Tobacco pricing process initiated in KP

Tobacco pricing process initiated

THE Pakistan Tobacco Board has started the process for determining cost of production and the price of tobacco for the year 2013.

“The representatives of tobacco growers, dealers and companies had a meeting with the PTB officials last week to discuss issues in pricing for the next tobacco season. Hopefully, the cost of production (CoP) would be acceptable to all stakeholders this year,” an official of the PTB said.

“Tobacco CoP and subsequently its weighted average price — for targeted purchase by companies, and minimum price for surplus tobacco above the target— are determined by a CoP committee with input from representatives of tobacco companies, PTB, Agriculture Policy Institute, and tobacco growers and dealers. After clearance by the PTB members, it is submitted to ministry of commerce, and the federal crop commissioner notifies the new prices,” he added.

Tobacco prices are increased every year as per the law governing the crop. The minimum price was fixed at Rs117/kg last year but growers rejected it. Later a committee headed by the director general of the National Agriculture Research Council Dr Sharif recommended a price of Rs183/kg. The PTB initially resisted this recommendation but finally revised the minimum price to Rs121/kg. Tobacco companies, however, paid up to Rs150, according to the official, and Rs137, according to growers. Private tobacco dealers and middlemen offered a price of Rs150-170/kg.

But growers in Swabi, which accounts for around 38 per cent of Virginia production, and also other areas say recommendations of Dr Sharif committee must be implemented or else they would boycott the crop.

Liaqat Yousafzai, general secretary of Kashtkar Coordination Council (KCD), said the KCD will wait till end of November when wheat sowing starts or seedbeds of tobacco are prepared for subsequent plantation in fields.

“In case the PTB persists with its opposition to implement the Dr Sharif report, we will go for complete boycott of tobacco like we did in 2007. We are distributing affidavits amongst the growers and they are being signed. As an alternative, as cereal crops aren’t economically feasible, growers will either go for opium or for vegetable cultivation,” he added.

Azam Khan, KCD president said the KCD had asked that the interviews must be arranged in government offices, farm services centres or hujrahs of the farmers.“When the CoP interviews are organised at the depots of tobacco companies, the farmers, who are mostly illiterate, get exploited at the hands of companies with the officials conniving with them. They easily get their approval by crowding out growers.

Unfortunately, the process continues in the same way,” he adds.

“When tobacco companies are not ready to allow any role to growers for determining the CoP of cigarette which they produce and farmers buy as customers, why do they participate in the process of tobacco CoP determination?,” he asked.

The role of middlemen has increased considerably in tobacco deals. Legally, tobacco companies cannot purchase tobacco from growers without purchase agreements and the purchase by middlemen, according to Mr Khan, is ‘illegal.’

“Around 10-20 per cent of tobacco purchases is made through middlemen. The private buyers are usually agents of small tobacco companies. The ‘illegal’ purchase deals benefit both farmers and companies. The grower gets good price. This year they sold their tobacco even at Rs180/kg. The companies, through the undocumented deals, evade taxes worth billions of rupees. We have time and again brought this informal trade to the notice of PTB but to no avail. Vis-à-vis private dealers, farmers only benefit when there is surplus production or companies stop purchase,” he added.

Yousafzai lamented that while the companies paid up to Rs180/kg to middlemen in the underhand deals, they were not prepared to increase the price in direct legal deals with growers.

“Middlemen and companies are making huge profits but cause huge tax loss to national exchequer. Obviously when a small company that has authorised quota of, say, 0.35mn kg but buys much more tobacco, it will benefit enormously,” he says.

To a question, he said in 1990 multinationals squeezed the small local companies. “Since then the latter have become the brokers of the MNCs. They are working separately but act as a cartel. They meet regularly every week during the tobacco season and decide together their line of action,” he said.

When asked why farmers don’t prefer to sell tobacco to middlemen when they offer good prices, he said farmers avoided middlemen because of trust deficit.

“If middlemen offer cash payment, farmers will never go to companies but it’s not the case quite often. Vouchers given by middlemen in many cases have bounced back. Hence, farmers prefer for purchase agreements with companies whose voucher is deemed as cash,” he said.

The PTB official said that the federal government, the PTB and the excise department conduct surprise raids on tobacco purchase centres to check ‘illegal’ sale of tobacco and fine the culprits.

“The government has also levied Rs10/kg cess on tobacco dealers to discourage this trend. But this tax cannot be charged from growers,” he added.

The official said after new prices are announced next month, farmers should enter into contracts with tobacco companies before cultivation of tobacco as companies will buy tobacco only from contractual farmers.

No to agri-engineering

No to agri-engineering?
Investment in latest technologies used in the 
agriculture sector can substantially increase the produce in KP
By Tahir Ali

The engineering sub-sector of agriculture in Khyber Pakhtunkhwa is faced with various snags which are hindering farm mechanisation in the province.

A senior official of the Agriculture Engineering Department (AED) said that meagre funds allocations, fragmentation of land holding by division, higher rates of agricultural machinery in the market, lack of awareness in farmers, policy blues and poor control on inflation and machinery prices have checked farmers from adopting farm mechanisation.

Farmers, however, also say that government’s indifference, low annual funds utilisation ratio, lack of coordination between the public and private sector and illiteracy and poverty of farmers and shortage of machinery pools, staff and offices at the grassroot level are rendering farm mechanisation a distant dream.

Though AED’s share in the budget has been increased to 0.38 percent of total provincial ADP this year from 0.19 percent in last year with its allocation jumping to Rs0.37bn this year from Rs0.16bn in last fiscal, it’s still way short of the requirements of the sector.

With present meagre allocations, agriculture mechanisation is impossible. While the government is either disinclined or incapable to give the required resources to the department, the private sector too has neglected the vital sector in its investment priorities.

Low priorities of investment in agriculture sector both on part of the government and farmers have led to a perpetual state of subsistence farming.

The AED needs plenty of bulldozers to prepare more soil for cultivation as the already scarce under cultivation land in KP is fast decreasing for urbanisation and soil erosion.

For this sufficient funds are required. But the provincial government continues to allocate meagre funds to the vital sector. Donor agencies, therefore, should come forward and help provide the machinery.

The AED was disbanded in the province in the Musharraf regime and its bulldozers, etc, were handed over to the department of Agriculture Extension. “The AED was reinstated a few years ago. It got back its bulldozers but in pathetic condition”, said an official who didn’t want to be named.

“The department is utilising over 22 years’ old outlived machinery that needs immediate replacement. We have only 30 bulldozers in workable condition while another 15 are non-functional, though repairable. There are 7 machinery stores in KP, one each at divisional level and most districts of the province have no such facility.

And the machinery there is outdated, not replaced since 1992. The federal government had in 2009 promised to provide 100 bulldozers to the province under a project but the promise wasn’t met,” he added. 

Even today, only 9 off the 25 districts in KP have seeds grading plants and the rest still remain deprived of these facilities.

According to the official, the government will procure 25 bulldozers this year for reclamation of land in KP. “Its tender was floated last year but no responsive parties turned up. Tenders are now being issued again and bulldozers will be in our hands at the end of this fiscal year hopefully. These will help reclaim 10000 hectares of land annually.”

Only about 20 per cent farmers use modern agriculture technology. This is because either most have no money to buy and, if they have, no knowledge or inclination to use the modern farming techniques and services.

But the official said the current year ADP has several good schemes for the sector. “The government will also install 3 power winches which will be utilised for installation of tube wells. Besides, the construction of agriculture engineering workshop in Mardan will also be completed. Work on the installation of 500 dug wells (2009-12) in water scarce areas of KP will hopefully complete by the end of this fiscal year. Another project for small farmers land development worth Rs100mn also continues,” he added.

According to the ADP document, only Rs15mn could be spent by June last on the land development scheme and the throw forward amount will be Rs69mn beyond this fiscal year.

Low funds utilisation and delay in completion of the projects is another problem. In all, Rs1.19bn of total agriculture ADP of Rs1.35bn could be utilized last fiscal. Most of the schemes of the AED from last fiscal were throw-forwarded to this year.

For example the installation of dug wells began in 2009 but still continues. Similarly, the land development scheme was launched in 2010 but is far from completion as yet. The delay increases the cost of the projects besides depriving the farmers of the benefits of the projects.

Insufficient staff is yet another problem. The number of officials of the department, according to the official, was 1500 a decade ago which has decreased since then as different offices and posts were given up in downsising initiative.

AED has great significance as it provides machinery to farmers for reclamation of cultivable wasteland and addition of cultivable land that enhances agricultural produce. It also helps exploit the surface and sub-surface water resources for irrigation by use of machinery. It also provides free of cost counselling services on the farm mechanisation related problems. And it intermittently helps the government in calamities like earth-quake and floods, etc, by offering the heavy machinery lying in its machinery pool.

According to an estimate, each year 0.1mh of irrigated and 0.28mh sof rain-fed lands is feared lost to soil erosion in KP, FATA and PATA. Another 3.9mh of non-arable land is also threatened by it.

Lands in rain-fed areas in southern parts of the province, Charsadda, Mardan and most of those in the hilly areas of Dir, Swat and Chitral are threatened by erosion, especially where there are little vegetations, forests or crop cover.

Agriculture worldwide has undergone great changes and various technologies are used for ploughing the fields and sowing, harvesting and packing crops but farmers in many parts of KP are still seen ploughing their fields with bullocks and hand-harvesting is widespread, resulting in delays and losses.

Mechanised farming can increase per acre yield but small landholding in the province is the hurdle. The government could solve this problem by importing or evolving miniature and using laser technology for the purpose.

Zahir Khan, a farmer from Peshawar, said that the provincial government should procure agricultural machinery and provide it to the farming community on subsidised rates across the province. It must purchase bulldozers in large numbers and open machinery pools in the district and tehsil level with a transparent monitoring mechanism in place to ensure merit-based provision to the needy farmers.”

“These machinery pools could be opened on the basis of public private partnership and could be extended to the grassroot levels. These machinery pools have long been promised in several agriculture policies promulgated by the government. The government also should streamline the laser technology for land levelling in the province,” he added.

little agriculture tax or uneven tax ratio

Uneven tax ratio
Computerisation of land record in Peshawar and other districts is the need of the hour

By Tahir Ali

Though agriculture accounts for nearly a quarter of Pakistan’s and Khyber Pakhtunkhwa’s gross domestic product, the collection of taxes from the sector has been negligible — just 0.11 per cent of KP provincial revenue receipts (PORs) last year.

Revenue is collected from agriculture in KP through some direct taxes -Land Revenue (water tax or Abiana), agriculture income tax (AIT) and Land tax (LT) –and non tax heads (user charges).

KP achieved the AIT/LT target of Rs21mn last fiscal and target for this year is Rs22mn. With a collection of Rs915mn in 2011, Land Revenue (LR) or water tax, one of the major direct taxes in KP, is the second biggest single contributor to provincial kitty after motor vehicle tax.

Last fiscal, agriculture and its related sectors also accounted for 2.6 per cent of the total Rs6.34bn non-tax provincial revenues.

Taxes from AIT were Rs19.7mn in 2007 which came down to Rs17.3mn in 2008 and to Rs15.7mn in 2009 but rose to Rs17.5mn in 2010.

The budget whitepaper informs that AIT’s share was just 0.11 per cent in PORs of Rs18.91bn and 1.5 per cent in the direct taxes of Rs1.4bn in last fiscal year. AIT’s share in PORs has been on the decline as it was 1.2 per cent in 2004-05 which came down to 0.41 per cent in 2005 and 2006 and to 0.37, 0.31, 0.24 and 0.19 per cent in the next four years.

AIT/LT are collected by the Revenue and Estates department through the patwaris while Land Revenue (LR) is collected by the irrigation department from the farmers in return for the irrigation water provided to them from canals, public tube-wells or other sources.

Under the 2001 ordinance, AIT is collected from the owner, mortgagee or lessee or the tenants and levied on income from ‘cultivated land — the net area sown, actually matured and harvested during a tax year, regardless of the number of crops raised, including area under matured orchards.

There is no exemption for the AIT and LR. However, 5 acres or less of agriculture land under crops or orchards was earlier exempted from LT in 2005. This limit has recently been increased to 12.5 acres.

Under the law, AIT would be 5 per cent if taxable income is less than Rs0.1mn. And if the income exceeds          Rs0.1mn but not Rs0.2mn, AIT would be Rs5000 plus 7.5 per cent of the amount exceeding Rs0.1mn. If the income is over Rs0.2mn but less than Rs0.3mn AIT would be Rs12500 plus10 per cent of the amount exceeding Rs0.2mn. And if taxable income exceeds Rs0.3mn, Rs22500 plus 15 per cent of the amount exceeding Rs0.3mn would be taken as AIT, provided that no tax shall be payable on the first 80,000 rupees of the aforementioned income in all the cases.

LT is collected at a fixed rate of Rs72 per acre over and above the exempted 12/5 acres of land under crops and Rs300/acre for orchards.

LR is Rs200/acre for cereal crops and around Rs250 for other crops this year as compared to Rs250/acre and over Rs300/acre for these crops respectively last year.

The province should have collected huge sums in AIT/LT if one goes by the slabs prescribed by the agriculture income tax/land tax ordinance of 2001 but for snags like malpractices in the tax collection machinery and tax evasion by the powerful landed aristocracy.

According to a report, there were around 28000 landlords holding over five acres of land, but only 100 were registered as AIT payers.

Several farmers admitted the net annual income from one acre of irrigated land and arid land is estimated at around Rs0.1mn and Rs0.05mn. With around 4.5mn acres of cultivated land in KP, income from the AIT/LT should have been dozens of billions even if we take the first slab as benchmark. 

While Rs46.93mn were collected as AIT/LT in 2004, these came down to Rs18mn next year. An official said the income from land tax/AIT came down from 2004 onward as the government exempted 5 acres or less land from land tax as tax payers decreased.

But even if the number of taxpayers came down, AIT should have gone up in wake of rising farm incomes for increased support prices and rising cereal and fruit/vegetable prices.

On the contrary, though per acre rate of LR or water tax has been decreased, its collection has been on the rise making it the second biggest single contributor to provincial economy after motor vehicle tax.

Land revenue receipts were Rs573mn and Rs572mn in 2008 and 2009. In 2010, it rose to Rs771mn and was recorded at Rs915mn in 2011. It has been fixed at Rs920mn for FY2012-13.

The targets for the AIT have always been fixed unrealistically ignoring several factors — the issue of terrorism and resultant exemptions given to farmers, the lack of enthusiasm on the part of taxpayers, lack of political will on the part of government to tax the sector, capacity constraints and corruption of the tax collection machinery and political pressure on tax-collectors and so on.

The AIT/LT targets, resultantly, are missed. For example Rs90mn was set the target for AIT in 2008 and 2009 but actually recovery was only Rs18mn and Rs17.4mn respectively. Farmers say big landlords hardly contribute any taxes while the poor small farmers are subjected to unjust AIT/LT.

“For the absence of any reliable computerised system for the assessment and determination of expected agriculture income each year and the lack of a sound computerised database of all landowners in the province, the AIT is left at the discretion of patwari. He can claim any amount from a landowner/farmer and the later in turn has to pay it or bribe him. Patwari after all can hardly be displeased as he has great nuisance value; he can damage property record, lodge complaint against you in revenue court etc,” said a farmer, wishing anonymity.

During an assembly session last month, members from treasury and opposition also severely criticised the patwaris.

According to farmer leader Niamat Shah Roghani, “Patwaris lack the power to make the powerful landlords pay the taxes.

“The problem will be there unless the land in the province is reassessed, land record is computerised, an unquestionable database of landholders, their normal incomes and AIT payers is prepared and the patwari discretionary role is minimised in the system,” he argued.

Farmers also complained there was no formula as to how the difference in the production, seeds, water, and hard-work employed thereon and the weather effects are to be taken into consideration for fixing land tax.

The provincial board of revenue needs to provide basic training to revenue officials on computing farm incomes on the basis of returns filed by growers.

KP revenue minister Mohammad Shuja Khan last month informed KP assembly that computerisation of land settlement record in Peshawar district was at hand and would be followed in seven other districts. Under the new policy, powers of patwaris were also being curtailed, he assured.


0live initiatives

Initiatives for olive plantation
By Tahir Ali Dawn 1st October, 2012

A THREE-YEAR project for olive cultivation in regions where climate and soil are suitable for the crop, has been initiated by Pakistan Agriculture Research Council.

The Rs382 million project envisages olive plantation over 800 hectares — 300 hectares in Balochistan, 100 hectares in KP, 300 hectares in Fata and 100 hectares in the Pothohar region of Punjab.

Being funded under the Pakistan Italian debt-for-development swap agreement, the project will be managed through public private-partnership between Parc, local community-based organisations, non-governmental bodies and farmers’ associations.

Meanwhile, the Punjab government has declared the Pothowar region as ‘Olive Valley.’ It recently distributed olive plants to farmers, and organised training of olive growers in the region.

The Punjab Agriculture and Meat Company (Pamco) plans to develop 10 certified nurseries in the private sector in Attack, Rawalpindi, Chakwal, Jehlum and Khushab districts.

These nurseries would have a catchment area of 27000 acres while 0.4 million acres are being targeted for olive cultivation.

The Barani Agricultural Research Institute reports that the climate, temperature, soil, average rainfall and other factors in Sialkot, Narowal, Gujrat, Jhelum, Rawalpindi, Islamabad, Attock, Chakwal and Khushab suit olive cultivation.

Similarly in Khyber Pakhtunkhwa, Rs100 million has been earmarked for research and development on European olive, and maintenance of model olive farm at Sangbhatti.

There are millions of wild olive trees in the country which bear no or a seed-sized fruit. And the country has only 1130 acres of land under productive trees, out of an estimated 0.67-088 million hectares of wasteland suitable for olive cultivation.

Italy produces and exports millions of olive plantlets by standardising its nursery production system. To develop nurseries, Pakistan also needs to shift to tissue culture technology and open more germplasm units.

Olives are grown by budding mode and grafting on wild olive trees or planting of new trees. However, farmers have found the method of grafting the most successful.

Seedlings take long to mature and conversion of wild olives into productive cultivars is the best way. Research shows that around 80-90 per cent olive trees grown through T-bud grafting technique from August to September were successful.

The areas with an altitude ranging between 400 and 1,700 meters, slope of 20°, rainfall between 250mm and 1,000mm and a warm, semi arid, winter rain climate are most suitable for olive plants.

Olive production varies on the basis of temperature and rainfall. Rain falls abundantly in March (olive flowering season) and in summer (not typical of the olive-rich Mediterranean region).

This rain pattern poses risks for the olive cultivation–the first may heavily reduce the yield and the second- rainfall in summer— could make it prone to various plant diseases. This requires extra care and pesticides which means high cost of production. The common diseases in olive plants are trunk decay, sooty mould and peacock spot.

While olive tree usually bears fruit after 4-5 years, a farmer in Swat, however, said over 85 per cent of olive trees in the mountainous orchards dried up, and the rest began bearing fruit after 7-8 years.

An olive plant could bear over 40-45kg fruit after four years if sufficient care, protection, pesticides and fertilisers are provided.

The olive trees need more nitrogenous fertiliser than phosphorous and potash. The latter two fertilisers should be mixed in the soil before planting of trees at the rate of 200 kg and 300 kg per hectare respectively. Best time of nitrogen fertiliser is pre-flowering and stone-hardening stage.

In KP and tribal belt, too few olive nurseries and marketing worries have kept farmers away from olive plantation.

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