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CORPORATE FARMING

The Potential of Pakistan Corporate Agriculture Farming


Abundant agricultural land
Total area

79.6 Mn Hectares (MH)

Cultivated area

22 MH

Irrigated

18 MH

Rainfed (Barani)

4 MH

Contribution to economy

26% to GDP

Employs 44% of labour force (16.35 Mn)

70% of exports (Agri-produce & processed products)

Natural Merits

4 seasons, tropical weather

Crop production throughout the year

Largest canal irrigation network

Vast tracts of land along Indus Basin - comprising 5 rivers

Centuries old farming culture

Amongst the lowest cost producers

Cost effective and hardworking agricultural manpower

Low cost irrigation water

Reasonable price of land

Farm to market road network

Competitive cost of inputs

Crops production

Wheat

21 Mn tons

Cotton

11 Mn bales

Rice

5 Mn tons

Sugarcane

50 Mn tons

Fruits/Vegetables

10 Mn tons

Fisheries & Livestock production

Fisheries potential (annual catch)

7.5 Mn tons

Buffaloes (Number)

23 Mn

Cattle (Number)

22 Mn

Sheep & Goats (Number)

75 Mn

Poultry (Number)

530 Mn

Country side

Traditional but simple culture

Inspiring music

Lively folk

Strategic location

Located in food deficit region:


Central Asian Republic (North)
Middle East (South)
Iran & Afghanistan (West)
Principal gateway to CARs
Strong historical & traditional links
Strong Potential

Comparative advantage in the region


Vast areas of cultivable waste land available
Strong potential for expansion of agriculture base
Corporate Agriculture Farming (CAF):
Objectives

Large local market increasing at 29% per year


Internationally competitive unit cost of production for all major crops, fruits &
vegetables
High quality agricultural products due to favorable resource base

Low transportation cost, and developed routes to Middle East, Iran, Afghanistan and
CARs
International Quality inputs available in country
Market driven polices. Least Government interventions
Investment Policy, Incentives & Opportunities:
Most Liberal Investment Policy:
CAF declared as an industry
100% foreign equity allowed
No minimum foreign investment
Remittance of capital, profits, dividends allowed
CAF will enjoy credit & other facilities
Local or foreign, private or public limited companies to invest in corporate farming
No ceiling on land holding
State land can be purchased, or leased for 50 years, and extendable for another 49
years
All banks and financial institutions will earmark separate credit share.

Attractive Fiscal Incentives:

0% Customs duty on import of agricultural machinery, equipment and implements


(not manufactured locally) New or used
Exemption of duty on transfer of land for CAF (under consideration)
Tax relief: First Year Allowance @ 75% of PME cost
In Addition:
Provincial Agriculture Income Tax (AIT) laws provide for proportionate liability of
corporate shareholders
Dividends from corporate agricultural farms (for non-industrial activities) not subject
to tax
Farm income given more favorable treatment than non-farm corporate incomes
because of the risk/uncertainty associated with farming
Existing definitions of farming activity, as distinct from processing/industrial activity,
continue to be maintained.
Investment Opportunities:

Land development/reclamation of barren, desert and hilly land for agriculture purpose
and crops farming
Reclamation of water front areas or creeks
Crops, fruits, vegetables, flowers farming/integrated agriculture (cultivation and
processing of crops)
Modernization and development of irrigation facilities and water management
Plantation
Forestry
Horticulture

Dairy farming
Livestock farming, breeding and small ruminants (sheep, goat)
Production of quality seeds
Fruits, Vegetables & flowers grading, processing, packaging, preservation
Seafood (farming/fishing, processing and preservation of fish, shrimps and other
marine products)
Agri-produce storage facilities (separate package)
Marketing/Export of Agri-produce (separate package)
Cool Chains (separate package)

PAKISTAN: AGRICULTURE POTENTIAL YET TO BE EXPLOITED


Many experts believe that the 20 percent of GDP contributed by agriculture is grossly
undervalued keeping in view the size of wheat, rice, sugarcane, cotton, minor crops, fruits,
vegetables, and edible oil produced in the country. If one adds to this livestock and dairy
products, the contribution of the sector should not be less than 30 percent.
This disparity in numbers is due to lack of documentation. With more focus the yield of all
the produce can be doubled without increasing area under cultivation. Without mincing words
it may be said that Pakistan has not been able to exploit the real potential of agriculture
sector.
Those who could be held responsible for this dismal condition are:
1) policy makers, 2) PARC, 3) irrigation departments, 4) seed, pesticide and insecticide
marketing companies and above 5) all poor literacy level of farmers. Added to these are
absentee landlords and fragmentation of landholding.
The yield achieved in Pakistan is far lower than the yield achieved in India. The factors
responsible for lower yield include: 1) use of uncertified and poor quality seeds, 2)
inadequate availability of irrigation water especially to the farms located at the tail end of
water courses, 3) rising cost of fertilizers, 4) improper crop management and 5) sale of
adulterated pesticides and insecticides. All these along with drought and floods further
increase the sufferings of farmers.

Fertilizer manufacturers have played a key role in promoting farming in the country.
Pakistans cultivable land suffers from acute shortage of nutrient contents, particularly
nitrogenous materials. The first urea unit in the country was established by Esso with an
installed capacity of 178,000 tons per annum that commenced operation in 1967. The special
focus of all the successive governments helped in expanding capacity that has grown to the
current 7 million tons per annum.
Farmers as well as the country are facing loss due to huge post-harvest losses. Farmers dont
get the right proceed of their produce and country is deprived of foreign exchange it can earn
by exporting the quantities that go stale.
Despite being fully aware, successive governments have failed in containing these losses as
they were not able to facilitate construction of required infrastructure, i.e. farm to market
roads, efficient transport and storage facilities.
The gravity of situation can be best understood by the fact that at an average, the country
produces 40 million tons of food grains but the storage capacity is a mere 6 million tons.
Since the produce is kept in the open, a large quantity goes stale during monsoon, whereas a
substantial quantity is eaten away by pests like rats.

Keeping in mind some of the reasons for post-harvest losses stated earlier, it may also be said
with full conviction that most of the factors contributing to these losses are controllable. Due
to inadequate availability of finances, lack of farm to market roads, poor transportation,
obsolete warehouses and above all heavy dependence on middleman, often the farmers are
helpless.
Though, State Bank of Pakistan fixed Rs500 billion lending target for the farmers, the amount
is still paltry keeping in view the requirements of farmers. They are still forced to borrow
from informal lenders charging as high as 36 percent per annum interest rate.
In Pakistan, farmers can be divided into two distinct categories: feudal lords and harees
(landless farmers). Feudal lords are the key beneficiaries of all the government policies.
Feudal lords not only get loans on top priority but their produce is also bought first.

The ultimate losers are small farmers, who have no voice or representation at any forum.
Though, the amount of loans disbursed among the farmers has increased manifold, bulk of it
still goes to feudal lords because small farmers have no ownership of land, they are just the
workers. Despite various land reforms papers of ownership of land are in the custody of
feudal lords.
For ages the government has remained the biggest buyer of wheat, current production is
around 25 million tons. Therefore, the private sector never thought about construction of
warehouses. Though, the export of rice is in the hands of private sector and all the flour mills
operate in the private sector these commodities are packed in jute/polypropylene bags and
stored in conventional hut type warehouses. Very few modern silos have been constructed.
And those too were built by individuals. Farmers are reluctant in keeping their produce at
warehouses operated by the private sector. Entrepreneurs are shy because they fear that some
bandits would pilfer the commodities stored in the warehouses. To sum-up the situation in a
few words, there hardly exists collateral management companies.
Despite the best efforts by the central bank and support by the multilateral institutions, little
success has been achieved as yet. Experts apprehend that it will take another five years to
make this dream come true.
Farmer advisory service is not available. Some commercial programs are broadcasted on
radio and television channels. The ultimate purpose of these programs is to promote the
goods marketed/manufactured by the specific entities.

Experts are of the opinion that more of these programs should be aired by the government,
which is the ultimate beneficiary. In case there is a shortfall of any commodity the
government has to spend huge amounts in foreign exchange on import and also bear the
incidental charges (transportation and distribution).
It is encouraging that the amount being disbursed among the farmers has increased
substantially over the years, and Rs500 billion target was fixed for 2014-15 financial year. In
absolute terms the growth may look significant but keeping in view the size and importance
of the agriculture sector, it is still a minuscule amount.

The amount must be doubled over the next five years and specific allocations needs to be
made for infrastructure projects. The time has come for the government to go for another land
reform for the consolidation of smaller holdings. One of the proposals is to allow corporate
farming that will facilitate higher borrowing for undertaking mechanized farming. There is
no doubt that yield of small farms is low because growers cant afford to use quality seeds
and apply balanced doze of nutrients and pesticides.
It is encouraging that SBP has embarked upon Warehouse Receipt Financing program.
However, it must be kept in mind that it is a long drawn process. First, warehouses on
international standards have to be constructed. Second, farmers have to be convinced to store
their produce at these warehouses.
Thirdly, proper collateral management companies have to be established and made fully
functional. The only concern is that unless quality warehouses and collateral management
companies are established achieving the dream of Warehouse Receipt Financing will remain a
far cry.