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'Mechanisation in agri sector makes poverty alleviation difficult'

ARSHAD AWAN

KARACHI: Any policy in Pakistan to promote labour-saving technology by encouraging mechanisation which would reduce employment in agriculture sector and could have a bad impact on poverty alleviation, said experts.

"According to one private consultant survey, estimating the different influences on employment for wheat, it found that between 1970-71 and 1990-91 net employment rose by 80 million days. Mechanisation reduced employment by 153 million days," agro-economist Iqbal Yousaf, said.

Yousaf added that some of this displacement was clearly warranted by technological developments, but some resulted from policy distortions.

"Far from helping the poor farmers, as perhaps intended, policy distortions have had an aggressive impact on poverty, arising from the distribution of subsidies, lack of tax instruments, and effect on employment," said Yousaf.

Sultan Ahmed, an independent agriculture consultant, said to the extent that the government policy has reduced agriculture growth, it has made poverty reduction more difficult.

"The distribution of the burden of the resource transfer within the agriculture sector may be regressive because of uneven distribution of subsidies. Direct taxes, the most effective instrument with which to ensure progressively of the burden, have not been available to policymakeres until recently," said Ahmed.

He was of the view that because the market surplus of large farmers was larger, pricing policy would have a greater impact on them. "They are also more likely to capture subsidies and have access to scarce inputs," he added.

Both the experts were of the view that wheat provided as clear example of the failure of the policy to achieve its intended goal.

"To benefit consumers, the government subsidised imports of wheat. This subsidy reduced producer wheat prices and held down production. At the same time, the government released wheat to millers at subsidised prices. Because the price of flour is determined by the market, consumers pay close to market clearing price," Iqbal Yousaf said.

He said that millers, not consumers, capture the gain from subsidised wheat as rent and, not surprisingly, excess milling takes place.

Sultan Ahmed said that even if the subsidies were passed on to consumers, the overall policy would represent an ineffective means of helping those in need since all consumers' benefits.

"A targeted subsidy would help the poor at a much lower cost to the government and with less distortionary impact on economy," Ahmed said.