Rising fertiliser prices

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Growers` concern over rising fertiliser prices

December 20, 2010
By Tahir Ali


THE dearth and rising prices of fertilisers could adversely impact cultivation of Rabi crops, especially wheat and vegetables in the province, say farmers in Khyber Pakhtunkhwa.

Low DAP and urea consumption, according to them, would lower wheat acreage and per acre yield. Growers have demanded of the government to withdraw general sales tax on fertilisers to bring down the prices and to restore the erstwhile public stores at districts level for easy availability of farm inputs.

According to Gul Nawaz Khattak, chief planning officer of provincial department of agriculture, the total off-take of urea and DAP for Rabi season is around 250,000 and 150,000 metric tons respectively.

The price of one bag of DAP has jumped by around 25 per cent while some other fertilisers have registered bigger increase. Haji Niamat Shah, vice-president of the Anjumen-i-Kashtkaran, Khyber Pakhtunkhwa, said the price of DAP has gone up to Rs3,300 from Rs2,600 per bag.

Consequently the farmers will have to bear an additional burden of over Rs2 billion on DAP alone. And if the average increase of Rs100 per bag in urea prices is taken into account, it will require an extra payment of Rs3 billion, he said.

He lamented that the farmers` community was hit by high prices and fake, substandard and under-weight varieties of fertilisers that were badly affecting agricultural productivity.

“Printed fertiliser bags of quality products are available in tribal areas and the unscrupulous fertiliser traders are stuffing them with fake fertilisers and selling them in the market, which is adversely affecting agricultural yield and harming farmers financially and damaging productivity of their land,” Shah said. “The government will have to ensure availability of quality fertilisers to the farmers. The role of public sector needs to be expanded to bring prices down and eliminate the role of fertiliser mafia which has been minting money. This is vital to save the money, time and hard work of farmers from going waste,” said Ghulam Hussain, a farmer.

Shah said the government should ponder as to why the commodity disappeared from the market when it was direly needed. “The fact is that the government has failed to check hoarding and smuggling and ensuring quality and weight of the commodity,” he said.

Prices of the commodity have registered manifold increases ever since the sector was deregulated, farmers say. They want regulation of the sector or some mechanism that could save farmers from artificial shortage and resultant hike in prices..

“Various mechanisms adopted for smooth supply of the commodities, like utility stores, MFSCs and private dealerships, have miserably failed. Therefore, there is a need to restore the old mechanism of governmental stores in the districts. Officials, farmers` representatives and other stake holders should sit together to work out a viable solution to the problem.

The agriculture department has sufficient staff, resources and capability to ensure timely availability of quality fertiliser. The private sector handles about 90 per cent of urea and 100 per cent of DAP. This equilibrium needs to be tilted on the public sector,” Shah argued.

Noor Rehman, another office-bearer of the AK, said village/union council- based old distribution is the only way to resolve the problem. “The province should also negotiate with fertiliser companies to devise a price mechanism for DAP in their respective domains as urged by the federal industries minister recently,” he added.

Khatak said under the Fertiliser Act, officials of the agriculture department were authorised to check and monitor the supply and quality of the commodity in the local market. “We conduct routine and monthly surprise visits throughout the province. If anyone is found guilty, first information report is lodged against him and he is arrested. If convicted, his dealership is cancelled and he is blacklisted for good,” he added. “Despite our demands and ban on export of fertiliser, 10,000 to 20,000 bags of DAP and other fertilisers are smuggled to Afghanistan. And more lamentable is the fact that while urea price is around Rs650 per bag there, it is being sold at Rs1000 per bag here in the province,” said a farmer.

Being a de-regulated industry, prices of fertilisers are determined by the forces of demand and supply. But farmers allege that while importers quickly pass on the increase in prices to consumers, it has been witnessed that farmers are mostly given little benefit for cut in international prices.

The government in November 2010 announced that total availability of urea and DAP fertilisers would be 3.4 million tons and 799,000 tons which would be sufficient to meet the local requirement and hence there was no need for imports. But then in first week of this month, it said, imports were needed.

The federal government will import 0.25 million tonnes of urea and 0.23MT of DAP but the stocks will not be available before March which will certainly cause shortage of the commodity in the market, leaving the farmers at the mercy of hoarders and profiteers.

National Fertiliser Marketing Limited`s total storage capacity is just 180,679 metric tons. It cannot import enough fertiliser for shortage of space. The government needs to augment the storage capacity besides opening its more bulk stores in central and southern parts of Khyber Pakhtunkhwa as there are only two such stores at present.

The private fertiliser companies should ensure a strict supervision of their dealer network. This, of course, should be done when the dealers are provided enough stock of the commodity.

New dams for agriculture

Level basin flood irrigation on wheat

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Water onservation

Pakistan needs a revamped water policy before it’s too late

By Tahir Ali

The prevalent drought has more forcefully reminded the policy makers in Pakistan what has been earlier established by this July’s devastating floods: that the country should build more water reservoirs to accommodate the rain/floods water sooner rather than later.

It has also underscored the need for utilising the waste-water resources for irrigation purposes to guard against the danger of having rain-fed areas without crops in case of drought as is being witnessed.

The devastating flash floods have inflicted huge losses of about $10bn to the national economy. But if we learn from this calamity and become vigilant to volatile climate hazards by taking some measures, the calamity will be turned into an opportunity for development and prosperity.

The situation is even dismal for Khyber Pakhtunkhwa where non-irrigated land accounts for over 50 percent of wheat acreage. The irrigated wheat area there is usually is around 0.8 million acres and the rain-fed area is over 1 MA.

With only a few days left in wheat sowing season, Khyber Pakhtunkhwa is likely to miss its wheat sowing target of around 1.8mn acres this year.

Gul Nawaz Khatak, the chief planning officer of ministry of agriculture in Khyber Pakhtunkhwa, said most of the wheat-specific southern districts like Laki Marwat, Tank, Bannu and Dera Ismail waited for rains, saying the rain-fed areas could have been cultivated had there been rain.

“Even if it rains till 20th of December, it will make sowing possible. Otherwise the area will be left without wheat this year. As of now only those areas in non-irrigated lands have gone under wheat cultivation that had some moisture in it. If there is no rain, wheat target will be affected by about 10 to 12 per cent,” he said.

This inability to sow wheat due to lack of water at the provincial and national level, means farmers’ poverty, debt cycle for them, food inflation and food security problems. But it will also have serious financial repercussions for the cash-strapped provincial and national kitties.

A loss of one million tons of wheat cost a whooping Rs24bn of exchequer. The province is expected to lose around 0.5 million tonnes and its woes would be further increased by this loss. Khyber Pakhtunkhwa has already sustained a loss of around Rs200bn for floods and another Rs300bn for militancy shocks.

Secretary irrigation Khyber Pakhtunkhwa Muhammad Ashfaq Khan said the irrigation sector has suffered a loss of Rs11bn in floods. “As international donors and the federal government has not provided us the funds for reconstruction so far, we have decided to suspend our annual development programme and diverted funds to reconstruction efforts,” he says.

“Khyber Pakhtunkhwa, for lack of infrastructure, is unable to utilise 3.28MAF of its share of water as per the 1991 accord. This is why new dams and canals are required in the province,” he adds.

An official said due to droughts the provincial seeds industry could sell only three of the target of six thousand tonnes seeds to farmers. “The situation is indeed very dismal this year. You know wheat can be sown till January but delay from December onward brings per hectare yield down considerably. The per hectare yield in the province already lower than rest of the country, it is not a good omen for the food deficient province,” he said.

He says the government would give around 1600 metric tonnes of the left over seeds to farmers free of cost now. The cost will be borne by a Kuwait based NGO.


“By giving this residue of seeds to farmers, not only the farmers will get relief but if utilised, its expected production will be around 42000 metric tonnes. This will help reduce the gap between the wheat target and actual acreage,” the official says.

The land under wheat cultivation in Khyber Pakhtunkhwa is 1/5th of the 2.75 million hectare total cultivable land in the province. This needs to be increased.

“The government must increase per acre yield, bring more land under cultivation and ensure mechanised farming and bigger land-holdings,” Shah says.

“This is why province badly needs the construction of promised but delayed/denied Chashma right bank canal’s lift scheme. This will irrigate 0.3MA of land. This will make the province food sufficient but it will also be in a position to export wheat,” Shah argues.

Khyber Pakhtunkhwa is dependent for 3/4th of its annual wheat requirements of 3.73 million tonnes on Pasco, Punjab’s government or imports.

Ghulam hussain, a farmer said first they faced shortage of seeds at the beginning of the sowing season and also DAP went out of the market. Later prices of fertilizers surged. How can we achieve the target when each and every input is scarce or costly,” he says.

“The climate change scenario was an established phenomenon for which the researchers and the government should try to introduce air/drought/ high temperature and excessive rainfall-resistant varieties that could resist the vagaries of the weather and yielded more grain,” Shah says. “The yield per hectare has reached to over 5000kg in China, but we still have about 2400kg per hectare in the country and still lower in the province,” he adds.


The provincial government has prepared detailed designs, feasibility study, pre-feasibility report of around 100 new small dams. The federal government should finance these and the Kurram Tangi dam, Munda dam and some other dams and rivers advocated by the provincial irrigation department. Reservoirs for rainwater should also be built. This is vital for Khyber pakhtunkhwa as 49% of cultivated area is rain-fed.

Low Sugarcane to mills

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Mills facing cane shortage

Dec 13 2010

By Tahir Ali

IT is not a good sight that the yard of Asia’s biggest sugar mill –the Premier Sugar Mill, Mardan— and roads surrounding it, that would have mile-long queue of cane-carrying trolleys and trucks a few years ago, has only a few of them. The mill is  getting a paltry supply of cane.

Officials at the PSM say they increased the price of cane and ensured prompt payment, expecting that the two measures would improve cane supply position to the mill but the growers did not respond.

They maintain that the PSM increased cane price from support price of Rs125 to Rs240 per 40kg to receive better supplies.

Masood Khan, cane manager at the PSM, said increase in cane price had not boosted supply of cane to the mill as expected. “Farmers wanted prompt payment and good returns on the crop. We have increased the price and are paying them within three days. But still the supply is not enough to run the mill.

He said: “We are running the mill intermittently for 8-10 hours a day or even after a break of a day so that enough stock is accumulated for crushing.”

“Our cost of production per kilo has increased to Rs75-78, which means sugar should be sold at Rs80-85 per kg. However, the prices are coming down, making the position of mills unstable,” he added.

According to him, less supply of cane means intermittent running of mills, which increases cost of production, especially in the event of higher prices to farmers, high wages offered to employees, burgeoning fuel prices and various taxes.

“Conversely, gur has no such taxes and burdens. Why won’t it compete with us? Its prices have increased tremendously and it is sold around Rs80-90 a kilo. To enable us to compete with it, we must be given subsidised fuel, power and relief in taxes. Or else gur making should be banned altogether,” he argued.

Haji Niamat Shah, senior vice president of Anjuman-e-Kashtkaran, Khyber Paktunkhwa, also said the government should announce a relief package and a rebate in taxes for Khyber Pakhtunkhwa sugar industry.

Abdur Rasheed, another official at the PSM, said the mill would daily crush around 100,000 maunds of cane five years ago but it was crushing only 20 per cent of the quantity these days.

Welcoming increase in cane price, Shah hoped farmers would grow more cane next year. Increased price would ensure the pledged and continuous crushing at the mills producing more sugar, save jobs of thousands of mill employees, who are laid-off when mills are closed, and help reduce prices of sugar in the country,” he said.

The new price would appeal farmers who make gur through rented gur-ganees. “But I think those with their own gur-ganees will still feel like making gur from their crop,” he opined.

“The new price may not improve cane supply to mills but it speaks volumes of the government’s indifference and lack of information on the ground situation. Look at the price fixed by the government and the one offered by the mills,” said a farmer.

The estimated production of sugarcane in Khyber Pakhtunkhwa is 1.3 million tons. It can produce up to 100,000 tons of sugar if farmers start bringing their crop to mills for crushing instead of making gur.

Ban on movement of gur to seven federally-administered tribal areas and their six provincial counter parts have caused a fall in its demand and as a result the prices have come down by about 20-30 per cent, but farmers are still going for it.

The gur-makers are alleged to have purchased standing crops from farmers and made advance payments to them for the gur they produce, according to a source. According to him, generator-run modern gur-ganees are consuming cane faster than in the past.

To get adequate supplies, the sugar millers will have to enter into contracts with farmers for purchasing their crop at fixed/better price, and a surety for prompt even advance payments before or after cultivation, but much earlier than harvesting.

There should also be a minimum price for certain fixed sugar-content, but farmers should receive a premium price for more sugar-content in their crop.

Investment in research for better varieties of sugarcane and improvement in per acre yield with better sugar recoveries is also required.

Pakistan is the sixth biggest sugarcane producer in the world but is ranks 15th both in cane and sugar yield.

Left in the lurch

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Left in the lurch?

Relief and reconstruction work has been ineffective due to corruption, shortage of funds, and skilled personnel

By Tahir Ali


Shortage of resources, capacity constraints, lack of commitment or flawed priorities on part of the government seem to be the main hurdles in starting the reconstruction phase for the flood affectees in the country, including Khyber Pakhtunkhwa.

Millions of people countrywide made homeless by the floods and living in camps and make-shift homes have been left to face the vagaries of weather as winter has set in. Feeling neglected and disappointed, many have started rebuilding their shelters temporarily.

According to World Bank and Asia Development Bank Damage Needs Assessment (DNA) report, around 1.7 million households have lost their homes worth $1.59 billion in floods in Khyber Pakhtunkhwa, Sindh, Punjab and Balochistan. If we take the low figure of 8 as an average household size, then around 13million people have lost their homes countrywide.

Floods inflicted a loss of around $10bn on Pakistan. Khyber-Pakhtunkhwa suffered $1.2 billion losses and requires $2.2 billion for flood reconstruction. Total reconstruction cost for all sectors is between $6.8 billion to $8.9 billion. The social sector, including the housing one, needs between $2.01bn $2.7bnn for the purpose.

The government plans to provide Rs100,000 to each flood-affected household for reconstruction of homes. An enormous Rs170bn and Rs30bn are required for the entire country and Khyber Pakhtunkhwa respectively for the purpose.

Reconstruction of homes can continue but only with the generous support of local entrepreneurs and international community as the challenge is greater than the resources at hand and the degree of determination shown by decision-makers.

A Pakistan army team recently reached to a family in a village near Peshawar alongwith building material when it was reported that the locals had started rebuilding their houses on self-help basis. The team also promised to help build houses of other people soon. But not all people are that lucky. Most are waiting for the much needed first or second tranche of Rs20,000 as house compensation given through Watan cards.

Various local and international non-governmental organisations (NGOs) have started building model housing schemes in the flood-hit zone but much more needs to be done by the government, the international community, the philanthropists and NGOs.

According to Adnan Khan, spokesman for Provincial Disaster Management Authority (PDMA) Khyber Pakhtunkhwa, the first home reconstruction tranche of Rs20,000 has been provided to 180,000 out of around 0.3mn households. “The flood affectees will get Rs20000 in the next installment too. But cheques for next tranche will be released as the PDMA receives money for the purpose,” he says.

The Khyber Pakhtunkhwa government has diverted Rs18bn this fiscal year for floods related expenditures but it still faces a shortfall of Rs107 billion for post-flood and militancy reconstruction projects during the next 18 months. Adnan says Khyber Pakhtunkhwa also needs Rs86 billion for Malakand reconstruction and rehabilitation and Rs234bn for post militancy reconstruction needs. “We need assistance from donors to provide the next installment of Rs20,000 to flood victims for construction of housing units,” Chief Minister Khyber Pakhtunkhwa, Amir Haider Khan Hoti, told the PDF meeting last month.

An official says on the condition of withholding his name that province have received nothing from the centre or the international community for the reconstruction phase as yet, making it difficult for it to start the phase in full swing. But with little fiscal gap available with the provincial government to allocate sufficient money in this head, the federal government and international community should come forward and provide the needed money.

Prolonged delay in the release of tranches for house reconstruction would waste the earlier money as people cannot be expected to keep the money for long. While the federal government has decided that the second installment of compensation would be paid under a unified formula, it cannot be justified as requirements and expenditures for building houses in the northern and southern parts of the country would not be the same.

Nepotism, political interference and corruption in the nomination of affectees for compensation have allegedly made verification (of affectees) difficult. Adnan, however, says, “The government has introduced complaint mechanism at the district level and anyone can contact local or provincial officials for the purpose.”

There are complaints that far off and militancy-prone areas have been neglected and the entire focus of the government and local and international NGOs has been on the easily accessible areas. Najamul Aleem Sayyed, who worked with a foreign NGO during floods in Nowshera, agreed that some areas like Mohib Banda were unbelievably the most favourite destinations of all aid agencies. “The problem is that relief agencies and the government departments have been concentrating on relief work at the easy-to-operate areas neglecting other areas,” he says. Zakhi Qabristan, Mughal Key, Mian Esa, Ali Muhammad and Meshaka are some of the areas whose residents claim they have been totally neglected.

Manzur Ahmad, a social worker from a worst affected area in Akbar Pura, is unhappy that his village had been totally neglected even though it lies at some distance from motorway.

“Our village was badly hit by floods. Nearly all homes were washed away. Our agriculture lands were damaged. But there is no support from the government and NGOs. There is no reconstruction. We still wait for issuance of Watan cards and house compensation. Provision of shelter is crucial at this stage. The people have built their homes temporality after they lost hope of any government action on the home rebuilding initiative,” he says.

Khalid Khan, district chief of Muslim Aid in Charsadda, says, of the 57,000 affected families in the city, 30,000 have been provided tents while the rest are going without them. “Shelter is the most urgent need at present. Livelihood restoration, quilts for women and children, and restoration of lands for farming are other vital needs. Our organisation intends to build a model village at Majoki where 55 families are still living in tents but have received little attention and relief support.”

“In this village a brave soul had saved 41 lives during floods before he was swept away by floods. His family has been given no financial support as yet,” Khan informs. The challenge is big but Pakistan has proven before that it can meet the challenge. In the reconstruction strategy of Kashmir earthquake, Rs175,000 were provided to the affected families in installments alongwith house designs and technical assistance. At the end of 2009, 95 percent of the destroyed houses were rebuilt with 97 percent of these according to the standards and hence safer.

But in the case of the 2008 Balochistan earthquake, the affectees were given one-time cash grant of Rs350,000 and Rs50,000 for completely and partially damaged houses respectively but without any technical assistance or required reconstruction standards. As a result, the rate and quality of reconstruction, according to UN-HABITAT engineers, is extremely poor there. The DNA also wants the reconstruction projects to be based on transparency, monitoring, and evaluation. While the Balochistan victims were given Rs350,000 for completely destroyed home, those in Khyber Pakhtunkhwa also deserve better package.

In most of the flood-hit areas, many people had built homes on lands near the rivers. Their lands have been eroded and they do not have the place to rebuild their homes. General Nadeem Ahmed, head of the National Disaster Management Authority, has “strong reservations” over the house reconstruction plan okayed by the government. The flood zoning policy must be strictly implemented. Construction of houses, hotels and shops near or on banks of the rivers should never be allowed.

The PDMA is supposed to deal with the crisis but it has only around 15 personnel in staff. At its present form, it is just a data collection, information dissemination, and coordination body. While it may suggest schemes, plans and strategies for reconstruction it has been kept out of the implementation and monitoring of these schemes. The result is obvious.

The PDMA should have offices in all tehsils and districts of the province. Its staff should also be increased commensurate with its responsibilities and functions. The badly-hit Malakand division inhabitants are in dire need of financial support as the area will soon become inaccessible for aid agencies. Relief and reconstruction work has been ineffective due to corruption, shortage of funds, resources, and personnel.

KP may miss wheat sowing target
DAWN December 6, 2010
By Tahir

Harvest of Wheat via combine

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WITH only a month left for wheat sowing, there are indications that Khyber Pakhtunkhwa may miss its target of 0.7 million hectares for this year.

The continued drought, failure to reclaim land in flood-hit areas, irregular water supply in canals and their closure next month for de-silting etc have made the target unachievable.

Due to three months of continued drought, most of the non-irrigated land in southern and central districts of the province, which account for around 55 per cent of the land under wheat cultivation, have not been brought under the plough.

“With canals to remain closed for repair from next month onward, there would be almost no water for the crops even in irrigated areas, reducing wheat yield in the province substantially,” officials and farmers say.

Khyber Pakhtunkhwa`s annual wheat target is 1.2 million tons and the actual production is around 0.7 million tons.

Farmers Ajmal Khan and Sajjad Ahmad in Laki Marwat said drought had badly affected wheat crop in the district. “Two-thirds of around 21,000 hectares under wheat cultivation in the district are rain-fed but there has been no rain. There is no canal network in the district. Lands are irrigated by tube-wells, but load-shedding, low voltage and increasing cost of oil and electricity has discouraged farmers to use it,” Ahmad said.

“Little wheat crop means food deficit, and food inflation. How will farmers pay their agricultural debts, continue farming and feed their families when they won`t be able to cultivate the crop on which they depend?” asked Khan.

Muhammad Ismail Jan, Director Seeds, Khyber Pakhtunkhwa, said the drought had also brought about failure of the provincial seeds industry to meet its target of 6,000 metric tons for the province.

“Around 3,000 tons of seed has been distributed so far. There is no market demand for seeds in wheat specific flood-hit areas either because of free seed distribution by local and international bodies and farmland damaged by floods which have not been reclaimed.

“The situation is very dismal this year. There is only one month left with the farmers to sow wheat. Wheat can be sown till January but delay from December onward brings per hectare yield down considerably. With the per hectare yield in the province already lower than rest of the country, it is, therefore, not a good omen for the food deficient province,” he said.

To cope with the problem, the government wants to give around 1,600 metric tons of the left over seeds to farmers free of cost now. The cost will be borne by a Kuwait-based NGO.

“By giving this residue seeds to farmers, not only they will get relief but this will cover around 35,000 acres in all and the expected production will be around 42,000 metric tons,” the official said.

The official said there was no shortage of the commodity but the demand was low, especially in the flood-affected areas.

“Khyber Pakhtunkhwa needs about 8,000 tons of seeds in all. The provincial seeds industry usually provides around 6,000 tons. But there is usually less demand as farmers mostly use their farm seeds.

Again, the land under wheat cultivation is on the decline due to its rampant use for commercial and residential purposes.

Wheat has also to compete with other crops like tobacco, canola and vegetables,” he added.

Farmers say that in peak sowing seasons, Khyber Pakhtunkhwa usually faces shortage of seed coupled with high prices. Absence of certified seeds at critical moments leaves farmers with no choice but to use substandard seeds obtained from the market. This explains the low yield per hectare..

“While the government wants to get relieved of the burden of left over seeds, the question arises why the process of free seeds distribution was delayed and why was the deal not made with the Kuwait NGO earlier?” a farmer Niamat Khan from Nowshera asked.

The land under wheat cultivation in Khyber Pakhtunkhwa is 1/5th of the 2.75 million hectare total cultivable land. This needs to be increased. “The government must strive to help increase yield, bring more land under cultivation and encourage mechanised farming and bigger land-holdings,” he said.

“To eradicate the problem of plenty or shortage of water in future, more water reservoirs will have to be built. Unless this is done, there can be no hope of any worthwhile development in the sector,” said a Mardan-based farmer.

Ban on Gur export

Farmers to resist ban on gur export

By Tahir Ali
Dawn Monday, 29, 2010 // <!–[CDATA[// –>

FARMERS in the Khyber Pakhtunkhwa particularly in the gur-producing Peshawar valley are angry over the ban imposed on the export of gur to Afghanistan and its supply to the tribal belt.

The ban on movement of gur to federally and provincially-administered tribal areas (Fata and Pata), according to them, would not only affect adversely the farmers but also expose the poor consumers in these areas to price-hike and create a sense of deprivation among them.

Both Murad Ali Khan, president of the Kissan Board, and Haji Nimat Shah, senior vice-president of the Anjuman-e-Kashtkaran KP, said it would worsen the plight of the majority of the growers in the province.

Khan said over 60 per cent farmers in KP who hoped to earn modest income from gur making has been denied the opportunity. “Farmers would never allow such unrealistic measures being taken at the behest of the powerful sugar mafia and resist it tooth and nail. We are in touch with gur dealers and commission agents to organise protests. We will first give the government a deadline to withdraw this decision and if it is not, then we will start agitation against the move,” he said.

According to him, the sugar mill owners with their power and clout in parliament and government have got the export of gur banned. “This conspiracy has been continuing since long but the previous regimes had rejected the mafia’s demand for the ban. This time round, the mafia has succeeded in its designs by threatening the government to close their mills if the export of gur was not banned. Their next target is to get moratorium on gur production for good,” he added.

“But we won’t allow them to do so because a large number of people and farmers depend on gur incomes. We will force the government to take the decision back,” he added.

Through such measures, people in the tribal areas, who are facing the worst effects of terrorism and extremism, are being exposed to price hike,” Shah said. “The government should restore sale and movement of gur to the tribal belt. By banning entry of gur to Fata and Pata, the government is bent upon pushing the people to extreme poverty,” he argued.

“Khyber Pakhtunkhwa has limited acreage while most of the growers are subsistence farmers living on the income earned from selling their yields or by-products. There are limited cash crops with sugarcane being the major one,” Shah added.

Gur is the main sweetener for the 60 per cent people in KP and Fata and Pata. It is exported to Afghanistan, Middle East and the Central Asian states where it is used as sweetener and for producing wine.

Estimated cane production in KP is around 1.3 million tons. Over half of the produce is used in making gur.

Though the government has banned gur export, allegedly a huge quantity of the commodity along with sugar is being smuggled to Afghan, Iran and other regional markets.

“It is surprising that the government has banned gur but has shut its eyes to the rampant smuggling of fertiliser, wheat flour, timber and live animals to Afghanistan and Iran, he alleged. Instead of banning gur export, the government should stop its smuggling,” Khan added.

A pur (80kg) of gur was being traded at Rs7,000-8,000 before the ban but now it has declined by around Rs2,000 per pur after the ban.

“Around 2,000 sacks of gur were being sent to the tribal belt daily which has been banned now. The prices are coming down, affecting a large number of farmers especially in the Peshawar valley where making gur is preferred,” he added.

Farmers say millers wanted ban on gur export so that they were left with no option but to take their crop to the mills, but this may not happen.

“The ban is uncalled for. If the millers start giving competitive returns to farmers for their crops, farmers would swarm at mills. The millers may not benefit much from the ban as farmers will certainly avoid sowing the crop in future as it becomes less rewarding,” said Khan.

According to a sugar industry source, gur manufacturing was causing a loss of about $70 million to sugar production and Rs500 million to revenue annually.

Writing off Pakistan’s foreign laons

Debt for development

Have we lost the opportunity to get a loan write-off?

By Tahir Ali

The News November 28,2010

Pakistan seems to have wasted another opportunity to get its huge and foreign debt written off in the aftermath of devastating flash floods. The destruction caused by the war on terror and the 2005 earthquake had also provided reason to do just that but the then Musharraf-led regime was not able to get a loan write-off.

Rebuilding the country requires huge funds. Foreign donors say about $10billion are needed for reconstruction of the country but Pakistani authorities speak of over $40 billions for the purpose. If funds desperately needed for reconstruction and poverty alleviation are used for debt repayments, the already precarious poverty situation in the country could become even worse.

Though the UN has made an appeal for funding the reconstruction process, promises of loans are bigger than pledges for grants. While there is little money available locally wit no hope for an increase in revenue in the near future, donor agencies are also giving little in cash, the call for a total and unconditional debt cancellation is the only way out for Pakistan to be able to reconstruct the devastated region.

Debt write-off will provide Pakistan the much needed fiscal space. International aid agencies Oxfam, ONE International, professionals, political parties, left wing activists and foreign dignitaries, therefore, have been calling for cancellation of all of Pakistan’s external loans by international finance institutions (IFIs) and lending countries.

On November 14, addressing the Pakistan Development Forum, interior minister Rehman Malik asked the international community to waive $50 billion loans of Pakistan assuring that the waived foreign debt will be utilised in the fight against terrorism.

He said Pakistan had sustained losses of $140 billion in its war against terror and the world should realise that this war was being fought to protect it from the ravages of terrorism and for global peace. Before him, Oxfam and ONE international urged Pakistan’s $56 billion debt be dropped for the destruction caused by floods and the massive costs of relief and reconstruction.

In its petition to International Monetary Fund’s managing director, ONE International said, “Please help freeze Pakistan’s debt to ensure the country’s poorest people are able to recover from the devastating floods.”

The government has restricted its internal borrowings to 10 percent of the previous year’s revenue collection and provincial borrowings at equivalent of six weeks’ expenditure of the previous year. But nothing of the sort has been done on the front of foreign debts.

France received more than 15 times, Japan more than five times, South Korea four times, and China three times money in debt payments from Pakistan this year as compared to their respective flood donations, Oxfam had calculated before the recent PDF meeting. Oxfam’s head of humanitarian campaigns Consuelo Lopez-Zuriaga had dubbed it madness and absurdity and urged that Pakistan’s debts should be written off so that reconstruction could be started in full swing.

Instead, addressing the PDF on November 15, federal finance minister Dr Abdul Hafeez Shaikh himself rubbished the idea and said that no wise person could demand debt write-off. He disowned the call for writing off over $58 billion Pakistan’s debt made by Rehman Malik, saying that asking for debt write-off was never an option before the government.

“Pakistan doesn’t want to become an international “pariah” by asking for debt write off. It is a grave issue with great consequences. This could negatively affect Pakistan’s sovereign credit rating and make it difficult for the country to raise money from the capital market (in future),” Dr Shaikh was quoted as saying.

He argued that most of the foreign debts were obtained from multilateral agencies like IMF, WB and ADB and Pakistan had made commitments to these institutions while taking the loans and being a sovereign nation Pakistan should fulfil its commitments.

Still, there are several laws, resolutions and international precedents that favour demands for a debt write-off. Natural calamities-like the one hitting Pakistan have given birth to the factor of “state of necessity”. Article 25 of the International Law Commission stipulates that in case of “actual threat or a prospective peril to a state’s essential interests, the state is excused for not performing an international obligation.”

A number of democratically elected governments — Argentine, Burkina Faso, Peru, Mexico, Paraguay, and Ecuador for example — have had refused debt payments on the basis of this rule. Pakistan can also decline to pay back its loans under this principle. According to a 1980 resolution by UN commission on international law, a state cannot be expected to close its schools, hospitals and universities, abandon public services to point of chaos, simply to have money to repay its foreign debts.

The IMF had cancelled all debt (US $ 268 million) of Haiti after the earthquake hit it earlier this year. The cancellation is given through the newly-established Post-Catastrophe Debt Relief Trust Fund, set up for this purpose. Pakistan hit by disaster can also resort to it.

Beginning in 1996, developed countries, under the Heavily Indebted Poor Country Initiative and the Multilateral Debt Relief Initiative, cancelled debt of $110 billion, $93 billion of which was in African countries. The countries agreed to channel their debt savings to poverty reduction. As a result, poverty reducing spending by HIPC-countries increased by the same amount by which their debt-service decreased. Success can be replicated in other countries like Pakistan where expenditure on health and education combined is less than two percent of the GDP.

Another argument that can be put forward is that all the foreign debts incurred by various regimes did not benefit the people of Pakistan. Argentine’ economy was badly hit by economic crisis after 2001. So its president announced the biggest unilateral suspension of foreign debt of more than $80b.

Pakistan’s current debt-to-GDP ratio is around 62 percent, exceeding the 60 percent limit set under the Fiscal Responsibility and Debt Limitation Act. Pakistan is fast approaching to the debt-to-GDP ratio of 80 percent, which according to WB is default stage. Pakistan’s external debt has doubled in the past four years alone and the government is currently spending more than four times as much per person on servicing external debt than on healthcare.

Latest loans from IMF ($7bn) WB ($1bn) and ADB ($2bn) will further increase Pakistan’s present foreign debt of $56bn. Its external debt will go up to $73bn in 2015-16, as debts that were rescheduled after 9/11 in return for Pakistan’s support in the war on terror are effective again. The ratio of debt-servicing will also jump up as a result. This may lead an already debt-trapped Pakistan to a worst economic crisis. It is currently paying on average over $3bn on debt-servicing per annum. It means payment of Rs710 million a day and Rs30mn every hour to lenders.

Pakistan’ inability to increase its direct taxes and improve upon its balance of trade and save money by adopting austerity measures and curtailing the burgeoning current expenditure has left it with no choice but to seek costlier foreign debts or over burden the existing tax-payers. The government has virtually eliminated subsidies that were offered on wheat flour, sugar and edible ghee, power and gas and other services and commodities inflicting heavy burdens on the household budgets countrywide.

The debtor country has also to hire costly consultants and import costlier machinery for the projects and other materials from the lender states, which reduces the net loans. It is said that almost 85 per cent of the US aid goes back to the US. While our governments are also to blame for the ever-increasing foreign debt, the IFIs and lender countries are also equally responsible for the catastrophic situation.

A debt audit commission should be established to make an inquiry into all foreign loans and their use. The government should restart a national self reliance scheme for self-sufficiency and getting rid of the debt burden. Once this debt cancellation or postponement is achieved, the money saved thereby should be used for reconstruction and poverty reduction.


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