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Another wheat crisis in the
making ?
 IT
is surprising that in the manifestos of various political
parties, not much attention has been paid to the problems
and challenges faced by the agriculture sector. In the 24-
member of the cabinet, no one was given the portfolio of
agriculture. An additional charge has been given to the
communications minister who is also the senior minister of
the cabinet.
The issues related to development of agriculture need urgent
attention of the policy-makers. Pricing policy is one of
them. Once the concept of support price for agricultural
produce is clear, i.e., if the market price in a good
harvest year falls below the announced support price, which
generally happens immediately after the harvest, the
government is obliged to purchase the produce that is
offered to it by the growers.
But, if and when, the market price goes above this level,
farmers should be free to sell their produce to anyone at
the ruling price. And if the government intends to procure
the produce for its own purpose ( which includes the supply
to the armed forces, to build up reserve stocks to be used
for stabilising the prices when such a need arises, for
strategic reserves and to meet the demand of the Northern
Areas and Azad Kashmir), the government should buy at the
market prices..
When the government finds that the free market price has
arisen to a level where the government thinks that the cost
of meeting the objectives for which it intends to buy, would
be enormous and would involve great subsidies, then it
announces what is called the procurement price, which is
generally lower than the free market price but higher than
the support price. Such a decision would, no doubt, be
against the of the farmers, but due to the financial
limitations, the government has to take such an unwelcome
decision.
The Shaukat Aziz government diluted the working of this
system gradually. In fact the government had almost decided
to abandon the support price system but the adviser to the
Chief Executive/President pleaded against such a decision.
So a committee was set up under the chairmanship of the
adviser and on its recommendations the system was allowed to
continue only for four crops, wheat, cotton, sugarcane and
rice.
In practice, the system was made workable for wheat and
cotton but for the other two crops it was just nominal;
meaning that it was not seriously implemented. Besides other
things, one main reason was that there was no political
strength behind the system to function in its true sense.
The second lesson was that the institution, the APCom set up
in 1981 to professionally work out the support prices for
recommendations to the government, did not have a
professional economist as its chairman for a number of
years.
There have been quick changes in the position of chairman,
so much so that from 1989 to date 13 changes have taken
place. The commission, which originally was set up as an
autonomous body, has now been made an attached department of
the ministry of food & agriculture and renamed as
Agriculture Policy Institute in 2006.
It was said then that necessary competent staff would be
provided and a board of governors constituted to guide and
supervise the work. Almost three years have passed, but no
progress had since taken place. A senior officer of the
ministry has been given the additional charge of the
‘chairman’ the position, which in fact, does not exist in
the changed set-up. Therefore, recommendations of the
‘defunct commission’, now Agriculture Policy Institute
(API), are not taken seriously. In the absence of the
professional, competent and full time “chairman” and the
frustrated staff, one is rather skeptical about the
soundness of the recommendations.
Take the case of wheat crop, 2006-07. The ‘commission’ had
recommended Rs425 for 40 kg of wheat against the cost of
production of Rs433 of an average farmer of Punjab. But the
government fixed it at Rs415, irrespective of the
recommendations of the commission and its estimates of cost
of production. This meant that the farmers would get less
than had been incurred by them in its production. Strangely
enough, the ‘commission’ (API- does it have a mandate to do
it now) did not submit any report for wheat price for
2007-08, as of today. The result was that every body assumed
that as no announcement for the support price had been made;
the earlier fixed price for the 2006-07 crop of Rs415 per 40
kg would also apply to the 2007-08 crop.
However, as the actual production from the 2006-07 crop fell
short of the target and private sector cashed the
opportunity by purchasing as much produce as possible at the
prevailing market price which was much higher than the
support price. Accordingly, the procurement target of five
million tons in the public sector could not be achieved
either. The government, somehow, remained under the false
impression that unprecedented harvest had been achieved, so
they hastened to export whatever stuff they could.
Early this year (i.e. the mid-year of the crop) the
government realised that any ‘support price’ for 2007-08
crop was not fixed. They then declared that the ‘support
price’ would be Rs510 per 40 kg. In true sense, this was not
support price; it could at best be termed as procurement
price.
After the new government took over, the procurement price
has been raised from Rs510 to Rs625 per 40 kg. The cost of
production, calculated at the prices prevailing at the time
of sowing the crop, has been estimated by two growers at
very close to Rs600. The government has a target of
procuring about seven million tons. But it would doubtful
that the target can be achieved.
First, the crop is going to be much short than being thought
of by Minfal for various reasons and second, market price is
go. In such a situation, the private sector is likely to
procure as much wheat as it can and then earn a profit
either through exports or by charging higher price from
domestic consumers. If they pay the farmers market-driven
price at harvest which, if it is higher than their cost of
production, the growers would not be the sufferers. There
could thus be another year of wheat crisis.
If such distorted situation continues, the country would
continue facing shortages in future. The result would be
that farmers would divert wheat areas to other more
remunerative crops, deepening wheat shortages.
Agriculture is the backbone of the economy. It is,
therefore, warranted that the government reviews the
performance of the agriculture sector in its entirety and
sets a policy which promotes its development and does not
transfer resources from poor farmers to other sectors and
urbanites.
The poverty trend can only be reduced if the farmers get
remunerative prices for their produce – may it be wheat,
cotton, sugarcane, rice or any other crop. If the
agriculture sector improves, it would also improve the
health of the economy through its many forward and backward
linkages.
The Agriculture Policy Institute should be made independent
and provided with adequate resources and above all competent
leadership to provide in-depth analysis of the emerging
challenges and issues for policy formulation. The method of
estimation of crops, and their demand projections also need
to be reviewed by competent people.
The writer is the former adviser to the Chief Executive of
Pakistan on Food & Agricultur.).
Courtesy:
The DAWN
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Pakissan.com;
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