Cabinet Approves Multi-Billion Agriculture Package With Multiple Subsidies

The Economic Coordination Committee (ECC) of the Cabinet has approved a multi-billion rupee agriculture package to provide farmers subsidies on fertilizers, reduction in bank mark-up on agriculture loans, subsidy on cottonseed, and whitefly pesticides and sales tax subsidy on locally manufactured tractors.

The agriculture package is part of the Rs. 100 billion earmarked out of the Rs. 1,200-billion coronavirus relief package, for the Small and Medium Enterprises (SMEs) and the agriculture sector.

The agriculture package was proposed by the Ministry of National Food Security and Research (NFSR) at a cost of Rs. 56.6 billion but the ECC chaired by Adviser to the Prime Minister on Finance & Revenue Dr. Abdul Hafeez Shaikh asked the Ministry of NFSR to rationalize it as per its share in the overall Rs. 100 billion package, announced for the SMEs and the agriculture sector, out of the Rs. 1200 billion coronavirus relief package.

The ECC had already approved a Rs. 50 billion package for the SMEs to provide indirect cash flow support to nearly 3.5 million people through pre-paid electricity.

Under the agriculture package prepared by the Ministry of National Food Security and Research in consultation with the stakeholders, subsidy to the tune of approximately Rs. 37 billion will be offered to farmers on the purchase of fertilizers.

The amount will include a subsidy of Rs. 925 per bag on DAP and other Phosphatic fertilizers and Rs. 243 per bag on urea and other nitrogen fertilizers. The ECC was told that the estimated Urea offtake will be around 3.04 million tons while DAP was estimated at 0.95 million tons for the Kharif season.

Provinces will implement the subsidy, and the amount will be disbursed through the scratch card scheme already being implemented by the Province of Punjab. ECC was told that the fertilizer share in the cost of production for major crops was around 10 to 15 percent and the provision of subsidy will reduce the cost of production for farmers and increase their affordability to adopt the recommended level of fertilizer nutrient and best agricultural management practices.

Similarly, under the agriculture package, reduction in the markup of agriculture loans to farmers at the total cost of Rs. 8.8 billion and subsidy on cottonseed at a cost of Rs. 2.3 billion and White Fly pesticides at a cost of Rs. 6 billion were also approved. The package will also include Rs. 2.5 billion subsidies on sales tax on the locally-manufactured tractors for a period of one year.

Earlier, the ECC discussed various features of agriculture relief package in detail and lauded the efforts of the Ministry of National Food Security and Research for preparing a comprehensive package for the farmers. However, the ECC called for the inclusion of other banks along with ZTBL in the scheme to enhance the outreach of farmers with a focus on subsistence farmers with a landholding of 12.5 acres.

It was also suggested that since markup had been reduced by the State Bank of Pakistan, the interest rates used in the proposal could also be rationalized accordingly. The ECC also called for an implementation mechanism, especially through the scratch card system, to be monitored carefully to ensure that the actual beneficiaries of the package were genuine farmers.

It was also pointed out that since the provision of subsidy on fertilizer demand for the fertilizers might increase, the same had to be communicated to the Ministry of Industries and Production in time to make arrangements accordingly.

Minister NFSR assured that the regular offtake of fertilizer was being subsidized, however, any increase will be communicated to the relevant Ministry.

During the meeting, the ECC also approved a proposal by the Poverty Alleviation & Social Safety Division for disbursement of the Special Relief Package for the population living along the Line of Control in a single installment of Rs. 12,000 for six month months from 1st January to 30th June 2020 while from July onwards, LoC families will be disbursed monthly installments of Rs 2,000 each till 31st December 2020.

The ECC also took up different proposals for technical supplementary grants by various divisions and approved one proposal by the Defence Division for technical supplementary grant of Rs. 16.6 billion to meet the expenses on POL, utilities, and medical stores maintained by the Defence Services and another proposal by the Finance Division for a technical supplementary grant of Rs. 288 million for payment of salaries to the employees of Pakistan Machine Tool Factory for the period from October 2019 to June 2020.

The ECC also approved a proposal by the Ministry of Law and Justice for technical supplementary grant of Rs. 40 million for the employees related and operating expenditures of the Federal Judicial Academy.

The ECC also took up a proposal by the Ministry of Industries and Production regarding the human resource rationalization of the workforce of Pakistan Steel Mills at a cost of Rs. 18.74 billion to be paid for retirements and termination dues of over 8000 of 9000 PSM employees.

It also discussed the proposal in detail and asked the Ministry of Industries and Production to re-work the scheme in consultation with the PSM Management to extend its scope to a maximum number of PSM employees and bring it back to ECC.

The ECC also considered and approved a proposal by the Ministry of National Food Security and Research for the release of 35,000 metric tons of wheat from the PASSCO to the Azad Jammu and Kashmir government at a cost of Rs. 1.52 billion, including the cost of wheat and incidental charges, to be paid 50 percent by the federal government from the stimulus package announced to fight against COVID-19.