Agriculture plays a prominent role in Pakistan’s economy. More than half of the country’s population is directly or indirectly dependent on agriculture and it contributes a major share to the national exchequer. However, agriculture is today passing through a crucial phase as plight of the farmers is aggravating with every passing day. Bureaucracy and political leaders, instead of preparing them to face the situation boldly, are creating unnecessary panic among the ignorant farming community.
Inflationary pressures
Pakistan is in a peculiar situation today. The fiscal deficit is high, debt is increasing, growth is minimal and unemployment is on the rise. The mounting debt and liabilities are being used for non-productive expenditures. Hence, the first and foremost task for the government is to control inflation in order to make life easier for the poor and put the country back on track for growth. Most of the inflation in Pakistan is being contributed by high food costs. Cumulative increases in some essential food items have been over 100 per cent.
A major factor in controlling food inflation would be to enhance agricultural yields. All crops should have price floors and ceilings, bearing in mind international subsidies and the prices of domestic agriculture inputs and outputs. Focus should be on value-added agriculture and farming, like fruits, vegetables, flowers and livestock. Research institutions should be developed in the agriculture and farming sector for crops, fruits, vegetables and livestock through public-private partnerships where state-of-the-art research should be pursued.
Support to farmers
Support to the small farmers is essential, both financially and technologically. This can be accomplished through public-private partnerships providing services like seeds, fertilisers, rental tractors and bulldozers, and consultancy on modern agriculture techniques. However, given our agriculture’s pathetic condition, the Agriculture Development Bank of Pakistan, a premier institution to gear up the financial sector by providing financial assistance to the farmers, has miserably failed to come up to the expectations. This sole lending financial institution is now in a mess because non-technical and non-merit leadership at present is just surviving on recovery of outstanding loans from farmers. The government’s claims of giving agriculture its due share in the economy have proved to be a tall talk. Non-availability of credit facilities has ultimately ruined the farmers.
Farmers are totally indifferent to agricultural costs. They neither conduct any cost-benefit analysis nor do they believe in keeping accounts. Whatever they get, they simply call it their fate. Owing to small land holdings they cannot derive the benefits of the economy of scale. Ego and pretensions of the farming community have also worsened their problems. In this scenario, it is important to analyse what agricultural costing and accounting can do for farmers.
Lack of business techniques
Agriculture is still not being undertaken on commercial lines and prudent business principles. The reason is that farmers neither keep accounts relating to agriculture nor do they apply any accounting techniques to control costs. Agriculture is now turning to be an industry and profession.
That is why it becomes important to apply accounting techniques and principles just as for any industry and business. Account keeping will not only be helpful in determining exact costs, but will also be instrumental in controlling them. The best crop cycle may be adopted by doing a cost-benefit analysis for each crop. A reserve may be created for the replacement of fixed assets like tractors, tubewells, threshers, etc. However, it is important to note that a standardised accounting system to record agricultural transactions is yet to be developed in our country whereas in advanced countries fully developed computer softwares are available for the purpose.
Agricultural transactions
Since, most agricultural transactions are exchange transactions, such dealings have to be converted into money value and then transferred to respective accounts. Self-produced goods are also valued likewise. Correct valuation of such transfers is also required. The produce used for personal use is also to be accounted for. Budgeting may also be helpful for earning good profits in agriculture.
After a survey of several small and large farmers in Islamabad and Rawalpindi rural areas, it was found that most of them were ignorant about agriculture costs and accounts.
If a farmer was asked about his income from agriculture, his answer would be that he had a crop of Rs50,000. He treats the whole receipt from the sale of the produce as his income without accounting for costs. Another phenomenon is that at the time of sale of his produce, a farmer clears his old debt, raises a new debt and feels satisfied that he has no outstanding dues from previous years.
Generally, a farmer never thinks about the expenses incurred on the crop, and if he does think about them, it is only about the amount spent on seeds, pesticides, manures and electricity; he never thinks about the costs of land and self labour. The concept of depreciation remains totally outside his purview. He does not take into consideration the accounting assumptions and techniques relating to fixed assets.
Disguised unemployment
Disguised unemployment is another factor that remains untouched because of non-maintenance of accounts. Mostly the whole family of a farmer works in the fields directly or indirectly, but he never evaluates this labour. If a thorough analysis of the matter is done, he will find some of the members as an economic burden. It is a fact that efforts and outcomes of farmers are generally disproportionate.
No distinction is generally made between the personal and agricultural transactions of a farmer. The produce consumed at home is also not accounted for. Whatever is paid to the workers in the form of produce is not valued in terms of money and accounted for. A farmer considers it below his status to account for things used for domestic purposes. But this approach is against the concept of a business, which states that the entity of the business and the businessman is different and all transactions are recorded accordingly. Such an approach is needed in agriculture too, if it is to be carried on commercial lines.
Where should we start?
In the beginning, only such a system of accounting can be implemented as it is easy to understand and simple to adopt. A beginning in this direction can be made by preparing a simple cashbook account of each crop, livestock, expenses, net profit and loss and, finally, the balance sheet. Most agricultural transactions are cash-based and the receipts and payments can be entered in the cashbook. Depreciation can be charged on farm machinery and buildings. Expenses incurred to make the land cultivable can be considered part of the costs of land. The produce used at home and given to workers may be treated like business accounts. So the principles of a double entry system may be applied with a slight difference.
It can be said without a doubt that once our farmers consider account keeping and become cost conscious, they will become truly commercial and agriculture will become a lucrative business. The government should play an important role in this direction by providing relevant training to farmers in order for them to be more beneficial for the country. The task ahead is daunting. The roadmap to progress and prosperity is clear.
The writer is a freelance journalist based in Islamabad and can be reached at [email protected]
