Volume 2, No. 8, August 2020
Editor: Rashed Rahman
The Pakistan Tehreek-i-Insaaf (PTI) government came into power riding the high horse of an anti-corruption campaign and gave the impression that once they are in the government, they would offer solutions to all the problems, including the economic situation. They had also claimed that they would not go with a begging bowl for bilateral and multilateral foreign aid, which clearly showed the lack of capacity of the PTI leadership to understand the economic challenges faced by the country.
Today, the PTI stands for doing all that for which they scathingly criticised the Pakistan Muslim League-Nawaz (PML-N) government. It also shows that because of this lack of capacity, they were perhaps not sure that they would get the government in the Centre. Had they spent some time in the conference room of the PTI head office trying to analyse the policies seriously and objectively instead of standing on the high stage pulpit of their container and shouting out untenable solutions to the economic problems, they would have been in a better position to deliver.
Even their godfathers in the establishment did not objectively realise the serious economic challenges faced by the country. Instead, they destabilised the government at a time when it was in the thick of an economic whirlpool. They jumped on the previous Chief Justice of Pakistan Saqib Nisar’s bandwagon and joined the donation campaign initiated by him for the construction of the Diamer-Bhasha dam.
The Naya (New) Pakistan Prime Minister (Imran Khan) could have easily raised the money by introducing a dam tax in addition to the Abiana (water tax). As it is, we have been told many times by the international agencies that existing Abiana rates for the canal irrigated land are very low – they don’t even meet the maintenance cost of the irrigation infrastructure.
For example, the rate of Abiana for the rice crop in Sindh, where water is consumed in abundance, is just around Rs 89 per acre for most canal irrigated areas; for wheat, it is between Rs 39 and Rs 53 per acre for the majority of the canal irrigated areas; for fruit orchards, it is around Rs 142 per acre for both Kharif (autumn harvest) and Rabi (spring harvest) crops; for cotton, it is between Rs 80 and Rs 93 per acre for most canal irrigated areas, while for sugarcane it is between Rs 137 and Rs 181 per acre. The Abiana rates for canal and tubewell irrigated agricultural land is not much different from Sindh in the other provinces.
The government has to subsidise the farmers every year. The government should increase the Abiana rates on the more than eight million agricultural farms in the country.
Almost 90 percent of water in our rivers is consumed by agricultural lands. So if the government can be bold enough to levy a dam tax on the agricultural water users with the promise that it would be withdrawn once the Diamer-Bhasha Dam is built, I don’t think there would be much opposition to this levy. This dam tax should be levied through an act of Parliament, which should clearly mention that it would be withdrawn once the dam is built.
The government should also separate the cost of power generation plants from the dam so it can raise the money from the local banks by making a proper marketable business feasibility. As it is, the foreign multilateral banks have shied away so far from financing the Diamer-Bhasha Dam because of Indian pressure, which says that it is a dam on the disputed territory of Gilgit-Baltistan (G-B), which was once a part of Kashmir. The people of G-B had fought for independence from the Kashmir state in 1948, and joined Pakistan on their own accord. Therefore, India’s claim on this territory is not tenable.
By debundling the power generation plant cost, which is around $ 4 billion, the government would not be burdening the agriculturists for this part of the project cost. It would be able to pay back the loans from the profits of the electricity produced by the dam.
Though the Council of Common Interests (CCI) has given its blessings to the construction of the Diamer-Bhasha Dam, experts are worried that it would lead to further reduction of the water that should be released from the Indus Delta into the sea for environmental reasons. The 1991 Water Accord provided that 10 Mega Acre Feet (MAF) water will be allowed to flow down from the Delta into the sea to keep it from encroaching onto the land and to ward off desertification. At present, only 4-5 MAF of water flows down from the Kotri Barrage, creating serious environmental problems.
The trouble is that we are not thinking about conservation of water as a part of the overall water strategy. The focus, instead, is on dams. What we don’t realise is that the availability of water in the Indus system has historically not been more than 145 MAF. Thus, the emphasis on water conservation is essential – perhaps more than building the dam.
According to some experts, more than 40 percent surface water is wasted by way of evaporation and seepage from canals that at times results in water logging and salinity. Many years back, in the 1980s, I met two Indian businessmen who said that they make special coatings that are laid under the bricks of the canals in East Punjab to save the land from water seepage. They were interested to export or set up a plant in Pakistan, but when I broached the issue with the then agriculture secretary, he said, “We are not allowed to have any relationship with Indian businessmen.”
At the same time, Pakistan is not applying the benefits of drip irrigation and sprinkler technology. The present government doesn’t have to go far to know how to conserve water at the fruit orchards and farms as their own Jahangir Tareen Khan has employed these technologies at his farms.
In Malir, the Pakistan Agriculture Research Council (PARC) had installed a drip technology pilot project, but, as happens in most government pilot projects, the Sindh agriculturists didn’t know about it till a few years back. The interest among the agriculturists and the irrigation departments about water conservation is low because the water rates are ridiculously low as stated above and the government pours in subsidies on the pretext of supporting the poor farmers.
In the cities, a water metering system should be installed so that people pay according to usage. The rich have lavish sprawling lawns and the poor have no access to drinking water.
The actual test of Imran Khan and his designated Finance Minister, my friend Asad Umar, would be to arrest the decline in the economy. The major challenge as everybody knows is to control the current account deficit. According to the last government, the current account deficit swelled to $ 80 billion. We are told that the import bill had soared mainly because of two factors — a hump in machinery import because of China Pakistan Economic Corridor (CPEC) projects and the rise in oil, gas and palm oil imports. The puzzling question here is, wasn’t China supposed to fund the machinery as a part of the CPEC investment? If that is the case, then how come it is said that we have to pay the amount for the machinery upfront like regular imports? The machinery imported under CPEC had to be financed by the projects they are meant for and that too over the course of some years. These questions should be asked by the PTI team.
There are also chances of the Chinese companies over-capitalising their projects and particularly the imported machinery that is going to come from their country. This can only be checked by a vigilant economic team that is not mesmerised by the promise of a $ 62 billion investment.
The next important economic challenge before the Imran Khan government is to stop the haemorrhaging of public sector organisations. The PTI manifesto does not talk about the privatisation of these public sector organisations. It promises to first turn around these companies by employing professional management that is not swayed by political demands. This is also an old unsuccessful mantra we heard in the Ziaul Haq era.
Imran Khan’s team should keep in mind that if anything is privatised, it should not be more than 51 percent so that the profit can be kept within the country, adding to its capital receipts. At present, the remittances of profit by foreign countries and these privatised entities is repatriated, adding to the current account imbalance.
The public outrage against the recent hike in petroleum, gas and electricity prices is more scathing because from on top of the container, he had made many untenable promises without realising that he would not be able to deliver. This shows the intellectual bankruptcy of his party and revives my question that was raised when he held the first public meeting at Minar-e-Pakistan in 2011 promising change. I had asked the question in one of my columns: Imran Khan-led change from what to what?