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Land market flaws main

obstacles to increased

agriculture output

ARSHAD AWAN

KARACHI: The land market imperfections in Pakistan represent one of the major obstacles to increased agriculture output, experts said.

"A supply and demand model reveals that the land market imperfections in the country are largely supply imperfections; access to both rented and owned area is inadequate and decreasing," said Yousaf Iqbal, agro-economist.

This inadequate access to land is at least partly responsible for production inefficiencies.

He said a major problem in Pakistan agriculture is the large yield gap in major crops. Compared with Mexico, the yield gap in Pakistan is estimated at two tonnes per hectares for wheat, or about 100 percent of production.

"The yield gap between the best and worst practices within Pakistan is estimated to range between 33 and 50 percent. This low and stagnating land productivity can be attributed to policy on pricing and suboptimal use of inputs by agriculture producers," Iqbal said.

Asad Ali, another agro-economist said that macroeconomic policy on pricing of inputs and output has been the subject of considerable debate in Pakistan.

"Agriculture inputs, including fertilizer, pesticides and canal irrigation, have long been subsidised in the country," Ali said. Subsidies on inputs other than canal irrigation have been reduced or eliminated as part of the World Bank's structure adjustment loans which were conditional on demand management to reduce the budget deficit.

"Output prices of wheat, rice and cotton in the country have been kept below world prices since the 1960s. Maintenance of output prices below world levels has resulted in net economic outflows from the agricultural sector to the rest of the economy," Asad Ali said.

Domestic terms of trade between agriculture and manufacturing were skewed against agriculture during the 1950s and the late 1960s, adding to the net economic outflow from agriculture.

According to the official survey nominal protection coefficiencies were gradually raised during the 1980s and 1990s as part of the sector adjustment supply response policy, resulting in a current net outflow from agriculture of about 8 to 10 percent of value added in the sector.