Economic Benefit of Sugar Industry Zoning Policy of Pakistan

Abstract

Zoning policy was best implemented, and it provided credit and input subsidies to farmers to increase seed variety, efficient use of chemical fertilizer, install tube wells, adoption of modern technology, and improve road infrastructure. The objective of this paper is to examine the benefits of zoning policy for the sugar industry. The paper uses data from 1951 to 2019 and has broken down the time series for Zoning and De-zoning Policy. The study uses Auto Regressive Distribution Lag Model (ARDL) cointegration and Error-Correction Model (ECM) model and Granger Causality Wald Test. Results found that Auto Regressive Distribution Lag Model (ARDL) bound test and Error-Correction model have established long-term cointegration association among fertilizer growth, irrigation land growth, transport growth, labor growth, technological growth, maximum temperature, mean temperature, minimum temperature, and rainfall and sugarcane yield. Results also found bi-directional causality the above variables within zoning policy and these results prove that zoning policy was better implemented, and farmers were supported by subsidized seed-fertilizer-water package, adopted labor-intensive technology and better-mechanized farming to increase irrigated land productivity. Climate change impact was also present and changing temperature and rainfall had a direct impact on sugarcane yield. Hence, the government should revive the zoning policy and reduce the role of middlemen, improve roads to reduce transportation costs, and improve the price mechanism of the sugar industry.