Pakistan is Running Out of Time to Fix its Agri-Sector
More than 61 percent of Pakistan’s people reside in rural areas and are largely dependent on crop and livestock productions. In fact close to 40 percent of Pakistan’s labour force is still engaged in agriculture. Overall, two out of three employed women work in the agri-food sector. Despite this overwhelming dependence on the agri sector, Pakistan’s wheat productivity is stagnating, and agri-food production is poorly diversified, despite significant agro-ecological potential.
Today Pakistan is facing the worst food crisis in its history, with flour becoming increasingly scarce. Last year more than a dozen people, including women, were crushed to death while trying to get free flour from government distribution outlets in Pakistan’s Punjab province.[1]
From a small exporter, Pakistan has become a net importer of wheat as it has been importing nearly 3m tonnes of grain every year to meet national needs for the last few years. Imports of pulses and vegetable oils have also increased, and the diverse and vibrant livestock production potential is ignored.
Pakistan’s current agri-food policy framework is heavily distortionary, and public spending is costly and not benefiting small land-holding farmers where the highest substantive growth potential lies.
Lack of proper storage facilities also result in loss of additional food grains whenever heavy rains and floods hit the country. About 80 percent of Pakistani farmers grow wheat every year. A majority of them have landholdings of up to five hectares. Unfortunately, rains hurting the crop at harvest time has become a regular problem for wheat farmers in Pakistan. In the event of torrential rains, thousands of tonnes of grains stored in old-fashioned mud-houses in farm fields and in large earthen barrels lying in courtyards of farmers’ houses are also either washed away or get wet and infested with pests.
Year after year, media reports indicate that wheat stocks in the warehouses of the Pakistan Agricultural Storage and Services Corporation (Passco) and provincial food departments are damaged by heavy rains.Wheat stocks at PASSCO warehouses and with the provincial food departments were also partly damaged because in some cases the stocks were lying in the open and, in other cases, storage facilities were exposed to heavy rains and seeping of flood waters.
Poor agricultural storage infrastructure, resulting in post-harvest losses, continues to take its toll on food security and depresses exports. Farmers face postharvest grain storage problems throughout the country because of traditional methods used for seed storage. Post-harvest losses of grains range between 15-18 pc and that of fruits and vegetables between 25-40pc. Currently storage facilities in the private sector are mostly outdated. The result is a huge gap between the public sector’s total storage capacity and the actual production of grains and fruits and vegetables.
Pakistan’s agri-food sector also underperforms when assessed against its own potential, with yields of major crops 1.5 to 4.2 times below field potential. Its use of water in agriculture puts it among the 10 percent worst performing countries on agricultural water productivity. The average wheat yields in Pakistan are almost half of those in China and 15 percent lower than in India. Cotton yields in China and Bangladesh are 2.3 and 1.7 times higher than those of Pakistan, respectively. Currently wheat yield for Pakistan stands at below 31 maund per acre. Compare this to the 58 maund per acre, which is the average output in India
Assuming an overall 15pc loss in cereals, it is estimated that Pakistan is annually losing as much as 5.6m tonnes of cereals worth $1.7 billion and 2.1m hectares of cultivated land resources.
According to a report of the Competition Commission of Pakistan (CCP) there is a huge gap between the public sector’s storage capacity and its actual needs, and estimates that there is room for developing proper storage facilities for 16 MMTs of wheat, 4.4 MMTs of rice, 4 MMTs of maize, and 3 MMTs of potatoes. The report states that Pakistan is facing grain storage problems at a large scale throughout the country, due to either traditional methods of seed storage or the shortage of commercial grain storages or their management. The shortage of grain storage facilities results in huge post-harvest losses that range from 15pc to 35pc and affects national agricultural output. Similarly, in case of excess production in crops such as onion, tomato and potato, farmers do not have the storage facilities and are compelled to sell their produce at a low price to the village dealers. In the worst-case scenario, they end up wasting the whole crop due to higher charges incurred for transporting the crop to mandis.
The procurement and storage of wheat by the government has resulted in crowding out of the private sector from the storage industry. The production, consumption and stock keeping of wheat in Pakistan is in such a pattern that it does not leave room for the private sector storage industry.
A Competition Assessment Study of Wheat Flour Industry by the CCP states that, “the present procurement of wheat and its subsequent distribution is expensive and inefficient for a number of reasons. These include: below cost release of wheat to the flour mills, the element of non-targeted subsidy is expensive by definition. The burden on the fiscal resources increase especially when international wheat price is higher, making imports costly. The benefit of the subsidy is limited to the millers and the traders only. This important link in the value chain is occupied by the public sector, which procures about 20 per cent of the wheat crop. Over the years, excess capacity has developed to get benefit from the cheap wheat releases from the government.”[2]
The CCP has recommended the State Bank of Pakistan (SBP) to encourage and incentivise private commercial banks to increase lending for storage facilities of agricultural commodities.
Low yields, lack of research, land fragmentation, poor international wheat trade policies, low mechanisation, high harvest losses, lack of proper storage, etc. are all major agri-economic issues which have failed to find consideration among policy makers in Pakistan. At a time when climate change is projected to decrease yields for some crops by 14 to 50 percent and increase demand for irrigation water by 10 to 25 billion cubic metres (BCM), Pakistan’s policy interventions are pushing the agri-food production system beyond a sustainable use of natural resources.
With the population likely to double by 2050, and volatility becoming a regular feature of international commodity markets, Pakistan’s increasing dependence on imports should be a cause of serious concern to policymakers. Additionally, its domestic and international wheat trade remains inflexible. From on-farm and off-farm crop losses through improved harvesting, bulk handling and storage in modern silos, none of the potentials have received due consideration from the unsteady polity in Pakistan. With large numbers of people facing moderate to severe hunger, and food imports soaring to nearly $10bn Pakistan is already running out of time to fix its farm sector in general and its wheat economy in particular.
[1] Unprecedented shortage of wheat may lead to anarchy in Pakistan – The Economic Times (indiatimes.com) https://economictimes.indiatimes.com/news/international/world-news/unprecedented-shortage-of-wheat-may-lead-to-anarchy-in-pakistan/articleshow/99870328.cms?from=mdr
[2] Competition Assessment Study of Wheat Flour Industry (cc.gov.pk)
