Inconsistent with national needs and not demand oriented

Farm Credit

• Essential for modernization

• Access to credit limited by collateral and information constraints and prone to political abuse

• Policy Distortions and inadequate market development

• Limited Geographical spread of the rural financial market – micro finance evidence mixed and

The Critical Constraints to Pakistan’s Agriculture Input Policy Reform… Numerous Strategies over the decades…Same Issues… Same Recommendations ……Little

Success

1. Extremely elaborate strategies but poor translation and lack of attention to detail and implementation capacity and processes

2. Inadequate Policy Research weak Extension and the Disconnect between the two

3. Lack of integration of agriculture (input) policy with overall policy reform and lack of integration of various inputs. Agriculture Policy Implementation based on residual resources available

4. One size fits all policy not conducive to meet diverse sub-national requirements

5. Modernizing Agriculture is not seen as an overall policy priority - Agriculture policy a means for accessing subsidies by influentals (elite capture)

6. Thin Markets and Weak Institutions – neglected in policy

7. Poor governance poor implementation and lack of accountability

8. Absence of M&E and lesson Learning - decade after decade same issues - same recommendations - no progress

The Pakistan Fertilizer and Seed Sector Studies being presented here Provide the Specific Details for the two subsectors!

Thank You So Much