Prime Minister makes shrewd move ahead of LG polls, National Assembly by-polls: Rs 341 billion package for farmers announced

Prime Minister Nawaz Sharif has announced a Rs 341 billion relief package for farmers with a direct cash assistance to rice and cotton growers, subsidy on fertiliser and electricity and tax relief on import of machinery. While unveiling the package here on Tuesday at a Kissan Convention, the Prime Minister stated that agriculture sector in Pakistan had been facing difficult situation due to natural calamities and fluctuation in commodity prices in the international market; therefore the government had prepared a relief package to provide support to farmers in difficult times.
The four components of relief package would be in the form of direct financial support to farmers, a reduction in the cost of doing business, provision of agriculture loans and making easier the loan disbursement process. The government has decided to provide cash support to rice growers as their exports have been adversely affected by low prices of commodities in the global market. The government would provide a Rs 5,000 cash per acre support to small farmers of up to 12.5 acres land holders that would entail a financial implication of Rs 20 billion to be shared equally by federal and provincial governments.
The government has also announced establishment of Rs 20 billion fund to be equally contributed by federal and provincial governments to provide a Rs 500 per bag subsidy on each fertiliser bag. He said farmers' income had declined as a result of a decrease in commodities' prices in the international market and government had decided to support them in the form of a subsidy on fertiliser against rising inputs cost. The government would also provide a Rs 5,000 cash support per acre to growers having up to 12.5 acres land, which would also involve a financial implication of Rs 20 billion. The Prime Minister said the government would also bear the premium cost of loans taken by the farmers for crops insurance. "This would cost Rs 2.5 billion to the government and around 0.7 million small farmers would benefit from it. The government would also provide interest-free loans to farmers for conversion of existing tube-wells and installation of new on solar power. The federal government and provincial government would also share Rs 14 billion on a equal basis on account of subsidy and sale tax on agri tube wells."
The Prime Minister added that the government had decided to fix Rs 10.35 per unit cost of electricity for agri tube wells for peak hours and Rs 8.85 per unit for off-peak hours.
The taxes and duties on import of agriculture machinery have been reduced from 43 percent to nine percent for the current fiscal year and rice mills have been exempted from turnover tax for 2015-16 due to their losses and tax exemption for a period of three years are being granted to the industry of cold chain, which preserves fruits, vegetables and fish. The government has also decided to reduce the sales tax on import as well as on purchase of agriculture machinery from 17 percent to seven percent, while a four-year tax exemption would be allowed on setting up Halal meat plants and there would be a withholding tax exemption on compliance of some conditions for supply of fresh milk and poultry.
The government has prepared a scheme to provide 50 percent guarantee to small farmers for taking agriculture loans from commercial banks and microfinance institutions. Under the scheme small farmers would have a loan facility of up to Rs 100,000 without collateral on five acre irrigated and 10 acre arid land. The government is required to make payment of five billion rupees if such a need arises.
The government has also decided to defer Rs 34 billion loan of rice traders till June 30, 2016. Additionally, traders would have access to fresh loans as well. The Prime Minister said the announcement included Rs 147 billion direct relief to farmers and Rs 194 billion in the form of additional loans for the agriculture sector. He maintained that total value of package was Rs 341 billion.
APP adds: The Prime Minister said the package was aimed at introducing progressive agriculture on scientific lines, reducing production cost of crops and make the small farmers prosperous. The Prime Minister said the country's development was directly related to the uplift of its agriculture sector, particularly farmers. The Prime Minister said the global cost reduction of agriculture commodities had affected the income of farmers beside increase in prices of seeds, fertiliser and pesticides, which had resultantly enhanced the cost production.
The Prime Minister announced setting up a Rs 20 billion fund to reduce prices of fertilisers which will lessen Rs 500 per bag of Potassium and Nitrate fertilizers. Also, the government was negotiating with local fertiliser manufacturers and gas companies to revert the increase in prices of fertilizers which had gone up by Rs 200 per bag.
He said it had been decide to provide Liquefied Natural Gas (LNG) to fertiliser companies to overcome the shortage of gas supply. He mentioned that the electricity price for running tubewells at peak hours had been fixed at Rs 10.35 per unit and Rs 8.85 at off-peak hours. He said the sales tax on these bills amounting Rs 7 billion would be borne by the federal government.
The Prime Minister said the custom duty, sales tax and withholding tax on the agriculture machinery had been reduced from 45 percent to nine percent. He said the traders of agriculture commodities, fruits, vegetables and fish would get an exemption of three years on income tax while the sales tax on cold chain machinery had been reduced from 17 to seven percent. He said banks in general show reluctance in giving loans to small farmers due to risks involved, which he said could be overcome through provision of guarantees. The Prime Minister mentioned that the time-limit to pay back Rs 34 billion outstanding loan on the rice traders had been extended up to June 30, 2016.
He said the government and the State Bank of Pakistan were working over reducing the mark-up rate on agriculture loans by two percent which would give a benefit of Rs 11 billion per annum to farmers. He said the Zarai Taraqiati Bank Limited and commercial banks would provide one-window facility to the farmers seeking loans. He said the value of production unit had been increased from Rs 2,000 to Rs 4,000 which would help farmers get doubled the amount of loan against their land value. The Prime Minister said a committee under supervision of Federal Minister for National Food Security Sikandar Hayat Bosan had been set up which would workout the ways to increase per acre yield and reduction of agriculture inputs. Federal Minister Sikandar Bosan said the country's 90 percent exports comprised agricultural commodities, which had also shown a marked increase in recent years. He said the government was fully aware of the difficulties faced by the farmers and would take all steps to facilitate them. A large number of wheat, rice and sugarcane farmers from across the country attended the Convention.