PAKISTAN CROP SECTOR: AN ECONOMIC EVALUATION

An evaluation of Pakistan crop sector was carried out covering the 1990-2005 period to check whether the sector was technically productive, financially viable and economically efficient and optimal. It started with evaluating the yields of Pakistan's crops relative to the world average yields. The results imply that: (a) Pakistan's crop yields are, in general, not comparable to the world average yields; (b) tomato, barley and sorghum are producing less than 50% of the world average yields; (c) the yields of lentils, millets, rapeseed/mustard and maize are ranging between 35 - 50 percent lower than the world averages; and (d) the yields of IRRI rice, onion, wheat, sugarcane and gram are 13 - 23% lower than the world averages.</p><p>To check financial viability of Pakistan crop sector, net returns from each crop were compared with returns from the banking sector in terms of interest rates. On the basis of these ratios (NIRR) all crops were categorized into five groups: (a) Basmati rice, IRRI rice, onion and tomato, which appear to have the highest NIRR values> 10 that is, returns are 10 times of the banking sector interest rate; (b) gram, berseem, millet fodder, potato and rapeseed./mustard, received NIRR values ranging between 5 and 10; (c) wheat, barley and sorghum fodder, having NIRR values between 2 and 5; (d) mung, seed cotton, maize fodder and sugarcane, with the NIRR value between 1 and 2; and (e) maize, millet and sorghum earned NIRR < 1; however, these crops turned out to be financially viable if grown as fodder.</p><p>Each of the major crops was tested using optimization technique (optimize output, which in turn minimize total cost). We find that producers of two crops (Basmati rice and potato) optimize their outputs; in 13 cases, crop producers have not been optimizing. In three cases (IRRI rice, maize fodder and millet fodder), the estimated optimal output falls beyond the upper limit of the confidence interval of the existing output level, suggesting that efforts to increase output (yield) per hectare would help. In the remaining 10 sub-optimal cases (seed cotton, sugarcane, maize, onion, mung, sorghum fodder, wheat, gram, berseem and rapeseed), the estimated optimal output falls below the lower limit of the confidence interval, theoretically suggesting that decrease in existing level of output (yield) per hectare would optimize, which is not a reasonably good option as the yields per hectare of these crops are already very low. Hence, efforts should be made to decrease cost of production and increase yield per hectare of these crops simultaneously. When testing the optimality of Pakistan crop sector using Linear Programming (LP), it was found that taking Kharif and Rabi crops separately would give representative results against when these crops were taken as a whole-year planning package. Of the 19 major crops tested for optimality, only 5 crops - Basmati rice, IRRI rice, onion, gram and potato - have emerged as optimal for all times; while another 6 crops - mung, sorghum fodder, millet fodder, wheat, rapeseed/ mustard and berseem - turned out to be optimal but not throughout the study period, indicating optimality of lesser degree relative to other crops. Of the remaining eight crops, six crops - sugarcane, maize, maize fodder, sorghum, millets and barley - have remained altogether sub-optimal throughout the period; one crop - seed cotton - remained suboptimal most of the times and another one - tomato - remained suboptimal for the latest period.</p><p>Optimality of these crops was further checked for possible effects of globalization and WTO's trade liberalization using the recent 5-year period (2000-05) in our analysis. As far as the five all-time-optimal crops (Basmati rice, IRRI rice, onion, gram and potato) are concerned, these crops are expected to withstand globalization with the exception of gram. Similarly, the six most-of-the-time optimal crops (mung, sorghum fodder, millet fodder, wheat, rapeseed/mustard and berseem) withstand globalization with the exception of mung. Hence, cultivation of gram and mung on large areas may not be viable in the wake of falling prices. As far as six altogether sub-optimal crops (sugarcane, maize and maize fodder, sorghum, millet and barley) are concerned, these crops would not withstand globalization, nor do they appear to be capable of benefiting from WTO trade liberalization induced high prices. Hence price incentives would not be recommended for these crops; instead efforts should be made to improve their optimality through improving technology. Seed cotton and tomato crops do not withstand globalization. WTO trade liberalization induced high prices are expected to work for seed cotton, but not for tomato. Hence, efforts to improve the optimality status of former crop should be made using price incentives as well, while for the latter crop, efforts should concentrate on improving productivity