Struggling between policy, corruption and economics
When the Punjab government announced its wheat policy last year and fixed the support price at Rs1200 per maund, it had certain objectives and policies in mind. It had raised the price to support the troubled farmer community, which had been suffering at the hands indiscriminate load shedding and staggering input costs. Last year, the support price was meant to give a breather to the common poor community and also to encourage the farmer to grow one of the most important and strategic crops of the year; wheat. A successful wheat crop is critical for the economy and welfare of the country. If political economics has taught us anything, it is that the crop will have far reaching impact both on micro and macro variables. An unsuccessful crop may lead to a drop in the GDP, for big landholders default on loans, while the poor rural economy falls behind, which at times takes years to recover. In India for instance, such situations have led to mass suicides within the farmer community. The money from this crop is circulated not only in the rural economy but also reaches urban society.
It has international implications as well. The wheat crop is smuggled to Iran and Afghanistan. Even if we do not like it, the crop supports poor communities of Afghanistan and some in troubled Iran. Hence if there is a successful crop, government policy and its support price actually trigger a series of events which have far reaching implications.
Policy is poorly framed and executed, which may choke the system
The entire wheat policy and planning begins with a numbers game. It starts with the yield and total wheat production of the province. How much wheat is produced? How much is stored, bought and carried forward by (a) mills (b) other provinces and (c) by the food department of Punjab? The Punjab food department, according to its targets, procured nearly 3,500,000MT and it revised its target of 4,000,000MT, which according to sources within the department may actually be achieved. How much wheat will be available for procurement? How much can Punjab food department store? How much will it procure? How much is the food department carrying forward? How much will it allow millers to procure from open sources? How much will it allow the millers to send back to other provinces? How much of it all will be smuggled? How much support price should government offer keeping in view some of the above questions? These questions and more determine the wheat procurement and disbursement policy which in turn manages the entire socio political agricultural economy.
The entire wheat policy and planning begins with a numbers game. It starts with the yield and total wheat production of the province. How much wheat is produced? How much is stored, bought and carried forward by (a) mills (b) other provinces and (c) by the food department?
This year, the basic numbers are not making sense for the same government while the facts and challenges remain the same. The escalating input costs for the farmers, and fear of smuggling, have not diminished.
According to figures released by government and subsequently by the flour mill association, the wheat acreage and yield is expected to be 20-25 per cent higher compared to last year. This year, according to one estimate, wheat is 19.5 billion MT which is expected to be a bumper crop, mainly due to more land cultivated for wheat, higher yield thanks to favourable weather, and last year’s wheat price hike, which encouraged famers to grow more.
The current N league administration at both Punjab and federal level suddenly kept the support price at last year’s level. The decision according to some was made in haste. So how did it plan to implement its policy when the farmers were demanding Rs1300 per maund?
The government policy was ill-timed. The crop was not ready and DCOs who were responsible for the procurement started pushing for early uplifting of the crop through the putwari administration, and the haste led to confusion. The government discouraged millers from buying directly from farmers. According to reports, the DCOs are being asked to ensure that millers are checked through pickets and random raids at storage points. The support price offered by the food department is Rs1200 per maund, while mills who were offering Rs1240-50 as an incentive to the farmer were then kept out of the market. The mills are being discouraged, and in Faisalabad division or Pindi district the entire civil district administration has been let loose to discourage private parties or millers from buying wheat from farmers. In Pindi alone the price has shot up to Rs1300 per maund despite no apparent shortage; part of the blame is laid on administrative corruption at pickets and check points, which eventually becomes the cost of the end product. Simply the corruption cost is added to the transportation cost and the poor man or the consumers end up paying for it.
In the past, the government would hold some portion of the crop, however the food department would make a killing in corruption practices and under the pretex of “storage losses”. According to sources, food department would make a provision of 3-5 per cent storage and handling losses while the actual story would be entirely different. Likewise, the district food department would take money from the poor farmers on the pretext of administration expenses. Mill owners would come next, who would store the wheat and then make a killing on the profit. In recent years, the government is unable to stop smuggling of wheat and millers are partly to be blamed as well. In either case the consumer and farmer are going to be on the losing side.
The situation has now become more complex with the inclusion of new factors such as KPK crisis and farmers storing wheat instead of letting it out. The current price does not make economic sense for the poor rural community.
Where is the situation heading?
The situation has now become more complex with the inclusion of new factors such as KPK crisis and farmers storing wheat instead of letting it out. The current price does not make economic sense for the poor rural community and now partly due to millers and government policy it is going to disturb the entire economic cycle. The open price of Rs1250-75 per maund is expected to increase once the food department closes its procurement drive.
Wheat procurement became dynamic once the neighbouring province of KPK jumped in for procurement. Not only that the Punjab government has banned movement of wheat from Punjab to KPK on the grounds that most of the wheat will be smuggled out of Pakistan into Afghanistan, but it is also to stop harassing the mills to procure wheat from farmers. The farmers can get higher price form the mills if the government allows procurement. Otherwise the system is going to choke, leaving the economy and consumers hurt the most. Ramazan is close and it will be difficult to keep the price pressure low. When the government is going to release its wheat, it may very well move across provinces and perhaps borders. September onwards there will be a supply shortage, and industry analysts predict the price will touch new heights.
