MFN status to India likely to crush local agriculture
November 22, 2012
As the eve of granting India the MFN status draws nearer, concerns about the local agriculture industry’s well being amidst the lack of a level playing field is prompting lobbyists to scream from the rooftops.
The removal of the negative import list, which will allow Indian produce such as vegetables, legumes and other agricultural commodities to infiltrate into the market, is currently being compared to the straw that will figuratively break the camel’s back, as the flood of cheaper Indian produce is expected to cripple the local growers.
With the price of different agricultural inputs having surged manifold over the last five years, farming has already become costlier than ever, pushing up prices of agri-produce in the country. Now adding to the local grower’s concerns would be pressure from Indian produce that is reportedly two to three times cheaper than the goods being sold in Pakistani market.
Drawing up a comparison between local and Indian farmers, stakeholders have been claiming quite justly that Pakistan’s agricultural sector is simply not equipped to deal with the kind of competition that Indian produce is going to present once we open our trade routes to our new best friends.
Coming off the back of agricultural subsidies as high as Rs 1300 billion in the last year, Indian farmers have been working with much cheaper inputs, with a 50 kg bag of urea that has been selling for an average price of Rs 1,757 in the last nine months in the Pakistani market going for roughly half that price in India. Although the Pakistani government continues to heavily subsidize the gas feed stock to local fertilizer manufacturers, there is simply no way that the price of even a single input commodity can be brought on equal footing with the Indian prices. Consequently, the price differentials between agricultural inputs in both countries simply cannot be brought on par until India substantially slashes the agricultural subsidies it provides to the local growers, experts agree.
However, at this point, that seems unlikely to happen. And as the day gets nearer and talks of greater access through land route pick up pace, it is essential to know that in all reality, Indian farmers, cushioned heavily by agricultural subsidies will be the ones who will glean all the benefits from the market access as a result of the removal of the negative list in December, whereas Pakistani producers will continue to struggle under the weight of skyrocketing diesel and electricity prices that leach away all their profitability.
Hence, opening our doors to Indian produce without taking steps to bring the local produce on competitive footing with Indian imports is like walking ourselves to the gallows and unless major crops are added to the list of barred imports, local growers are in for a crushing.
In the long term however, in order to transform the challenges of greater market access into opportunity, Pakistan should adopt sustainable agricultural policies by making efficient use of available resources. At this point, increasing productivity and profitability at the farm level for sustaining a vital production system is utterly imperative for Pakistan.