Rural poverty: agri
inputs, price policies
By M.H. Panhwar
The price support policy was
originally recommended by the US economist, John Kenneth
Galbraith, to Pakistan's planning department in the mid 50's
for only five years, to keep food price very low so that
industrialists were able to accumulate capital and put up
industries.
It was actually a policy to suppress prices of agricultural
products. This has been admitted in various official reports
stating that prices of wheat and other commodities were kept
low during the First Five Year Plan so that commerce and
industry would get cheap labour. But the policy recommended
for five years only continued for the 50 years at the cost of
farmers.
At present, the farmer does not make any profit on wheat
prices. He even does not get proper wages for his labour. The
example quoted below shows how a farmer does not make any
profit in the presence of support prices.
Cost of cultivation: The figures below in terms of tractor
hours, fertiliser inputs, herbicides and labour requirement
are based on studies of Sindh's planning department but the
prices are taken as prevailing currently.
(1) Time spent on seed-bed preparation and drilling by 50 H.P.
tractor:
* One deep ploughing. 11/2 + hours
* Two harrowing total. 2 hours
* Drilling of seed.1/2 + hours
Total4 hours
(2) Cost of above at
Rs 250/hour Rs1125
Seed at Rs.350/maund. Rs 350
Fertiliser:
* DAP 65 kgs at Rs 650
per bag of 50 kgs. Rs 845
* Urea one bag at 1st
irrigation Rs 350
* Urea one bag at 2nd
irrigation Rs 350
* Potassium sulphate
per bag Rs 650
* Herbicides Rs 450
* Herbicide application
with sprayer Rs 250
* Labour for herbicides Rs 250
* Harvesting charges
(average) 30 maunds yield
Rs 850
* Threshing charges including
extra labour Rs 1,000
* Water rate charges Rs 142
* Land tax Rs 300
* Transport charges during
cultivation Rs 350
* The farmer's and his family's labour, working for 6 months
and handling five acres compensated at Rs5,400 per month or
Rs4,500 per acre Rs 5,400
Total expenditures Rs 12,907
(or say) Rs 13,000
The farmer can get Rs350 per maund of 40 kgs, if his yield is
37.0 maunds per acre. And this does not include any profit on
his capital (land), interest on annual production investments
and management charges. Since he never gets these returns, he
reduces his inputs by:
* restricting deep ploughing and seed bed preparation to one
harrowing only; * drilling with borrowed bullocks and his own
labour; * using cheap poor quality seed; * using less
fertilisers than optimum; * using less herbicides and by
manual labour; * using only family labour; * avoiding periodic
and precision land levelling; * Avoiding watercourse
improvement.
A farmer's yield then is reduced to about 15-20 maunds/acre
and he retains most of it for his own domestic use and seed
for the next year and sells away the rest to pay for borrowed
inputs. In general, this is the way he barters his family
labour for,wheat he needs and for no profits.
This has resulted in rural poverty, low yield, neglect of land
as natural resource, etc. The aim of getting high yields,
therefore, is defeated for ever. Should the farmer get the
same prices as imported wheat, his income from 30-35 maunds/acre
would be about Rs15,000-17,000. The farmer is convinced that
it is uneconomical to grow wheat and thus produces quantity
only for his own domestic use.
The price policy from 1950 to 2004 has given the farmers 40 to
50 per cent less than the international prices as shown in the
table below. The figures in the table are worked out by taking
into account the depreciation of Pak rupee from year to year
since 1950 and calculating back the various years' support
price with 1950 price. Current price is the lowest in the past
54 years:
Under the present support price policy (to be precise,
'suppressed price policy'), there cannot be any transition
from subsistence farming into commercial farming, as the cost
of the additional inputs will not be compensated by the
additional returns from additional yields.
As compared to this, the international prices of wheat as
reported in Dawn (10h January 2004) are:
(i) American, Argentinean and Australian wheat - $224 to $230
per ton and freight $16-20 per ton. The cost comes to Rs14.50
to Rs15 per kg or Rs580 to 600. ex-go-down in Pakistan, Rs650
per muand. (ii) Local price at farm gate- Rs350 for 40 kgs or
Rs8.75 per kg. (iii) Subsidy on imported wheat has to be
Rs7.25 per kg to keep local prices low. (iv) Fungus-free wheat
is available from India at $170-175 per ton and assuming the
same freight it comes to $190 per ton C&F Rs11 per kg or Rs450
per 40 kgs. The fob price will be Rs120 per kg or Rs480 per
maund. (v) A large quantity of wheat is smuggled into
Afghanistan every year. Prices in Afghanistan are about Rs550
per muand or 40 kgs.
The Pakistani farmer has to bear Rs200 per maund as smugglers'
profits. The net result of all this is that the wheat
production is down and wheat is imported at about double the
rate as paid to the farmer.
This makes industrial labour available at cheap rates and
enhances profits of industry but keeps rural and urban labour
as well as the farmers very poor. Similar calculation can be
made for the cost of production of different crops from 1950
onwards. In brief, the price policy is essentially anti-farmer
and causes rural poverty.
Migration to urban areas: Rural unemployment and insecurity
combined with poverty is forcing farmers to sell most of their
produce at 40-50 per cent of the international prices, and has
led to unprecedented migration from rural to urban areas,
resulting in more and more 'kuchcha abadis'.
Year |
Support price of
Wheat as compared to
1950 price in percentage |
Year |
Support price of
Wheat as compared to
1950 price in percentage |
Year |
Support price of
Wheat as compared to
1950 price in percentage |
1950-51 |
|
1966-67 |
53.30 |
1982-83 |
65.50 |
1951-52 |
100.00 |
1967-68 |
50.20 |
1983-84 |
53.60 |
1952-53 |
82.20 |
1968-69 |
72.50 |
1984-85 |
61.90 |
1953-54 |
73.10 |
1969-70 |
69.40 |
1985-86 |
55.60 |
1954-55 |
68.10 |
1970-71 |
63.80 |
1986-87 |
50.70 |
1955-56 |
63.90 |
1971-72 |
57.90 |
1987-88 |
50.20 |
1956-57 |
60.40 |
1972-73 |
53.00 |
1988-89 |
42.39 |
1957-58 |
55.70 |
1973-74 |
65.50 |
1989-90 |
45.18 |
1958-59 |
50.60 |
1974-75 |
106.50 |
1990-91 |
55.66 |
1959-60 |
54.00 |
1975-76 |
94.80 |
1991-92 |
49.05 |
1960-61 |
88.70 |
1976-77 |
50.20 |
1992-93 |
48.58 |
1961-62 |
47.20 |
1977-78 |
84.50 |
1993-94 |
43.68 |
1962-63 |
43.80 |
1978-79 |
79.50 |
1994-95 |
42.30 |
1963-64 |
41.00 |
1979-80 |
88.70 |
1995-96 |
42.30 |
1964-65 |
60.20 |
1980-81 |
80.90 |
2004 |
37 |
1965-66 |
56.20 |
1981-82 |
67.10 |
|
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