Wheat crisis continues
By Syed Shahid Husain

The government's recent decision to import one million tonnes of wheat confirms that the crop is short of expectation and that the wheat cisis continues and is severe. Last one year has been dominated by news of an impending wheat crisis. First a lower wheat crop was forecast and imports were ordered on that basis to overcome the shortage. Imports were ordered from Australia at a very high price of $224/ tonne. Egypt has recently purchased Australian wheat at a much lower price of $165.40/tonne. Usually the price has been around $100/tonne. India was ignored although price was lower and the time required much less. It is in everyone's knowledge that the ships arrived in February, a month before fresh crop was due to arrive. But before they could unload we rejected it for being infested. Strangely enough, the UAE government bought it. Subsequent events confirm the belief that imports had been ordered on other than economic grounds because for one the country survived without those imports and another the crop is higher than the estimate deliberately made to justify the imports. One suspects that imports involved some shady deals which would have been exposed had the deal fallen through. The federal ministry of food and agriculture, four food departments of the provincial governments and PASSCO represent the government side of wheat equation. Consumers are another. The former claims to be helping the latter, and has found the villain causing the crisis. He is the trader, the middleman or the 'hoarder'. By blaming it on the villain the government is trying to absolve itself of the responsibility for the creeping crisis. The solution: ban on movement of wheat not only from one province to another but also from one district to another. This is particularly true of Punjab, which is a surplus province. Private trucks full of wheat have been seized and godowns raided to unearth the hoarding. Obviously, the wheat has not been unhoarded and the crisis continues to expose the policy of the 5 governments because the problem has not been correctly identified. Hence the solution is misplaced. Latest in this battle of wits between the food departments and the "hoarder" is the decision by the State Bank of Pakistan to impose 50 per cent cash margin for procurement of wheat, which could widely reduce the private sector participation in the commodity business. The rationale of the policy announcement is to discourage hoarding of wheat and to ensure stability in prices. That the objective has not been realized and will continue to defy such solutions is now more than apparent. The policy is a knee-jerk reaction and is intended to show that the crisis is being averted with all the ingenuity the civil servants can muster. This policy is discriminatory of traders in wheat and is likely to add to trading costs is another matter. The government functionaries have acquired a vested interest in perpetuating their hold on wheat trading imposing thereby an enormous cost on the consumer as well as taxpayer. Punjab purchased an unprecedented quantity of six million tonnes in the year 2000 when we had a bumper crop and lost most of it to elements and pest because it had no storage facilities. In spite of Rs.300 as a support price that year, the grower got Rs.240 to 250 according to a mini-survey. This year when the crop is not so good and grower is getting a better price, the government is forcing him through coercive methods to suffer a loss by selling at a lower than the market price to the government. An arbitrary target fixed by the government is far from being achieved. The draconian measures adopted by the government have caused the disappearance of wheat from the market and not the perfidy of traders. If the government stopped acting as the ultimate arbiter of the market and allowed the invisible hand of the market to operate, the situation would not be any worse but would perhaps improve. After all the government functionaries are not trained to outwit the market in allocating resources more efficiently. On the contrary, they show a complete lack of understanding of the problem. Instead of allowing him to grow, they are undermining the private trading and the growth of private traders. Because the crop is good this year, the price would have stabilized if the government permitted private trading to take place. The cost of hoarding stocks could force the private sector to off-load. He can't hoard it for long. The private sector could prove beneficial for generating employment and ensuring a fair deal to the grower, which the government claims to constitute a plank of its support price policy. The measures adopted by the provincial governments with encouragement from the federal government have deepened the crisis. The ban on movement of wheat, the raids on godowns and the seizure of trucks loaded with wheat are all illegal and contrary to the Constitution. One is reminded of Martin Luther King who said: "Shallow understanding from people of good will is more frustrating than absolute misunderstanding from people of ill will". Any amount of advice from do gooders like the World Bank or the Asian Development Bank to privatize wheat trading has been disregarded both in word and deed. The decision makers are frightened or pretend to be frightened of a wheat crisis if the market forces are allowed to replace them. So they would do everything to avoid risk and follow the old time (dis) honoured policy. How wrong could they get is borne out by a field survey, conducted by the Agricultural Prices and Policy Commission itself, in a randomly selected areas of Punjab and Sindh. The information relates to the year 1997-98. The survey is based on a sample, limited to 16 Tehsils in Punjab and 6 Tehsils, known as Talukas in Sindh. These cover 79 villages in Punjab and 27 in Sindh. Inqilab-91 variety of wheat is the most popular in Punjab, sown over 75 per cent area. But in Sindh it does not enjoy as much popularity, with only 24 per cent area devoted to this variety. Marketable surplus was 55 per cent of the total production in Punjab against 42 per cent in Sindh. Interesting part of the survey is that a very small percentage of farmers sell their marketable surplus of wheat at the procurement centres (PCs), established by the government to buy at the support price; 74 per cent respondents in Punjab sold their surplus either at the village or the 'mandi' Only 21 per cent farmers sold their crop at the PCs. Comparable figures for Sindh are just about the same as far as the PCs are concerned. In Punjab, 30 per cent of the marketable surplus was sold by 15 per cent of the farmers at the PCs. As for Sindh, the figures were 38 per cent and 21 per cent respectively. Tables below show some more details. Table 1 above would show that more wheat was sold in Punjab at the village level than in Sindh (54 per cent against 38 per cent). On the other hand Sindh sold more wheat at mandi level (24 per cent vs 16 per cent); 38 per cent more farmers in Sind as opposed to 30 per cent in Punjab used PCS.
 

Consumers would be paying less for wheat if the government policy had borne fruit. That it has not is crystal clear from rocketing flour prices in the market. It is high time the government opted out of trading and left it to the private sector. Let the government give security to the citizens. sshusain@hotmail.com.
 

The Dawn 

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