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Rising trend of farm prices: causes and remedies
By Siraj-ul-Hasan

ARTICLE (October 17 2002) : A study of farm prices reveals that wholesale prices of most of the products followed an upward trend during the last five years as is evident from the Index Number of three Commodity groups (base year 1990-91) given in Table. A close examination of the above figures shows that general price index continued rising year by year except for 1999-2000, when it was lower by about 6 points than the previous year. Food items price index shows a continuous rising trend over the year. Raw material group, like the general group showed some easiness in its price index during 1999-2000 as compared to the previous year.

Source: Federal Bureau of Statistics (FBS)

Group-wise examination of price indices shows that in the case of food group its index for 1998-99 and 2000-2001 was lower than that of the general group in the same year. In the raw material group, its index number for only one year (1999-2000) was less than that of the general group.

Increases in specific wholesale prices of various agri-items: During FY01 the prices increased by 4.6 percent compared with 3.6 percent increase in the previous year. Both food and non-food group recorded higher prices. The extent of rise was greater in respect of food prices due to demand/supply imbalance of certain food items. The rise was more pronounced in the case of sugar, pulses and vegetables. The pressure in the non-food group mainly stemmed from the increase in kerosene oil, gas, electricity charges, diesel products prices and transportation cost.

During FY01, the wholesale prices of 32 commodities recorded double-digit increases as against 17 commodities in FY00. In terms of items whose prices have decreased or remained unchanged during FY01, there were 18 such commodities as against 33 items last year. Some of the food items which influenced the price behaviour of wholesale market, were fresh milk, cooking oil, powder milk, chicken, wheat, spices, meals, vegetables and vegetable ghee. Increase in the food group prices was mainly due to pressure from vegetables, fruits, sugar, pulse and rice. Various other factors, contributing towards price increases during FY01, are summarised below:-

- Increase in the international market prices of some essential products like petroleum. It was translated through adjustment in retail oil prices, electricity tariff and gas charges which adversely affected the domestic cost of transportation, production and distribution of goods and services.

- Pak Rupee depreciation by 18.6 percent vis-à-vis dollar during FY01, making imports more expensive. The import unit value of many groups of products, therefore, recorded substantial increases - 16.5 percent in petroleum products, 9.8 percent in crude petroleum and 21.7 percent in sugar.

- Adverse impact on prices of pulses, gram due to shortage on account of dry weather as well as on sugar price due to low production and speculative hoarding.

- Increase in issue price of wheat to flour mills by provincial government and increase in prices of certain fruits and vegetables due to seasonal factors, putting an upward pressure on food prices in general.

Current price situation of essential food items: During the week ended October 11, 2002, the national wholesale and retail prices of most of the essential food items showed a mixed trend as is evident by the relevant data given in Table.

* Eggs wholesale prices in Rs/30 Dozen. Retail prices in Rs/Dozen

Source: Federal Agricultural Marketing Department (GOP)

Remedies: The Federal Ministry of Industries is responsible for stabilising the prices in general, including agricultural prices which are more vulnerable to seasonal changes. This Ministry, due to its multi farm engagement, of late, has not been according its undivided attention to this important function (viz. stabilisation of prices).

The price Stabilisation Board in the Ministry of Industries, in the past, was duly vigilant in this regard holding its periodical meeting of all concerned, public and private sales agencies.

Presently, on account of slackness in taking necessary measures, both the wholesale and retail prices of essential food items have been registering undue upsurge to the determent of consumers of average means. Therefore, there is a dire need for government intervention to bring the price to a reasonable level.

It is, therefore, suggested that for stabilising agricultural price in the country, a Price Stabilisation Committee may be set up in each province under the direct control of respective provincial governments/chief ministers.

This proposed committee should have the marketing experts (both in-service and retired) as its member. For co-ordinating the working the provincial committee, a high-level committee may be set up at the Federal level in the Ministry of Food and Agriculture. Alternatively, the Federal Agricultural Marketing Department, presently ill-staffed may be strengthened by providing necessary funds for hiring experts and consultants.

It may be recalled in this connection that such a price Stabilisation committee was established in the province of Sindh a couple of years back under the direct control of the Governor. This committee is understood to have done some commendable work. Unfortunately with the change in the country's political scenario on October 12, 1999, it has been defunct.

Courtesy Business Recorder

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