Another wheat crisis in the making ?

wheatIt 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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