Leveraging support prices

In a recent move the government has announced to increase the support price of wheat crop across the country in a bid to help farmers ward off inflationary impacts on agriculture. While most of the farmers do agree to and readily accept the support price, arguments against and in favour need be heard before any such decision is made. Pakistan being an agrarian country has high stakes in how the delicate equation of agrarian economy is kept afloat. One way or another, it has to look after the needs of its large populace whose major chunk is still reeling under poverty.
Pakistan’s agriculture sector abounds with problems. They may be as varied as a lack of trained human resource to profiteering by the middlemen. But nothing stands out as a worse downside factor than the totally uneven distribution of prime farmland in the country. On one hand, we have landlords with large land holdings while on the other, we find only sustenance farmers, owning not more than 20 acres of land. This huge difference leverages unjustly to the farmers with large land tracts.
Complicating the situation, this huge unbalance creates certain problems that run even deeper. A small time farmer is forced to care for his household, his family, his cattle, and pay for the amenities that are at his disposal besides his share of income tax, land revenue, property tax among other needs of routine life. What complicates the situation for him is the fact that he is ultimately sucked in to the trap of the loan sharks.
Support prices for agricultural produce are used all over the world as a guarantee against the inflationary trends, natural disasters, high yield, and as an incentive to lure the farmers into farming a certain crop, and wean away from certain other cash crops. Beneficial as it may be, there are strong arguments against it too as it may make the farmers choosy about a certain crop, causing a severe dent in the balance of demand and supply of crops in the market. Moreover, it may totally be useless to sustenance farmers.
To illustrate the above statement, here is a case in point: say a small farmer has 10 acres of land in a fertile district of Punjab. He cultivates wheat as one of the two crops in a year. Even with an average of 40 maunds per acre yield (Punjab’s official average is around 26 maunds per acre), he is only able to earn 42,000 rupees per acre per year. Experts put the production cost of wheat crop per acre in between its 60-70 percent of its total sale price. This leaves him with only 13,000-15,000 rupees in savings per acre per year. Multiply it with 10 acres and we get a meager amount of 130,000-150,000 per 10 acres per year, which is in fact nothing less than a slap in his face for the effort.
Logically, we are forced to ask as to how he makes it through the year. He is forced to look towards other crops which are in fact his life support. Come May-June and he will be looking forward to grow cash crops such as potato or corn. With a bit of luck and no flooding, he can usually save enough to sustain and move on with his next year’s plans. Unsettling as it is, this is but only half the story. As huge tracts of prime farmland are owned by the big fish, the ones with thousands of acres, it is they who benefit the most from government’s support prices for they can then afford being lethargic and not experiment with GMC or high-yield varieties of crops.
Farmer exploitation and farmer discrimination takes place in many ways, some not as apparent as this. It is in this perspective the support price offers a unique incentive to farmers to grow certain crops. But, maybe the government needs to revise its policy of support price in a more targeted manner.

The writer is sub-editor Op-Ed, Pakistan Today