Agriculture in Pakistan is currently in a state of disarray, and there is an urgent need for effective measures to revitalize the sector. At the center of this issue is the alarming decline in total factor productivity (TFP) in the agricultural sector, a critical measure of its efficiency and productivity. Total factor productivity considers all inputs of capital and technology to provide a comprehensive assessment of the agricultural sector's performance. Unfortunately, TFP in Pakistan's agriculture sector has been on a downward spiral, despite being responsible for providing employment to a 37.4% portion of the population and contributing 22.7% to the country's GDP.
A World Bank report “From Swimming in Sand to High and Sustainable Growth in Pakistan” confirms the TFP in the agriculture sector has remained stagnant, trailing behind all other countries, as it has expanded at an annual rate of less than 1.5% which is four times lower than the South Asian average. Likewise, the average output in the agriculture sector grew annually by 0.7%, whereas the South Asian average expanded by 2.8% over the same period.
One of the primary factors negatively contributing to this decline is the shortage of irrigation water, resulting in low yield. According to the Pakistan Council of Research in Water Resources (PCRWR), nearly 50% of the total land area suffers from water scarcity, and the water availability per capita has decreased from 5,260 cubic meters per year in 1951 to less than 1,000 cubic meters per year by 2021. This has led to a decline in irrigated land, which negatively affects TFP. The Indus River System Authority (IRSA) expects an 18% irrigation water shortage during the Rabi growing season of 2022-23 from November to May. Furthermore, an inefficient water pricing system and the under-pricing of water-intensive crops such as sugarcane, and rice have also prevented diversification toward higher-value crops, further reducing overall productivity.
Another significant factor contributing to reduced TFP is outdated and labor-intensive farming methods. Most farmers in Pakistan still use non-certified seeds, which are often of low quality, resulting in lower crop yields. According to a study conducted by the State Bank of Pakistan in 2021, 40% of farmers relied on informal seed systems. In addition to this, Pakistan's fragmented and poorly integrated marketing system both at the national and international levels has resulted in fetching low prices for cash crops such as rice and cotton.
Apart from human factors, natural calamities such as floods and locust attacks have further reduced productivity. The country experienced the worst locust attack in 2020, affecting 60 districts and causing losses of around $3 billion. Moreover, frequent floods in Pakistan have dealt a severe blow to the crops, resulting in a substantial decline in agricultural yield. These calamitous events have highlighted the urgency of adopting improved agricultural practices.
To increase TFP in agriculture, both federal and provincial governments can take action by implementing two tiers of interventions. The first tier aims to bridge the yield gap, and includes measures such as water efficiency, post-harvest storage, seed sector reforms, and mechanization. The second tier includes horizontal expansion and measures such as value chain development, and promotion of organic farming.
To address the issue of water exploitation in the agriculture sector, the government needs to increase the rate of irrigation water per acre and simultaneously, adopt innovative farming techniques, such as drip irrigation and vertical farming systems, to further reduce water consumption. Pakistan can follow the example of the Dutch government, which encourages its farmers to adopt modern methods and provides them with incentives to do so. By adopting similar policies, the Pakistani government can incentivize farmers to use water resources efficiently and prevent overexploitation by large landowners.
In Pakistan, the use of high-yield hybrid seeds of cotton, wheat, and rice has gained momentum in recent years. However, to optimize productivity and profitability, farmers require a more complex and technical approach to crop production. This approach involves the use of new agricultural inputs and skills, such as precision farming techniques, crop rotation, and optimal use of fertilizers and pesticides. The government should increase the capacity of pre-existing agriculture-based vocational institutes and incubators to train farmers and provide them with technical expertise.
Our current agricultural subsidy system does not effectively incentivize productivity because of the disparity between value-adding crops such as fruits and vegetables, and cash crops, such as cotton, sugarcane, rice, and wheat. The government can address this issue by implementing zone-based subsidies that specifically target and encourage productivity in different regions. By doing so, farmers would receive subsidies that align with the crops that are most profitable in that particular area, ultimately leading to increased productivity.
It is crucial to explore innovative strategies that can aid small farmers in accessing new technologies and markets. One way to achieve this is by promoting contract-based corporate farming models. Recently the United States announced its Fertilizer Right project in Pakistan, which involves a significant investment of $4.5 million to improve the efficiency of the agriculture sector. If implemented effectively, this initiative has the potential to significantly enhance total factor productivity.
To ensure the prosperity of Pakistan's agricultural sector it is crucial to allocate resources towards water conservation, modern technologies, public-private partnerships, and precision farming techniques.
A World Bank report “From Swimming in Sand to High and Sustainable Growth in Pakistan” confirms the TFP in the agriculture sector has remained stagnant, trailing behind all other countries, as it has expanded at an annual rate of less than 1.5% which is four times lower than the South Asian average. Likewise, the average output in the agriculture sector grew annually by 0.7%, whereas the South Asian average expanded by 2.8% over the same period.
One of the primary factors negatively contributing to this decline is the shortage of irrigation water, resulting in low yield. According to the Pakistan Council of Research in Water Resources (PCRWR), nearly 50% of the total land area suffers from water scarcity, and the water availability per capita has decreased from 5,260 cubic meters per year in 1951 to less than 1,000 cubic meters per year by 2021. This has led to a decline in irrigated land, which negatively affects TFP. The Indus River System Authority (IRSA) expects an 18% irrigation water shortage during the Rabi growing season of 2022-23 from November to May. Furthermore, an inefficient water pricing system and the under-pricing of water-intensive crops such as sugarcane, and rice have also prevented diversification toward higher-value crops, further reducing overall productivity.
Another significant factor contributing to reduced TFP is outdated and labor-intensive farming methods. Most farmers in Pakistan still use non-certified seeds, which are often of low quality, resulting in lower crop yields. According to a study conducted by the State Bank of Pakistan in 2021, 40% of farmers relied on informal seed systems. In addition to this, Pakistan's fragmented and poorly integrated marketing system both at the national and international levels has resulted in fetching low prices for cash crops such as rice and cotton.
Apart from human factors, natural calamities such as floods and locust attacks have further reduced productivity. The country experienced the worst locust attack in 2020, affecting 60 districts and causing losses of around $3 billion. Moreover, frequent floods in Pakistan have dealt a severe blow to the crops, resulting in a substantial decline in agricultural yield. These calamitous events have highlighted the urgency of adopting improved agricultural practices.
To increase TFP in agriculture, both federal and provincial governments can take action by implementing two tiers of interventions. The first tier aims to bridge the yield gap, and includes measures such as water efficiency, post-harvest storage, seed sector reforms, and mechanization. The second tier includes horizontal expansion and measures such as value chain development, and promotion of organic farming.
To address the issue of water exploitation in the agriculture sector, the government needs to increase the rate of irrigation water per acre and simultaneously, adopt innovative farming techniques, such as drip irrigation and vertical farming systems, to further reduce water consumption. Pakistan can follow the example of the Dutch government, which encourages its farmers to adopt modern methods and provides them with incentives to do so. By adopting similar policies, the Pakistani government can incentivize farmers to use water resources efficiently and prevent overexploitation by large landowners.
In Pakistan, the use of high-yield hybrid seeds of cotton, wheat, and rice has gained momentum in recent years. However, to optimize productivity and profitability, farmers require a more complex and technical approach to crop production. This approach involves the use of new agricultural inputs and skills, such as precision farming techniques, crop rotation, and optimal use of fertilizers and pesticides. The government should increase the capacity of pre-existing agriculture-based vocational institutes and incubators to train farmers and provide them with technical expertise.
Our current agricultural subsidy system does not effectively incentivize productivity because of the disparity between value-adding crops such as fruits and vegetables, and cash crops, such as cotton, sugarcane, rice, and wheat. The government can address this issue by implementing zone-based subsidies that specifically target and encourage productivity in different regions. By doing so, farmers would receive subsidies that align with the crops that are most profitable in that particular area, ultimately leading to increased productivity.
It is crucial to explore innovative strategies that can aid small farmers in accessing new technologies and markets. One way to achieve this is by promoting contract-based corporate farming models. Recently the United States announced its Fertilizer Right project in Pakistan, which involves a significant investment of $4.5 million to improve the efficiency of the agriculture sector. If implemented effectively, this initiative has the potential to significantly enhance total factor productivity.
To ensure the prosperity of Pakistan's agricultural sector it is crucial to allocate resources towards water conservation, modern technologies, public-private partnerships, and precision farming techniques.