Prime Minister Nawaz Sharif has announced a Rs.341 billion relief package for small farmers, aimed at inspiring confidence in the agriculture sector. Addressing the Kisan Convention in Islamabad, the PM said that farmers would receive Rs147 billion as direct benefits, while Rs194 billion would be allocated for agriculture loans. The relief package has been designed in four parts, with the first part being direct financial cooperation for farmers, second being relief in agricultural costs, third being provision of agricultural loans and fourth being facilitating the process of obtaining loans. This package seems too good to be true; and that’s exactly what it is.

This package provides interest-free loans to farmers who own 12.5 acres or less land for the installation of solar-powered tube-wells or conversion of existing tube-wells to solar system. With a view that farmers should have the facility of insurance for their fields, but since most small farmers cannot afford to pay insurance premium, the government has also decided to pay premium for the farmers, the prime minister announced. This is a welcome step and shall lend some breathing room to the growers in tough times of low commodity prices. However, there is nothing mentioned in the relief package on the way the money will be transferred. Knowing history, chances are that part of the subsidy will be drained in the process. Experts suspect that middlemen may pocket a sizeable chunk of the cash disbursements.

In an attempt to modernize farms, the government has reduced import duty on farm machinery from 43 percent to nine percent. This will encourage large farmers to import more machinery and will improve their yield. However, it is unlikely to help small farmers who lack the financial muscle to import expensive machinery.

Instead of doling out cash, the government could have provided some subsidy on urea, free seeds, very easy loans, better irrigation facilities and support for buying local machinery. As long as inputs prices are not reduced, the sector will continue facing problems. Agriculture needs reforms, rather than cash handouts. Nawaz’s opponents seem to think that the government is putting real issues under the carpet and doling out money to get elected again. This might not be so far from the truth. The relief is not as much as it sounds from the headline. However, given the fiscal strapped position of the government, it is a good move. The political gains are obvious as farmers plan to have their representatives in each constituency for local body elections. It seems that the PML-N government just wanted to win their hearts, and they did it just in time.