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Need for new agribusiness models to spur farm output

Need for new agribusiness models to spur farm output

AS the Punjab government plans to pour in more money into agriculture development, it may be time for it to focus on the difference between the performance and the potential of the soils.

Most of its lands have been under-performing for a variety of reasons, but fragmented holdings (up to 65pc held by small growers (less than 12.50 acres) with no meaningful financial and technological investment make any commercial sense. This problem of fragmentation is complicated further by the inheritance laws, dividing landholdings with every passing generation.

The issue was highlighted at Dawn’s Food and Agri Expo last week where speakers pleaded for some kind of land integration methodology, not by changing inheritance laws but through introduction of business models that create economies of scale and these lands, in turn, are served by a strong service sector.

Provision of such services already exists in the rural areas. But the problem is that it revolves only around tractors due to an overwhelming presence of the machines with over 500,000 tractors servicing around 43m acres. Beyond tractors, only a few hundred thousand ploughs and plankers exist and that’s it. Though these three varieties of basic machines still have a role, farm mechanisation leapfrogged beyond them decades ago.

The rudimentary form of service provision has traditionally revolved around almost defunct cooperatives. It is time to change the very concept and promote the services sector as a new business model, especially for small landholdings and unleash their potential.

For this, cooperative and corporate farming should be encouraged for creating economies of scale. Under the fresh initiative, the government should actively ask small farmers to join hands to work with production and marketing cooperatives.

It would not only strengthen their bargaining position against service and inputs providers (mechanisation, fertiliser, pesticides etc) and middlemen and other buyers, it could also improve their access to formal credit sources.

Parallel to this process, the government should start facilitating new service providers, both as landholding based cooperatives and as independent business models. Those interested in purchasing the entire line of machines (starting from bed-preparation to post-harvest storage of the produce) for serving their own lands and others should be enlisted and helped.

Instead of subsidising them, the government should help them secure loans (collateral for which has recently been computerised with the Punjab government) and machines.

According to experts, these service providing models could be especially successful in orchards because: essential pruning and picking machines ? highly effective for better yield and returns but costly – are beyond the reach of small farmers.

The country’s natural endowment can also facilitate such initiatives as most of its crops and fruits are grown in clusters – like kinno cluster in central Punjab, guava around Lahore and mangoes in the South.

If the Punjab government can pick three such tehsils of these orchards for rimplementing service providing models, the process could be emulated gradually in the rest of 131 odd tehsils.

The new money, which the Punjab government promised under Rs100bn package for development, should find a good avenue in the services sector. But the experts also warn that the new initiatives should not be flashy concepts borrowed from highly developed western economies and not applicable to prevailing conditions in the country.

Instead, it should be aimed at helping in solving problems of local land fragmentation; integrate them to make them viable for financial and technological investment and convince the farmers and service providers that their effort is worth trying for.

Published in Dawn, Business & Finance weekly, April 11th, 2016

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