Wheat price issue: solve it or face shortage
13 April, 2006
By Sohail Shahryar
Various farmer organizations are predicting a wheat-related crisis in the country that has nothing to do with the crop production, but with the commodity's price and its marketing techniques.
It is usually seen that whether there is shortage or abundance of any commodity, people have something or the other to complain about. In both cases, it is the hoarders and the middlemen who mint money at the cost of the small farmers.
Though the government has fixed the support price of the wheat crop at Rs415 per 40kg and is also expected to give subsidy to the tune of over Rs11 billion this year, the farmers say it is less than their cost and significantly lower than what the government pays for imported wheat to foreign agriculturists.
They are of the opinion that with huge increase in the cost of input price of wheat, the government ought to give its agriculturists if not equal at least half the amount of the subsidy it offers to their foreign counterparts.
The Ministry of Food and Agriculture this year has fixed the countrywide wheat procurement target at over 3.8 million metric tons. Out of this figure, the Punjab food department will procure 2.7 million metric tons, Sindh 0.4 million metric tons and Balochistan just 30,000 metric tons. Whereas, the federal department of PASSCO, which is managed by military functionaries, will procure 700,000 metric tons of wheat from across the country. This year, targets of operational and strategic reserves of wheat have been set at 3.83 million metric tons and 900,000 metric tons, respectively. The total availability of this staple food item is 4.73 million metric tons. However, estimates for the total wheat production in the country this year vary from 3.5 to 4.2 million metric tons.
As per the Wheat Policy 2006 announced by the MFA, there would be no restriction on inter-district or inter-provincial movement of wheat or its products. There should be one market in the country and no province or area would pursue a segmented approach.
Similarly, operational reserves would be released to flour mills on need basis while the strategic reserves would be utilized to stabilize the price in the market.
Representatives of the farmers' community are confident that the country will have a good wheat crop this season and there will be no need to import the commodity from the US, Australia or India. However, they have also expressed their disappointment at the support price, which the government had announced for the crop.
The office-bearers of the two major organizations -- Farmers Associates Pakistan and Kisan Board -- argue that the government is always willing to pay a high price of over Rs550 to Rs590 per 40kg to their US, Australian or Indian counterparts along with the subsidy. But, when it comes to Pakistani farmers, it does not offer the same rates.
This is not a healthy sign for the agriculture sector because in an agrarian society like ours, the nation's prosperity is directly related to the well-being of its farmers, they added.
They, however, appreciated the decision announced in the Wheat Policy 2006 concerning lifting of restrictions on the movement of wheat as it could fetch farmers a better price for their crop.
On the other hand, Pakistan Floor Mills Association (PFMA) is critical of the current wheat policy mainly for two reasons. One is the free movement of the crop and the other is unavailability of the promised credit. They are also not happy with the crop assessments made by the departments concerned.
In the wheat policy, credit scheme envisages margin facility in the ratio of 90:10 where the State Bank provides 90 per cent of the funds for the purchase of wheat to the public. It is actually not happening due to huge carry-over and stuck up loans worth Rs40 billion from similar credit released by the SBP last year. So the bank is somewhat reluctant in issuing fresh credit.
Moreover, the private sector is not happy about another important factor, which is also a significant contributor towards the dwindling wheat prices in the local market. That factor is the ban imposed by the government on export of wheat to Afghanistan.
Moreover, positive market players are of the opinion that free trade regime is the need of the hour. Therefore, the role of the federal and provincial departments concerned should be that of market stabilizers and not of players. To secure the interests of the growers there should be two-price mechanism including minimum guaranteed price and the support price to allow market forces to contribute accordingly in the crop procurement process.
In an era of free trade, fixing prices of agricultural commodities has become a dogma for agri-economists. That is why Agriculture Prices and Policy Commission (APCom), which used to fix prices of nine commodities in the 90s, is now focusing on only two major crops -- wheat and cotton -- left in the support price regime. However, support price in most cases only favour the middleman (Aarthi) or the big farmers.
It is high time that the government started taking into account all such ignored aspects, came up with a new wheat procurement system, safeguarded the interests of small farmers and involved market forces under the free trade regime.
It is essential because wheat is a staple food item like sugar and if the grower is not encouraged it is very much possible that he may decide to reduce wheat cultivation next year just the way he did with the sugarcane in current season.