South Asia Research and Analysis Studies

Ensuring the success of agriculture
S M Hali

The fertiliser industry is the backbone of Pakistanís agro based economy and continues its supportive role through the supply of fertilisers at hugely competitive prices to the farming community

Pakistanís economy is dependent on agriculture since 67 percent of the countryís population resides in rural areas and is directly or indirectly linked with agriculture for its livelihood. Agriculture accounts for about 25 percent of its GDP and employs about 43 percent of the labour force. Pakistanís most agriculturally rich province is Punjab, where wheat and cotton are high yield crops besides having superior quality of oranges. Mango orchards are mostly found in Sindh and Punjab provinces, making Pakistan the worldís fourth largest producer of mangoes. As per a latest report by the UN Food and Agriculture Organisation (FAO), Pakistan is one of the 10 major producers of wheat in the world with an average of 24 million tonnes output per season. Pakistan has a total land area of 80 million hectares. Of this, 22 million hectares are used for crop production. About 18 million hectares (80 percent) of the cultivated land is irrigated while the remainder is under arid farming.
The importance of agriculture cannot be underscored since it feeds the whole rural and urban population of Pakistan besides exporting wheat, rice, pulses and vegetables to Afghanistan. Realising its importance, Pakistanís planners and policymakers are keen to provide support to farmers and enhance the annual yield. High quality seeds, superior fertilisers, abundant water supply, sunshine and timely use of pesticides ensure good crops. The fertiliser industry is the backbone of Pakistanís agro based economy and continues its supportive role through the supply of fertilisers at hugely competitive prices to the farming community as opposed to international rates. The driving force to promote fertiliser product is to overcome food crises through increasing per acre yield from decreasing cultivatable land.
Pakistanís fertiliser industry comprises of the Fauji Fertiliser Company (FFC), Engro, Dawood Hercules and ICI. Of these, FFC merits mention since it is one of the success stories of Pakistanís public sector enterprises (PSEs). In a bleak milieu, where PSEs are incurring huge annual losses, FFC is not only the market leader, being the largest chemical fertiliser producer of Pakistan, it is amongst the highest contributories to the national economy. It was established as a joint venture between Fauji Foundation Pakistan and M/S Haldor Topsoe A/S Denmark in 1978, where Fauji Foundation holds the majority shares and leads the board.
The Privatisation Commission of Pakistan and the Prime Ministerís (PMís) committee that is evaluating the performance of 69 state sector companies has concluded that the annual losses incurred by PSEs are more than Rs 500 billion. Amidst this depressing statistic, FFC stands out as a whiff of fresh air since it is not only earning profits but 98 percent of the profits are offered to the shareholders. Its 57 percent shares belong to the general public while the remaining 43 percent shares are being maintained by the Fauji Foundation. FFCís tax contribution in the year 2013 was Rs 43.5 billion, the tax paid from 2009 to 2013 was Rs 142 billion whereas the aggregate tax contributions from its inception to the end of year 2013 were Rs 247.9 billion. FFC has been amongst the top 25 companies at the Karachi Stock Exchange (KSE) since 1994 and has been declared number one in 1997, 2010, 2011 and 2012.
The secret of its success lies in its endeavour to diversify and pay back to society. In energy starved Pakistan, FFC has pioneered wind energy by setting up a 50 MW wind power project at Jhampir in Sindh, which provides clean, green and sustainable energy to the national grid. The success of the project has invited huge investment in the wind energy sector for Pakistan.
Natural gas, one of Godís gifts to Pakistan, has multiple uses. It is a feed product in fertiliser production while motor vehicles utilise it as an alternate fuel, besides domestic consumption of heating and cooking. In transportation and domestic uses, natural gas can be substituted by alternate sources but in fertiliser production gas is the main ingredient with no alternate or substitute. Pakistanís agro-based economy should take cognisance of this obligation while formulating its national gas distribution and subsidy policy.
In the field of education, FFC has adopted and assisted over 50 government schools and colleges through infrastructure and educational and teaching support, catering to about 15,000 boys and girls students. Annually, more than 250 students are awarded scholarships for institutions such as LUMS, Wah Engineering College, FC College and Cadet College Gothki. In order to sustain the health sector, FFC has made numerous contributions, including grants to various hospitals, establishing coronary care units and burn units, and running free medical camps for deprived communities throughout Pakistan. A notable involvement has been in disaster relief and rehabilitation, especially in Balochistan and Sindh.
It is small wonder then that the Privatisation Commission recommends other PSEs to emulate FFCís best practices and turn around their organisations to profit earning units rather than lingering behind.