Livestock insurance: Farmers not educated enough to derive benefits

The State Bank of Pakistan, in association with the SECP, has developed a framework for livestock insurance for borrowers. PHOTO: FILE

KARACHI: 

According to a Food and Agriculture Organisation (1997) report, the best buffaloes are available in Pakistan, which have been termed ‘Black Gold of Asia’ and average yield per lactation has been recorded at 1,800 to 2,500 litres while few species can produce up to 6,000 litres in 305 days.

There are about 25 and 27 million cattle and buffaloes respectively in the country. The Landhi Cattle Colony is the world’s biggest concentration of buffaloes/cattle at one place. This colony, which is usually referred to as Bhains Colony, has a dairy animal population of about 400,000 with a daily yield of about four million litres of milk.

Dairy and livestock production consists of 55% of the country’s total agriculture production and contributes 11.04% to the GDP. But unfortunately this sector has been ignored by banks and lending agencies and the major reason for the low credit offers is inadequate availability of appropriate insurance cover.

Naturally, no bank will lend money to a person or an organisation without covering the risk factor because inadequate risk management can result in severe consequences for companies as well as individuals. Bank financing for the livestock, dairy and meat sector was only Rs56 billion, constituting just 17% of the total agriculture lending in the current fiscal year.

To solve this problem, the State Bank of Pakistan, in collaboration with the SECP, banks, insurance companies and provincial livestock and dairy departments, has developed a framework for livestock insurance for borrowers. The idea is to improve provision of finance to the livestock and dairy sector by minimising the risk of loss.

The scheme would safeguard the interest of farmers in case of death of their animals – buffaloes, cows and bulls – due to disease, accident, flood, heavy rains and storm. Under the scheme, banks will obtain insurance of all livestock loans up to Rs5 million for the purchase of animals. The SBP has advised banks to implement the scheme and enter into agreements with reputable insurance companies for underwriting livestock insurance for their borrowers.

The central bank will also request the government to bear the cost of insurance premium for small farmers through budgetary support as is being done under its mandatory Crop Loan Insurance Scheme for five major crops.

This is undoubtedly a very good decision and will definitely help modernise cattle farming in the country. But are the cattle farmers educated enough to derive benefits from this scheme? No. Most of those involved in the business of cattle farming are not qualified enough to understand the importance of developing a fully-equipped modern cattle farm.

There is a need to publicise the scheme, educate them and persuade them to develop farms on modern lines. Mere introduction of the plan will not result in any progress unless the farmers understand the benefits of the scheme.

Schemes developed with lot of research, series of consultations and visionary planning cannot be translated into reality unless they are based on facts like target area, behavioural pattern of the ultimate beneficiary and prevalent socio-political scene of the region.

It is, therefore, necessary that a comprehensive plan for effective implementation of the scheme be prepared and a team of banking counsellors be set up to educate the cattle farmers and disburse loan to them.

It is very unfortunate that despite the important role of livestock in Sindh’s economy, it has not yet received required attention from the planners. There is a need to motivate the thinking of professional economists and owners of livestock in rural areas of Sindh with a view to finding ways and means to increase the per lactation yield.

Although per animal milk yield is lower than other countries, Pakistan is the third largest milk producing country in the world. Increase in milk production is due to increase in quantity of livestock population. It is, therefore, important to introduce improved technological methods in dairy farming to enhance per animal milk production and meet international market standards.

Huge losses are faced by the farmers due to improper transportation, unavailability of interconnected cold storage chains, etc

Energy giant: Bid to privatise OGDC raises questions

According to the financial results, OGDC made a profit of Rs90 billion in the last financial year and contributed Rs129 million in taxes to the national exchequer. PHOTO: FILE

KARACHI: The government looks determined to implement the ‘reforms’ programme associated with the fresh loan agreement with the International Monetary Fund, in which putting privatisation on a fast track is a key part.

After signing a structural adjustment programme in the late 1980s, the privatisation of state-owned enterprises, though, had been the priority of successive governments, the pace of privatisation had remained very slow in recent decades. Now, the PML-N government, which is widely believed to be business and investment-friendly, is committed to privatising some loss-making enterprises along with profit-earning giants like Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL).

Apart from poverty alleviation and clearance of state debts, the prime objective of privatisation is to earn profit. So people ask why the government is initiating the process of selling the major oil and gas producer, OGDC, which is the most profitable organisation in the public sector.

According to the financial results, OGDC made a profit of Rs90 billion in the last financial year and contributed Rs129 million in taxes to the national exchequer. Similarly, it contributed Rs5 billion to the state budget. Keeping this in view, can we justify the privatisation of OGDC.

The second argument in favour of privatisation is that the change in ownership from the government to the private sector will bring improvement in the efficiency of the profit-making organisation. This may be true anywhere in the world, but in this country it is fraught with concerns.

Corruption is a major cause of mounting losses in state-owned enterprises, so the government may go for tackling corruption, instead of privatising the companies.

Not only this, corruption also occurs during the process of privatisation. The decision of the Supreme Court cancelling the privatisation of Pakistan Steel Mills, where the value of the entity’s land was higher than the privatisation bid is one of the examples, showing that the privatisation process could lead to corruption.

The government has opted for an easy way out – selling state assets by privatising the oil and gas industry players to repay the country’s debts and reduce poverty. Instead, it should improve its fiscal conditions by increasing revenue collection. Why not the government steps up efforts to generate more taxes?

The privatisation of the oil and gas sector is also opposed in the context of global scenario as some experts argued in newspaper reports two years ago that three quarters of the world’s oil reserves were held by state companies and two of the 10 biggest oil companies were state-owned because securing access to natural resources was a fundamental pillar of national security.

The analysts agreed, while quoting a story published in The Economist, that ownership in a capitalistic economy was irrelevant to profit generation.

Pakistan is facing multidimensional challenges on the economic front in an era where the slogan of globalisation is considered a tactic to take control and exploit the resources of the developing world. In this regard, focus must be on the national and financial security of the state before going for privatisation of profitable state-owned enterprises in global capital markets

Carmakers eye a return to Iranian market

Renault, present since 2004 in Iran, sold more than 100,000 cars in 2012. PHOTO: FILE

TEHRAN: 

Major carmakers and parts suppliers showed up in Tehran to assess the Iranian market’s ‘considerable potential’, just one week after Iran’s historic nuclear agreement with world powers.

The International Conference of the Automotive Industry, the first such event in Iran, brought together more than 150 companies from around the globe, according to organisers. The key industry has been battered for more than a year by Western sanctions on Iran over its nuclear programme.

Industry Minister Mohammad Reza Nematzadeh said he wanted “more cooperation with foreign companies,” including French manufacturers Peugeot and Renault, both of which have had a long history of doing business with Iran. Nematzadeh said he hoped for the lifting of sanctions on the car industry “by the end of December.”

Iran and world powers reached an interim deal last week in Geneva, with Tehran agreeing to partially roll back its nuclear work in exchange for limited sanctions relief, including measures imposed on the car industry. In 2011, Iran had the 11th largest car market in the world and was the 13th automobile producer.

Patrick Blain, president of the International Organisation of Motor Vehicle Manufacturers, told AFP of ‘considerable potential’ in the Iranian market. “There is no reason not to come back,” he said, adding that Iran can manufacture 1.6 million vehicles in 2014, the same number as it produced in 2011.

He highlighted the low car saturation rate of 89 vehicles per 1,000 people, less than China, in a country with a population of nearly 77 million and a yearly per capita GDP of almost $12,500.

Gilles Normand, director of operations for Renault in the Asia-Pacific market, said the Middle East represented a “future market” for all manufacturers.

In Iran “50 per cent of the fleet of over 20 million vehicles is more than 25 years old,” said Normand, whose company’s activities in Iran have been severely affected by US sanctions.

Renault, present since 2004 in Iran, sold more than 100,000 cars in 2012, accounting for 10 per cent of the market. Peugeot, which left Iran in spring 2012, sold 458,000 vehicles the previous year in Iran.

The French firm has renewed ties with its longstanding partner, Iran Khodro, said a source within Iran’s top car manufacturer. “We had good talks,” the source told AFP.

Sasan Ghorbani, the conference organiser, said government officials “were very clear about their support for foreign investors.” “There have been very good meetings here that will lead to future agreements,” he told AFP.

But for participants, the economic recovery can only materialise if sanctions are eased and curbs lifted on financial transactions as quickly as possible.

Normand said he preferred to wait for implementation of the agreement signed in Geneva, expected to come into force in January.

“We have a pragmatic policy, we respect international sanctions,” he said, while adding that talks with suppliers were underway to resume operations in Iran.

Gas import projects: Country must woo foreign investors

As a policy, US and many EU countries have been promoting the use of gas to reduce reliance on imported fossil fuels. PHOTO: FILE

ISLAMABAD: Compressed natural gas (CNG) has been used as a vehicle fuel for decades. At present, about 5 million vehicles are estimated to be running on CNG worldwide. Many countries including India and Bangladesh don’t have any indigenous substitute for gasoline and they lack proper gas infrastructure, but still they sell CNG at lower prices compared to Pakistan despite importing liquefied natural gas (LNG) and paying for conversion for its use in vehicles.

As a policy, US and many EU countries have been promoting the use of gas to reduce reliance on imported fossil fuels due to uncertainty in the supply chain and to save foreign exchange.

Pakistan became the largest consumer of CNG in the world in 2011, overtaking Iran, Argentina and Brazil in the number of vehicles using gas as fuel and replacing the more polluting fuels. With 21% of vehicles converted to CNG, Pakistan is way ahead of India that has little over one million vehicles converted to CNG, Italy which has 730,000 vehicles on CNG and China 450,000.

In 1964, average daily supply of natural gas in Pakistan was around 47 million cubic feet per day, which now stands at 3,800 mmcfd.

Natural gas is also a fuel of choice for power generation due to it being cheap, environment-friendly and high efficiency of gas turbine-based combined cycle equipment.

Natural gas is a dominant fuel, accounting for 47% of the primary energy demand in 2007. Since 2000, natural gas and petroleum are the main sources of energy, accounting for 50% and 29% of the energy consumption respectively. Nevertheless, the consumption of petroleum products is decreasing because of increase in their prices.

As natural gas is the cheap and cleaner alternative energy source, it is important and timely to investigate the linkage between gas consumption and economic growth. Pakistan needs to ensure that this source of energy is able to cater to the growing demand.

However, the gas demand and supply projections indicate a gap of around 1,700 mmcfd, so any commitment of additional gas supplies to industries in the long run seems to be impossible.

This may be possible through IP and TAPI gas pipelines, which could take a considerable time. To cover this gap, an alternative is LNG import, for which there are plans to bring 3.5 million tons per annum (around 500 mmcfd).

Pakistan has a huge potential to attract foreign investment in gas import projects as demand for energy increases consistently and existing infrastructure for gas distribution promises maximum profits.

It is imperative that an appropriate natural gas policy is framed to improve energy efficiency that aids economic growth. Being one of the largest users of condensed natural gas, Pakistan should also increase investment in infrastructure and technology development.

It should intensify private-public partnership which ensures a more reliable supply of gas, operational efficiency and better distribution. A commitment to increasing gas exploration, attracting investment and providing incentives would ensure sustainable supply of gas to propel the economy. This would also ensure that the price for locally produced gas is kept at an affordable level.

Profile: Motorcycle giant planning to expand

Big player: 47% is the current market share of Atlas Honda in all categories due to induction of Japanese technology. PHOTO: FILE

LAHORE: 

The motorcycle industry in Pakistan has recorded strong growth over the past decade, mainly due to increased urbanisation and induction of many new players in the market who are manufacturing and providing motorbikes at much cheaper prices, but nobody has been able to beat the market leader, Atlas Honda.

Despite tough competition, Atlas Honda, a sister concern of Atlas group of companies, enjoys the lead in its 70cc and 125cc segment. Although the company faced lesser sales initially after other companies entered the two-wheeler market, the cheaper bikes helped Atlas Honda to once again boost its sales graph.

The company, which has invested to expand its production capacity up to 500,000 units, is now planning to further expand its premises adjacent to the Sheikhupura factory, but this time for painting spares and accommodating the products of vendors, who are doing business with the company worth Rs20 billion annually.

“In the last decade, the motorcycle industry of Pakistan posted a solid growth of 35%, in which 70cc bikes accounted for 80% of the total bikes produced,” said Afaq Ahmad, General Manager Research and Development Atlas Honda, while talking to a group of journalists who visited the company’s production plant at Sheikhupura.

According to Ahmad, the market share of 70cc bikes is shrinking and demand for more powerful bikes is on the rise mainly due to the interest of younger generation in powerful bikes coupled with rising demand from urban cities. Atlas Honda is still a major market player, currently enjoying 47% of the market share in all categories due to induction of Japanese technology.

The company sold 630,063 units in the 12-month period ended March 2013, up 5% compared to the corresponding period in the previous year. Total production capacity of the company is 750,000 bikes annually.

According to Ahmad, the company produced one million bikes since its inauguration in 1962 to 2002.

However, as demand rose in the beginning of this decade, the company produced another million units from 2002-2005.

“In the last two years, we have produced another million units and we expect this demand to rise further,” Ahmad added.

The company is regularly opting for technology transfers and currently 94% of the parts and accessories for all five of its products are produced in Pakistan, either in Sheikhupura or in Karachi in the company’s plants. However, the company imports raw material to manufacture these parts locally.

During the last few years, the company has introduced new models of 70cc and 100cc bikes. “In the last two years, we have localised 150 parts, which shows our commitment to the country,” he said.

Revenues of the company are also peaking. The company posted record sales of Rs42.3 billion in fiscal year 2012-13, up 11.3% compared to the previous year when they were Rs38 billion. The company attributed this to volume growth, better sales mix, cost cutting and other improvement measures.

Ahmad claims that the group contributed Rs25 billion to the national exchequer in fiscal 2012-13, out of which Atlas Honda contributed Rs8.08 billion.

The company is operating its plant at 80% efficiency to meet the demand. The company operates in two shifts, which produce a single unit after every 26 seconds. The company is producing 1,950 bikes daily in Sheikhupura and 500 bikes in its Karachi plant

Energy solutions: Hydroelectric power – the way forward

The new government has announced that the Diamer-Bhasha Project has the highest priority. Efforts should be made to start the construction of Bhasha and almost simultaneously Dasu 4320MW. Bhasha would also increase the life of Tarbela by 30-40 years. PHOTO: FILE

ISLAMABAD: 

It really would be a cliché to say that the country requires more electrical power. For a long time, authorities have complained of shortage — the issue dragging on such that we feel that nothing can be done about it.

But there is a solution. To produce electricity, coal, wind, solar power can all be used. But given the magnitude of our requirements there is only one source — our hydroelectric potential of over 60,000 megawatts. Only by recognising this and pursuing the project, can there be abundant and affordable electricity.

As a member of the Planning Commission‘s Energy Working Group in 1990-1991, I identified 42 projects to produce over 40,000MW. I kept on striving for these hydroelectric projects at various seminars and conferences, and these were incorporated into a programme in the Water and Power Development Authority’s (Wapda) ‘Vision 2025’.

Wapda was established for the integrated and multi-purpose development of the water-power resource. Under Ghulam Faruque, I belonged to a small group of engineers that formed the nucleus of the organisation in 1958. It soon became Pakistan’s largest development organisation with world-class engineers. Projects were completed on time, within stipulated periods.

Role of hydroelectric resources

As early as 1975, it was realised that economic development needed to be accelerated with hydel development. In 1975, a national conference was organised in Lahore. This was chaired by the then Minister of Water and Power Yusaf Khattak with Wapda and concerned federal secretaries along with 200 engineers taking part.

In my keynote address, I emphasised on two issues. First, that since Tarbela was near completion, we should immediately undertake the process of constructing two major hydroelectric projects on the Indus and to take up the installed capacity to 12,000MW by 1982. Second was that the selection of these two projects should be undertaken through a ranking study by a reputable international consulting engineering organisation.

My paper was accepted as the conference recommendation and the ranking study was finally completed in 1984, by the reputable Montreal Engineering Company. They ranked nine projects on the Indus, prepared and completed a detailed feasibility study of the top-ranked Bhasha Dam and hydroelectric project in 1984.

Since they had not ranked Kalabagh, the Kalabagh lobby practically blacklisted them. However, a separate consulting engineering firm prepared and completed the feasibility study on Kalabagh, also in 1984.

Since then, we could have built the three non-controversial mega projects, Bhasha, Dasu and Bunji to add 16,000MW power. But by stressing only on Kalabagh, not allowing construction of the other non-controversial mega projects, and impeding hydroelectric development, we have been faced with an inadequate power shortage, as well as over dependence on oil-powered and inefficient thermal power IPP’s coupled with their unaffordable cost.

After many years of delay, work started on filling the gaps in Bhasha’s feasibility study. By 2005, the design and engineering documents were ready but to please the Kalabagh lobby, Bhasha was delayed.

No further feasibility of the Bhasha is needed now and we must not fall into the trap of asking for more funds.

The way forward

The new government has announced that the Diamer-Bhasha Project has the highest priority. Efforts should be made to start the construction of Bhasha and almost simultaneously Dasu 4320MW. Bhasha would also increase the life of Tarbela by 30-40 years.

We are not in a position to add 23,837MW by 2015 but hydropower can be our salvation in the power sector — the only indigenous and abundant resource that can make electricity affordable and cheap enough to cost around Rs2 per unit.

Electricity from coal is Rs10, furnace oil over Rs16, gas over Rs4 and wind about Rs14 per 30,000MW in 10 years. It is imperative that we proceed and accelerate through hydel projects and this can be done if the government produces the will and commitment to pursue them.

The writer is a former chairman of the Planning Commission Working Group on Hydropower and Alternate Energy

Why are public officials transferred so rapidly?

The writer served as deputy chairman of the Planning Commission from 2010 to 2013

Democracy is more than mere elections. Our elected leaders have to be kept in check. They have no divine right to power. One such check is an independent, professional, honourable and reasonably satiated civil service. While there are many items that go into making such a civil service and Ishrat Husain’s report is a step in that direction, here I want to focus only on one item — the prime minister’s (PM) power to transfer and appoint everyone in the system. This is archaic and inefficient, and it must be done away with.

During my three-year tenure as deputy chairman of the Planning Commission, five of my secretaries were changed by the PM without the courtesy of consultation with me. Similarly, I saw five new secretaries of finance and the finance minister had no say in the matter. While the power sector was in a mess, we saw about five secretaries change again, with not a care or a thought. And none of them was a professional.

At one point, when I raised this matter with some senior secretaries, the arrogant answer I got was that the PM should have this prerogative — to change whoever he likes. When I pointed out that Barack Obama and David Cameron do not act in such a way and in fact, most civilised countries do not give their PMs this discretion, they looked stunned. This thinking must change; the PM should not have this arbitrary authority.

The wooden boards in most offices show names of officials who served in those offices, as well as the dates of their tenure. Most officials are lucky if they remain in a position for more than a year. Secretaries are rotated out almost on a yearly basis, customs officials are lucky if they last a few months and the director cooperatives board is moved so rapidly that he probably remains in a daze.

Why do we have such quick transfers? The explanation is a combination of the following four factors: 1) Each of these offices confers a certain power and privilege and in some cases, even possibly certain pecuniary advantages. Quick transfers may be an egalitarian method of sharing these advantages; 2) Longer tenures could make the officer more entrenched, increasing corruption and power gains, and possibly, even making it difficult to remove him/her. Quick transfers would prevent anyone from becoming too powerful; 3) Longer tenures could also create a sense of pride in the job, leading the officers to improve the situation to the detriment of those that follow. Quick transfers would, therefore, keep the rent-seeking equilibrium stable. 4) There is a stable group around any leadership that is strengthened by these quick transfers. Key secretaries, such as the principal secretary and the finance secretary, are relatively more stable. Their role is obviously strengthened by these quick transfers.

Do these quick transfers affect efficiency of the department? No, because in every job, there is a learning content. Management specialists say that a person takes a few months to a year to learn the job. Every job also has a creative content in that the incumbent can, once having learnt the job, develop better methods of doing the job. Learning by doing in a job and innovation through such learning often results in productivity improvements and reforms. If both these internationally-proven facts also apply to Pakistan, then certainly these quick transfers are detrimental to efficiency.

Transfers are a colonial legacy. Nowhere in the advanced countries do you have the concept of transfers. Most civil services do not have common cadres. Each department employs, trains and manages its own staff. No transfers are forced on any official to arbitrarily move either location or department. As a result, employees are happier and specialise in their respective areas.

Civilised countries have a better approach to transferring and appointing bureaucrats without making them totally hostage to politicians. We must learn from them