No agriculture tax in next budget, says Tarin

[LahoreEstate]

No agriculture tax in next budget, says Tarin
ZAHID BAIG
LAHORE (June 07 2009): Advisor to the Prime Minister on Finance and Revenue Shaukat Tarin has said that huge allocations are being made in the next budget to make agriculture a profitable business as without it this sector could not be taxed. He said this while speaking at the 114th extraordinary general meeting of the Farmers Associates Pakistan (FAP) here on Saturday.

He said there was no plan to levy agricultural tax or general sales tax (GST) on agricultural inputs in the next budget. He said that the present government was giving top priority to the agriculture sector with the vision to produce agricultural surplus, which should be exported.

Tarin said that the government's focus was not only on ensuring food security for the country, but also on ensuring income security for the farmers, as, at present, it was not a profitable business as compared to other businesses. "For this, we have to link the agricultural commodity prices with the international prices. We should not oppose it as in the past we saw that our wheat price was lower than the international prices, which encouraged its hoarding and smuggling and later the government had to import the commodity on higher prices," he said.

He said: "We should create exportable surplus to send it to Afghanistan, Iran, Gulf and Central Asian States." He said that Argentina and various European Union (EU) countries first started exporting agricultural exports and then turned towards industries.

Tarin said: "We could also go to value-addition by turning our kinnow into juices and tomato into paste." He said that in the coming budget, the government would allocate money for construction of large and small water reservoirs, research and development to introduce new varieties and setting up marketing infrastructure. The focus would be on agriculture, poverty alleviation, health, education, manufacturing, energy and infrastructure, he added.

He said that the government would allocate huge amount on construction of storage of agricultural commodities where the farmers could keep their produce and get a receipt, which it could get discounted loans from the banks forthwith or hold it for longer period for better profitability.

He said that the government also wanted to set up an "Agricultural Policy Institute" so that the policy-making system could be strengthened. He also assured the FAP that he would consult the farmers wherever agriculture would be discussed in the departments falling under his purview.

The Advisor said that they would not only double the funds for existing research institute, but would also set up world class institutes for major crops. Tarin said that seed would be imported and localised according to the requirements, and added the trade centres would also be set up and present the "Mandis" would be turned into model trade centres to make marketing system effective.

He said that there was also plan to set up warehouses and trade centres near different airports so that fruits and vegetables could be exported through special cargo flights. He said that these centres could be set up in Multan, Lahore, Faisalabad, Sukkur and Peshawar to export fruits and vegetables to Abu Dahbi and Jeddah.

He said that Abu Dhabi alone imported fruits worth 90 million dollars from the UK annually. Licenses would also be issued to new air cargo lines for helping exports in fruits and vegetables, he added. The government would also make efforts to set up processing centres, he said, adding that these initiatives would be taken under private-public partnership.

Tarin said that the government wanted to make 100 model agricultural union councils on experimental basis, which would be provided seed, storage capacity, fertilisers, machinery and all inputs according to their requirement. If get positive results, than it would be replicated in other parts of the country, he announced.

He said that "model organic farms" would also be set up on experimental basis. Regarding agricultural credit, he admitted that banks were only catering to the needs of urban areas. He said that the government would ensure that agricultural sector should not be credit-starved and, if needed, the government might set up agricultural regional banks in rural areas.

He regretted that Pakistan could not computerise "land revenue information" system for the last five years, while Philippines had done this work within three years. He said that the banks seemed hesitant to extend credit as they were not sure of correctness of title of land and once this land revenue information was computerised, they would be extending loan to rural people too.

Tarin said that the government would soon announce support price for cotton and paddy crops in line with international prices so the farmers could go for maximum production and the government would ensure that they get this price. He criticised the Passco's performance, which was required during the last season of paddy procurement. Regarding lowering mark-up rates on agricultural loans, he said that mark-up rates would come to single digit in the next 12 months and demand of subsidy on mark-up rates should be avoided.

He said that it would be the government's effort to bring the inflation down, which would also help to bring the interest rates to single digit. Tarin also told the audience that Pakistan was working in collaboration with China for drip irrigation system and China had also extended financial assistance. He said that biogas policy would also come soon.

He also termed the withholding tax on withdrawal of cash from the banks as regressive, and said he wanted to abolish it. Replying to various queries, he said that the allocation for agriculture would be more than the last year and it would be the effort of the government that priority sectors, including agriculture, would see no cut in it next year.

He said that the budget allocations would be made keeping in view all contingencies, including security, military, internally displaced persons (IDPs) and other aspects. He said that a pay and pension committee was also looking to make a raise for the employees in line with inflation.

Tarin said that under Benazir Tractor Scheme (BTS), the government would import tractors if needed and also asked the domestic producers to ensure quality. He said that the government would not hurt the local industry, but would also give options to the people.

He said that last year was an abnormal year, and added this the year government was exercising to ascertain resources on strong footings so that expenditures could be budgeted in line with that. He said there were many subsidies and the government would withdraw subsidy only in electricity on over all bills over a period of time.

He said that the government was conducting a survey with the World Bank to ascertain household income after which a process would be formulated that subsidies should not go in to the pockets of third party. He said that inflation had reduced as compared to last year and next year, it would be in single digit. He said that the government was trying to overcome the fiscal deficit and it had stopped borrowings from the State Bank rather returned Rs 200 billion till March.

He said that the government would try that bank borrowing should be zero during the next fiscal year rather the government should return the money it owed. He said that the government was looking towards alternative energy sources such as solar, coal and gas.

To a question regarding distribution of resources in next National Finance Commission (NFC) award on rural and urban basis, he said that the next NFC was being deliberated on various grounds such as backwardness, resources mobilisation and population.

He said that the Prime Minister was chairing a committee in this regard and the government did not want it to postpone till next year. Federal Foreign Minister and Chairman of the Farmers Associates Pakistan (FAP) Shah Mehmood Qureshi, in his welcome address, told the audience that the agriculture sector needed three million tons of urea.

He said that the local producers had assured of provision of 2.5 million tons, while for rest of the requirement, the government had placed import orders and received schedule of arrival of vessels. He said that 255,000 tons of urea fertiliser would reach Pakistan during the month of June.

He said that the government would go for further import, if needed, and even the private sector would be allowed to import fertilisers. He said that the government was paying huge amount in subsidies on fertilisers and decided to continue it.

He expressed the hope that the crisis of fertiliser, feared by agri sector in Kharif season, would not be repeated during next season. Earlier, FAP Vice-Chairman Hussain Jahanian Gardezi submitted proposals for the progress and development of the agricultural sector, and demanded doubling the research and development funds, increase in allocation to agricultural universities, preparing agricultural technicians, extending funds to the farmers organisations, increasing agricultural credit and introducing agricultural credit guarantee scheme for landless and farmers. The advisor assured implementation of all these suggestions.

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