Mishandling in the wheat sector
At last the government, which has been claiming of having
sufficient wheat stocks for the current year (2004-05),
despite reservation of independent analysts, has decided to
import one million tonnes of the commodity to meet the
estimated requirement of the country during the year.
The
high hopes of the government for having good wheat crop this
season have dashed to the ground due to early and a bit severe
summer and later unexpected rains in Punjab - the major wheat
growing area of the country.
According to the official figures, the total requirement of
wheat for the 2004-05 will be 20.25 million tonns. This
includes 10.55 million tonnes for Punjab, 4.31 million tonnes
for Sindh, 2.97 million tonnes for the NWFP, 0.97 million
tonnes for Balochistan, 1.0 million tonnes for seed, feed,
etc., and 0.45 million tonnes for other miscellaneous
purposes.
The expected official wheat output during 2003-04 has been
calculated as 19.75 million tonnes which comprise, 15.85
million tonnes from Punjab and 2.1, 1.1 and 0.7 million tonnes
from Sindh, the NWFP and Balochistan, respectively.
However, keeping in view the lowest ever carry-over stock
(1,60,000 tonnes) in the history of the country, it was being
feared that the government will not only miss its extremely
optimistic targeted output by a fairly wide margin but would
not even be able to procure enough wheat to maintain the
strategic reserves for food security.
Independent observers have warned that the crop looks
insufficient to under write post-harvest losses, seed retained
for the next cultivation and wide scale purchases by the
private sector.
They also mentioned another important factor that due to the
lack of proper storage facilities and techniques available
with the private sector, a sizeable stock retained by the
private sector is likely to be lost in case of early monsoon
season and humid climate which would be a national loss at the
end.
Agriculture
in Pakistan has been subjected to a high degree of the
government influence and intervention since long. Because of
the importance of wheat, there has been strong government
involvement in this sector since the late 1950s.
Ban on inter-provincial and inter-district wheat trading by
the private sector on the start of harvesting season has
become an annual routine in order to facilitate the government
procurement from the surplus production areas.
The provincial government decision to enforce ban on wheat
movement in certain districts of Punjab and Sindh not only
denies its previous claims of level-playing fields to all
stakeholders but it also throws the private sector out from
the ongoing wheat procurement drive in affected areas.
It would be worth mentioning here that while announcing the
procurement policy, the government has ruled out
inter-district or inter-provincial ban on wheat movement
during the procurement drive.
A combination of sector specific trade and micro economic
policies in our country are said to be used in an effort to
maintain low consumer prices, achieve price stability for
farmers and support the agricultural processing industries. As
a matter of fact wheat prices in the country have always
remained low relative to imports.
Therefore, much of the benefit of cheap wheat is received by
foreign producers and floor millers rather than the consumers.
The agricultural prices commission recommends to fix the
support price of all major agricultural commodities (wheat,
rice, cotton, sugarcane, grams, non-traditional oil seeds,
potatoes and onion) each year before the planting season.
The intention, no doubt, is to encourage production and
protect farmers from cost increases. But certain loopholes in
the policy and mismanagement on the part of the concerned
agencies have not yielded the desired results.
The perception behind the support price idea is that the
increase in wheat support price will encourage higher
investment in wheat production and promote agricultural
productivity thereby benefiting the majority of population
which lives in rural areas and to safeguard the interests of
consumers by making supplies available at reasonable prices.
But the objective of the government to encourage farming
community for higher production on the mere basis of support
price increase has never been achieved as yet. The table does
not show any significant impact on either yield or production
area whenever support price was increased.
The decision of farmer to grow more wheat depends upon the
pricing of all cropping pattern available before him. It does
not depend just on relative price of wheat compared to other
crops but on the relative price of inputs to other crops.
The farmer does not look at one price but he calculates the
relative prices of various crops that he can grow and also the
expected profit margin. So it will be wrong if one assumes
that the decision of farmers to grow any crop depends upon the
support price.
Further, the support price is intended to be a minimum
guarantee at which the government would purchase the commodity
in case private sector doesn't. The support price, in any
case, is not a fixed or controlled rate at which the growers
are liable to sell their produce, either to the government or
the private sector.
No
doubt that in most of cases farmers sell their produce to the
government at harvest as they have little storage capacity and
do not want to take risk of spoilage. But it does not happen
all times, as the case during current year is.
The low carryover stocks and the uncertainty about stocks and
supplies have pushed the commodity price quite high to that of
the support price. Therefore, wheat farmers are preferring
private sector rather than the government agencies for selling
the harvest to maximize gains on their produce.
Despite reduction in wheat rates in the recent days, private
sector parties still offer Rs360-370 per 40kg of wheat to the
growers against the government offer of Rs350. It is the basic
right of a grower to sell his produce to who-so-ever offers a
good price.
Pakistan needs at least 5.3 million tonnes of wheat to
maintain the strategic reserves for ensuring food supply of
the provinces. Passco has so far been able to achieve half of
this target and is facing problems in wheat procurement
despite using all sorts of unjustified administrative measures
as the private sector offers attractive price as well as
better incentives to growers.
What needs to be understood by our policymakers is that the
prolongation of such non-farmer friendly policies bodes well
neither for farming sector and inter-provincial harmony nor
the well-being of the common man.
The answer of a vital question that why Pakistan has not
sustained wheat self-sufficiency with such a strong
agricultural background lies in the failure of the wheat
policy whose sole objective is an assured food supply and
provision of cheap flour.
The government has neither achieved food security nor the
protection of the common people from paying the high price for
wheat/flour. As a matter of fact, in any case, an
agriculture-based economy should not be suffering from the
shortage of a primary staple food.
The government must ensure food security to people as its
import costs a lot to the national exchequer in the shape of
foreign exchange. It is estimated that the government will
have to spend over Rs5 billion on subsidy for importing one
million tonnes of wheat.
Besides this, the government should take concrete steps to
bring down input costs of agricultural produces, unveils
farmer-friendly policies on time and cuts official levies on
seed, fertilizer and pesticides. Agriculture is the backbone
and must be treated like that.
In this scenario, it is also recommended that instead of
intervening in the wheat sector, the government should
liberalize farmgate prices and reduce the state's role in
procurement and distribution of wheat with only a strong
regulatory and supervisory role for improving wheat production
in the country.
Table |
Year |
Support Price
(Rs per 40 kg) |
Production area
(000 hectares) |
Production
(000 tones) |
Yield
(kg per hectare) |
Wheat import
(000 tones) |
1990-91 |
112 |
7911 |
14565 |
1841 |
627.3 |
1991-92 |
124 |
7878 |
15684 |
1990 |
1640.4 |
1992-93 |
130 |
8300 |
16157 |
1946 |
2356.6 |
1993-94 |
160 |
8034 |
15213 |
1893 |
1408 |
1994-95 |
160 |
8170 |
17002 |
2081 |
2273 |
1995-96 |
173 |
8376 |
16907 |
2018 |
1931 |
1996-97 |
240 |
8109 |
16651 |
2053 |
2383 |
1997-98 |
240 |
8355 |
18694 |
2238 |
4109 |
1998-99 |
240 |
8230 |
17858 |
2170 |
2334 |
1999-00 |
300 |
8463 |
21079 |
2491 |
1588 |
2000-01 |
300 |
8181 |
19024 |
2325 |
0 |
2001-02 |
300 |
8058 |
18227 |
2262 |
0 |
2002-03 |
300 |
8069 |
19235 |
2384 |
0 |
2003-04 |
350 |
8080 |
19750 |
2444 |
1000 |
Change
1990-04 |
212.5 % |
2.13 % |
35.60 % |
32.27 % |
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Curtesy: The Dawn
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Pakissan.com;
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