Wheat policy needs review

By Aftab Ahmad

THE present government raised the procurement price of wheat — soon after it came to power in 2008 — from Rs625 to Rs950 per 40kg. The objectives behind upward revision of the support price were no doubt achieved during the subsequent years.

Production of wheat went up from about 21 million tons in 2007-08 to 24 million metric tons in 2008-09 and smuggling of wheat was significantly reduced.

With higher wheat production there has been no shortage in the country during the last 3-4 years. The trading surplus enabled the country to export a part of the surplus.

However, the average retail price of wheat flour went up from Rs18.07per kg in 2007-08 to Rs25.64 per kg in 2008-09. Due to increase in electricity, transportation and storage charges, the average retail price of wheat flour moved up to Rs29.73 per kg in 2010-11 (July-April).

According to the World Bank, food security is considered to be in jeopardy not only when there is a shortage of food but, also, when food items go beyond the reach of the poor due to higher prices.

In economically advanced countries, governments issue food stamps to all those who do not have money to buy food. No such social safety nets are available in this country. The government provides relief to the poor through utility stores, where items of daily use are sold at relatively lower prices. The coverage of the utility stores is insufficient and essential commodities are quite often not available.

Wheat surplus of nearly four million metric tons of wheat – lying in government stocks – cannot be exported since international prices are lower, as compared to domestic prices. Two million metric tons of wheat was exported when international prices shot up for a while. Currently exports look extremely difficult.

Russian and Ukrainian wheat are being quoted at $240 to $260 per ton as compared to $305 per ton for Pakistani wheat.
There is a marked difference in prices of $45 to $65 which may not be worthwhile to subsidise.

To add fuel to the fire, the support price has been further raised to Rs1, 050 per 40 kg – from the earlier price of Rs950. This will further increase wheat/flour prices in the open market, aggravating the difficulties of local consumers and wheat exporters.

Fear has been expressed that millions of tones of surplus wheat lying in government stocks may go waste or become unfit for human consumption if not exported within the next few months. This may also create difficulty in stocking wheat purchased from the new crop – due in April/May – because of inadequate storage facilities.

The government of Punjab had borrowed huge amounts of money from banks for procurement of wheat from last year’s crop.
A sizeable portion of the loan still remains outstanding since four million tones were lying in government stocks.

World’s leading wheat producing nations keep their focus on their export capability to formulate an export-oriented wheat policy.

The government should have compensated farmers by keeping prices of fertilisers, pesticides and agricultural implements at a lower level. Developed nations subsidise their farmers on a regular basis. They keep prices at a lower level for the benefit of local consumers and, also, in order to remain competitive in the international market——, something very difficult for the cash-strapped federal and provincial governments.

The government needs to strike a balance between the interests of wheat growers, local consumers and exporters.

DAWN

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