Mar 22, 2010

Food for future

Pakistan has moved from being an exporter to an importer of food

By Aadil Mansoor

Fifty years down the road, the reign of the Green Revolution that began in the 1960s in India seems to be nearing its end. The Green Revolution pushed the production frontiers of the agriculture sector through farm mechanisation and introduction of high yielding varieties (HYVs), complemented by the construction of upstream water reservoirs. It helped farmers increase food grain and crop production at higher rates than the rates of population growth. In the following three decades (1960-80), the average yield per hectare rose at an impressive average rate of 4 percent per year. This growth was not only enough to feed a population of 85 million, growing at a fast rate of 4.12 percent per year during that period, but also generated surpluses that improved Pakistan's export performance and earned foreign exchange reserves for a cash starved economy.

Sadly, that phase of growth and ample food is no longer the prospect for Pakistanis today. In the last five years, there have been several occasions when the production of food grains (wheat and rice in particular) fell below the demand and the resultant shortfall had to be met through imports. This caused widespread food shortages and unrest on the one hand, and a serious blow to the country's scant foreign reserves and cash flows, on the other. Since 2004-05, Pakistan has imported as high as 4 million tonnes of wheat each year to meet the domestic demand. The situation is food security is worsening with every passing year and the crisis will likely turn into a disaster unless targeted and timely reforms of the agricultural system are carried out.

From a long term perspective, it is evident that agricultural productivity growth has remained dismally low in the past three decades. Since 1980, the food grain productivity has increased on an average rate of 1.79 percent per year. Over the same period, the country's population has increased at an alarmingly high rate of 2.5 percent per year. Pakistan has been able to partly bridge this gap, and by so doing defer the threat of food insecurity, by expanding the area under cultivation. This was, of course, possible only as long as cultivable land and irrigation water were available. While additional land may still be available, a long term decline in the flows of freshwater, storage capacity of reservoirs and underground water table, have depressed, if not altogether exhausted, the prospects of further land development.

The stagnation of the agricultural productivity has many causes. The key factors behind Pakistan's agricultural crisis include the distributional inefficiency and tenancy of land, ineffective management of water resources, low investment in production and technologies, and an ambitious - but highly ineffective, if not counterproductive - regulatory regime governing the agricultural factor and output markets. While all these issues are in want of reform, the issues of land distribution and tenancy are at the centre of the crises as it has been neglected by successive governments since the 1980s.

Historically, the distribution of land ownership in Pakistan has been highly unequal and concentrated in the favour of few landowners. According to the Pakistan Agricultural Census Organisation, in the year 2000 more than half of the cultivable land was possessed by less than 10 percent of the landowners - who own 20 or more acres of land. Ironically, the situation has not changed much since the 1960s when 7 percent of the landowners owned half the cultivable land in the country, each with a landholding of more than 25 acres.

That land reforms lead to efficient utilisation of land, improved agricultural production, employment and poverty reduction is a well established argument, supported by theory and empirical evidence. China and several countries of East Asia have successfully used land reforms to reinvigorate agricultural growth, promote employment and reduce economic and social inequalities. In the case of Pakistan, a growing and vibrant agriculture sector in the 1960s marred the need for the much needed land reforms. While two formal attempts at land reform were made in 1959 and 1972, both failed to achieve their stated objectives as they were mainly meant to contain social unrest and political chaos and to gain popular support in times of crises.

A closer look at the cultivable land ownership and use statistics of Pakistan make the need for land reforms obvious. First and foremost, research shows that in much of the developing world, where agriculture is characterised by constraints to investment and mechanisation, small and medium sized farms (12 acres) are more efficient than large sized farms (20 acres). Several empirical studies demonstrate that, if the effect of capital, technology and other factors is held constant, the income per acre of land from small farms can be up to double that of large farms. This becomes possible because of a higher allocative efficiency of land in the case of medium and small sized farms and b) the lower reservation price of labour for small farms in contrast with the larger farms that have to hire labour and thus making it expensive for them.

Secondly, the Pakistan Agricultural Census shows that nearly 40 percent of the arable land (i.e., 4 million hectares) is not cultivated in a given year. Almost 2/3rd of this utilisation land is held by large landowners, who own 25 or more acres of land, pointing towards the unmanageability or inefficiencies that are associated with large and concentrated landholdings. In contrast, most small farms cultivate over 90 percent of the arable land, deriving maximum benefit per acre of land.

The third important issue pertains to the weak land tenancy in the country, where nearly one third of the cultivable area is under tenancy. Amidst an absence of tenancy regulation and social safety nets, tenants are more often than not wholly dependent on and indebted to the landlords. Often tenancies are carried from one generation to the other and so are the debts and obligations, at times taking the form of bonded labour. Tenancy contracts are mostly informal and hence not enforced legally. Jacob and Mansuri (2006), in their seminal research for the World Bank, show through their research that incomplete tenancy contracts lead to "investment holdups", where due to tenure insecurity, the tenants tend to under-invest in productivity, thus leading to inefficient and suboptimal factor productivity of land.

Fourthly, in Pakistan's "labour surplus" economy, almost 44 percent of the labour force is employed by the agriculture sector. Due to the highly concentrated distribution of land, a large part of the labour force is landless and is hired seasonally, while others work as sharecroppers or tenant families, under a wide range of contract and tenancy regimes. However, as discussed above, the efficiency losses from incomplete contracts and insecure tenancies can be overcome by means of land redistribution and private ownership, where land can be distributed to a part of this labour force thereby creating incentives to invest in productivity enhancement and conservation.

And finally, land being the most valuable asset and a symbol of social status, also serves as a source of monopolisation of political and social power. In Pakistan, unequal landholdings have led to social polarisation and exploitation of landless and smallholders by the landed elite. In the rural arena, feudal capture of political institutions, public service delivery and extension services, access to farm credit, sources of inputs and means of marketing is hard to ignore. This has not only affected agricultural productivity but also suppressed the social, political and economic progress in the country.

One may ask that, given a total failure of previous land reform efforts, is land reform a mere idea in Pakistan's context? Experts have extensively reviewed the land reforms of 1959 and 1972 and have suggested that the failure of earlier land reforms was not a "strategy failure" - i.e., land reforms as a strategy for improving factor allocative efficiency and agricultural productivity and reducing unemployment, economic inequalities, and poverty.

Studies found that reforms failed due to, a) lack of political commitment, b) loopholes in legislation, e.g., provisions for exemptions and allowance of land transfer to heirs, c) the burdensome payments that the beneficiaries had to pay for the allotted land, and d) centralised and inefficient bureaucratic administration.

Recent land reform experiences of China, East Asian economies and selected regions of South Asia provide substantive evidence that land reforms are not only possible but also lead to positive economic and social outcomes. Depending upon the political, social and economic context, base conditions and specific objectives, different countries have applied different policy instruments, strategies and management models to land reform. The choices, trade-offs and balancing acts have involved setting the ceilings for landownership, government engagement versus the use of market based approaches (e.g. incentives, penalties and taxes), allocation and pricing of expropriated land, and timeframe for implementation. Pakistan can draw upon a wealth of international experience and learning to develop its land reform strategy.

If designed well and implemented through market based instruments, implementing a land reform policy will not require very large budgetary commitments. The requirements can be met by re-appropriating the existing budgets and resources of the Ministry of Food and Agriculture, Federal Board of Revenue, Provincial and District Administrations and the relevant line departments. Given the centrality of agriculture to Pakistan's economy, concessionary development financing from multilateral and bilateral institutions may also be forthcoming.

To delay land reforms is no longer an option today, given the current state and impending prospects of food insecurity, agricultural productivity and economic growth. If the issue is not addressed on a priority basis, it won't be long when we will be faced with a large food-starved population, high unemployment and unsustainable inequalities which can push the country into chaos, political turmoil, and jeopardise the gains from years of, albeit very slow, progress.

Taxing agricultural income

None of the four provinces followed the Constitution while levying income tax on agricultural income

By Huzaima Bukhari and Dr. Ikramul Haq

Taxing income earned through agricultural activities is the sole prerogative of provincial governments under the 1973 Constitution of Pakistan. All the four provinces have enacted laws to this effect, but total collection in 2009 was below Rs. 2 billion against the actual potential of Rs. 200 billion (share of agriculture in GDP was about 22 percent). This abysmally low collection proves beyond any doubt lack of political will to tax the rich absentee landlords. Presently, the provincial governments are not collecting tax on agriculture income but on fixed per acre basis. They charge Rs.150 per acre from the irrigated area and Rs100 per acre from non-irrigated land. This is gross violation of Constitution that requires tax on agricultural income.

Entry 47, Part 1 of Federal Legislative List provided in Fourth Schedule to the Constitution empowers the federal government to levy "taxes on income other than agriculture income". The expression "agricultural income" is defined in Article 260(1) of the Constitution, which says: "Agricultural income" means agricultural income as defined for the purpose of the law relating to income tax."

This is an exhaustive definition binding provincial Legislatures to levy tax on "agricultural income" as defined in the Income Tax Ordinance, 2001. The definition of "agricultural income" as contained in section 41(2) of the Income Tax Ordinance, 2001 has to be followed by all the provinces. The said definition defines agricultural income to mean (a) any rent or revenue derived from land which is situated in Pakistan and is used for agricultural purposes and (b) any income derived by a person from land which is situated in Pakistan from agriculture; or the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) and (c) any income derived by a person from (i) any building owned and occupied by the receiver of the rent or revenue of any land described in clause (a) (b) or (ii) any building occupied by the cultivator, or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any operation mentioned in sub-clauses (ii) or (iii) of clause (b) is carried on, but only where the building is on, or in the immediate vicinity of, the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of the rent-in-kind by reason of his connection with the land, requires as a dwelling-house, or as a store-house, or other out-building.

It is pertinent to note that the above definition cannot be altered even by the parliament without the prior sanction of President of Pakistan as provided in Article 162 of the Constitution forbidding that "no Bill or amendment which imposes or varies a tax or duty the whole or pat of the net proceeds whereof is assigned to any Province, or which varies the meaning of the expression "agricultural income" as defined for the purposes of the enactments relating to income-tax, or which affects the principles on which under any of the foregoing provisions of this Chapter, moneys are or may be distributable to Provinces, shall be introduced or moved in the National Assembly except with the previous sanction of the President."

The historical record shows that this Constitutional command was violated even by the authors of the Constitution. By the Finance (Supplementary) Act, 1977, the definition of agricultural income as obtaining in section 2(1) of then Income Tax Act, 1922 was amended by the words: 'and is either assessed to land revenue in Pakistan or subject to a local rate assessed and collected by the officers of the Government as such' were deleted. The aim of this exercise was to broaden the scope of agricultural income with a view to subjecting it to tax for which a schedule was also enacted.

This was a revolutionary step to impose tax on agriculture income for the first time in Pakistan, though approval of President was not sought as required under the Constitution. It is tragic that on 5th July 1977, the government of Zulifkar Ali Bhutto was overthrown by a military dictator. The historic decision of taxing "agricultural income", as passed by Federal Parliament in the shape of Finance Act, 1977, was thwarted by the military regime of Ziaul Haq. Zia's legacy continued for long 11 years and that of General Musharraf for nearly 9 years, but feudal lords (including mighty generals who received state lands as gallantry awards or otherwise!) did not pay a single penny as agriculture income tax.

Both the federation and provinces under the Constitution are bound to follow the definition of "agricultural income" as provided in the income tax law while determining their legislative powers in terms of Article 70(4), Article 141 and Article 142 read with Forth Schedule to the Constitution. However, it is a matter of great concern that the federation violated the commands of Constitution as narrated above in respect of tax on "agricultural income". The same is true for the Provincial Legislatures. Even a cursory look at laws (and amendments therein) from time to time promulgated by them to tax agricultural income shows that:

NWFP did not even provide the definition of "agricultural income" in its "Northwest Frontier Province Agricultural Income Tax Ordinance, 1993"! The tax levied under the name of "income tax" was, in fact, a land tax on the basis of produced index units. This was nothing but a mockery of legislative process. If there was no political will to impose income tax on agricultural income, then what was the need to hoodwink the people by calling it Agricultural income tax?

The same is the case with Sindh Agricultural Income Tax Act of 1994 as amended from time to time.

The Punjab Agricultural Income Tax of 1997, as amended from time to time, is no exception. No effort was made till 2000 to impose income tax on total income earned from this source. A face-saving device has been restored to levy yet another levy on acre basis for different rate in respect of irrigated and unirrigated lands.

In Balochistan, the position was no different. From 1993 to 1999, the Baluchistan Legislature promulgated various Agricultural Income Tax Ordinances, amended from time to time, following the same pattern as in three other provinces. In 2000, it passed The Balochistan Tax on Land and Agricultural Income Ordinance, 2000 that contained the same definition of "agriculture income' as in income tax law promulgated by the federation.

The above analysis shows that none of the four provinces, while levying income tax on agricultural income, followed Article 260 of the Constitution. All the laws passed by them for taxing "agricultural income" were sham. It shows an attitude of contempt and apathy towards Constitutional provisions. One hopes the federal government and all the provincial governments will take note of it and remedial measures will be provided in the forthcoming national and provincial budgets.

Mar 15, 2010

Other half

If Mumbai can have separate trains for ladies and Cairo can have women-exclusive taxis, why not Lahore and Karachi or some of our smaller cities?

By Ammara Ahmad

Pakistan celebrates the International Women’s Day with passion. Yet, most women in Pakistan live deplorable lives. Whatever ‘improvement’ has occurred in their lot, has been very insignificant and has been carried out at a snail’s pace. Let us just take a look at some of the problems confronting the vast majority of poor women in our country.

The labour rooms of Pakistan’s major government hospitals are terrifying. Most are over-crowded and dirty. If the beds are full, women are made to stand or share beds. Hills of garbage are littered all over the wards, along with crowds of noisy relatives and cranky staff. The women who can actually avail of these wonderful ‘facilities’ are the lucky few as professional healthcare is rarely available to the bulk of the rural women. If one compares these healthcare standards to those in (say) the US or even China, the entire situation becomes very depressing. This comparison is deemed futile by our ‘planning babus’, on the basis that the US is a developed country, unlike Pakistan. But even then, our various governments have had over sixty years to ensure that women don’t die giving birth but with what results?

UNICEF reports state that the under-5 mortality rate here has dropped from 130 in 1990 to 89 in 2008, per 1000 live births. But according to a 2007 report by the Society for the Protection of the Rights of the Child’s (SPARC), Pakistan had the highest infant and mother mortality rate in South Asia. This meant that we were behind India, Sri Lanka, Bangladesh, Nepal, Bhutan, the Maldives and maybe even Afghanistan. One really doesn’t see much improvement since then, and one wonders where the UNICEF gets its figures from? According to most international indicators, Pakistan women and their children have been suffering and continue to suffer, the same as before.

Even everyday needs like good transportation facilities are absent for our women. Cities like Lahore and Karachi have plenty of middle class women car drivers. However, they are still very rare in smaller cities like Faisalabad, Gujranwala, Sukkur, Hyderabad and so on. The poorer you are the worst is your transportation problem. In over-crowded buses and vans, women are harassed and jostled. Seats supposedly ‘reserved’ for women are forcibly taken over by men. College and school girls can seldom go out alone. If Mumbai can have separate ladies trains and Cairo can have women exclusive taxis, why not Lahore and Karachi or some of our smaller cities?

A few days back, sitting in the Race Course Park, Lahore became an ordeal for some of my friends. Within minutes, they were accosted and harassed by hordes of frustrated young men, and, ultimately, forced out of the park. Expecting much government support against public place harassment is unrealistic. Even the PPP, Pakistan’s most liberal mainstream party has not been able to pass much significant pro-women legislation, except for the recent, very unsatisfactory Harassment of Women at the Workplace Act of 2009. Indeed, it has not even been able to implement previous acts with any real force or conviction. The Domestic Violence (Prevention and Protection) Act 2009 has, to all intents, simply collapsed. In 2008 alone, the Aurat Foundation reported that there were 7,733 reported cases of violence against women in the country, with perhaps five times that number going unreported. This was first time the Parliament had devised legal and practical measures to curtail home abuse but the Council of Islamic Ideology believed anti-violence laws might increase the divorce rates. Although even the most developed countries cannot completely wipe out domestic violence, yet the state fulfills its duty of formulating anti-violence laws, implementing them firmly and providing institutional support to victims.

The present, ongoing "war on terror" is also taking a big toll on our women. The areas bearing the brunt of the fighting are already poor; and to their existing misery, new dimensions have been now added. With the mass displacement of population from these tribal and frontier areas, women have had to pay a very heavy price. Many of them have previously never stepped out of their homes, kept strictly in ‘purdah’; they have little or no idea how to tackle the harsh realities of life in their camps. Their whole world has been turned topsy-turvy, they and their families are living hand to mouth and bearing up stoically with unbearable hardships. Almost 6000 of the women in various camps were due to give birth last June. WHO declared that the medicines became short within the first week of the displacement. Lady health workers were reluctant to approach the areas due to security threats. Due to "purdah", these women couldn’t go to male doctors. To top it all, the UN report on the women declared that 3 out of 5 of the pregnant women were anemic, with high risk of abortions, and other natal complications, and were in dire need of blood transfusions, surgery, medicines, vitamins and other dietary supplements etc. The report also stated that a number of children were delivered in tents, which was like "giving birth in an oven". The threats of epidemics in the summer months and the harshness of exposed winters are other factors they are contending with. Many of these women also lacked male family members or escorts and were consequently struggling for food and basic necessities as well as protection in strange new localities.

Why should all this be relevant over here? One of the chief feminist arguments against war is that wars are started, planned, financed and largely fought by men; yet take a disproportionate toll of women and children. The plight of the displaced women as stated above is typical of women trapped in violent conflicts; women who are poor, displaced, with missing husbands and with children to feed. The terror, crimes and humiliation the internally displaced Pakistani women have suffered and are suffering is still largely undocumented and frightening to contemplate. A lot of coverage is given to the war, daily, and the number of militants killed etc — but how many channels at home or abroad have given comprehensive coverage to the women in the camps?

On Women’s Day, an advertisement sponsored by the Ministry of Youth, Government of Pakistan appeared in the press. It stated: "We mothers, We sisters, We daughters, The honor of the nation is from us." How do we ‘honor’ our women — mothers, sisters, daughters, today, in the face of the above, select examples? This is worth contemplating at this time, instead of all the hypocrisy and cant that usually prevails. We women are not mere relatives to our male counterparts but also individuals, humans, citizens. It is high time we received what are our essential rights.