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October 20, 2020

Real solutions

Opinion

October 20, 2020

There appears to be a certain despondency with reference to our ability as a country to tame food prices. This abnormal rise in prices comes at a time when people’s incomes have been adversely impacted by a contracting economy and a loss of livelihood worsened by the Covid-19 pandemic.

For the vulnerable, the low-income earners and to some extent the middle-income earners this is no less than a double whammy. Millions of households are feeling the pinch. Higher food prices erode the savings of the low-income earners kept for a brighter future or simply retirement, as a larger proportion of their earnings is spent on living expenses.

A number of countries moved from a just-in-time management of food items to building food reserves in their country, fearing disruptions in supply chains during the Covid-19 environment. Authorities in Pakistan could have preempted the same with more farsightedness of keeping extra reserves of essentials, especially when shortage of some key crops was a certainty. In the short run, ensuring adequate supplies from abroad can help stabilize prices of wheat, sugar, onions and tomatoes. However, managing the elevated levels of prices of essentials on a sustained basis requires a deeper correction of polices, regulations and incentives. The idea of this piece is to divert attention on more fundamental issues.

Good intentions only take us so far. Good management of any issue, and one of this criticality, requires the ability to conduct sound diagnostics and a thorough analysis of data. Our first constraint, and one which is likely perpetuating shortage of crops, is the scarcity and reliability of available demand and supply data. Sound decisions require evidence and we have a long way to go to develop reliable crop data in the country and put it together.

Yet we must be humbled when we realize estimates on agriculture yields of four key crops in the country are unacceptably dismal. Rice production averages mere 2.7 tons per hectare in Pakistan compared to a world best of 9.2 – a hefty 71 percent lower productivity. Wheat production averages 3.1 tons per hectare compared to a world best of 8.1 – a substantive 62 percent lower productivity. Sugarcane production averages 63.4 tons per hectare compared to a world best of 125.1 – a notable 49 percent lower productivity. Maize production averages 4.1 tons per hectare compared to a world best of 11.1 – a distinct 59 percent lower productivity.

The country’s most critical crop for exports and growth prospects is cotton. Productivity estimates for cotton are equally discomforting, with a low yield of 2.5 tons per hectare compared to a world best of 4.8 – a sizeable lower productivity of 52 percent. One is further intrigued that a Sahiwal cow produces an average of 6.17 liters of milk a day compared to Holstein Friesian of Australia producing a whopping 27 litres.

Fundamentally, we must ponder: do we have a strategy at work to improve the agriculture sector’s productivity? What are the fundamentals of Pakistan’s agriculture productivity strategy? The significance of this ‘productivity query’ is a lifeline for Pakistan’s agriculture economy as countries with a well-defined productivity framework alone can lower the cost of production of crops in the end.

The second string of related queries can help us glide out of a lingering stalemate. So, we may ask: Do we have a supply chain which is efficient for point-to-point delivery? An efficient supply chain of carrying goods requires adequate warehousing facilities and cold chains set ups. Again: a cursory look at an estimated wastage of 30 percent of perishables paints a rather suboptimal supply chain story.

The third set of queries relates to the use of a precious natural resource which in coming decades has the probability of putting Pakistan at risk of being characterized as a water scarce country. Water wastage is simply unaffordable and yet our canal intake of 104 million acre-feet (MAF) and outflow of 58 MAF horrifies us. Forty-four percent wastage of water, year after year, costs us $23 billion annually. Yet one cannot count the number of times one has heard of projects of canal lining in one’s lifetime.

In a post-Covid era, there is an evolving thinking about remodeling efficiency and self-sustenance, which poses new queries. Have we created an agriculture goods’ market in the country? Is it viable to keep fiddling with import tariffs? Does the unpredictable closure or opening of export and import windows help or hurt? Have we looked beyond traditional sectors to develop our fisheries or food processing sector to add value to our agri-produce? Have we done enough to control illegal exports from the country? The answer to a number of these queries is unfortunately a less than optimal performance. It should however make us more than concerned to take our attention level to red.

The structural issues left unhandled on our part are unlikely to be solved through temporary administrative measures when the problem is productivity, efficiency, supply chain and market creation. Of course, inculcating modern knowledge to our farming community will by far trump all other efforts.

The sooner we get into tackling fundamental issues in the agriculture sector, the sooner we will ensure price stability. It is indeed a challenging picture by any stretch of imagination. Let us untangle the agriculture economy from the clutches of inadequate research. Homegrown structural shock therapy can invigorate the agriculture sector with a share of 20 percent in GDP and break the mould of rising prices in the medium term.

The writer is former advisor, Ministry of Finance, Government of Pakistan.

Email: [email protected]

Twitter: @KhaqanNajeeb