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Private sector participation in wheat exports

Farmers are under pressure to sell their wheat crop below the official price

By Syed M. Aslam
July 02 - 08 , 2001

The year 1997 witnessed the worst-ever food riots in Pakistan. The pictures of frenzied mobs looting trucks laden with wheat flour and police resorting to firing causing injuries, and even deaths, in many parts of the country would remain etched in the memories of many of us for good. The question is: Would 1997 happen in 2001?

There are many who believe that the decision of the Economic Coordination Committee (EEC) of the Cabinet on May 19 allowing private sector to export wheat would result in the repetition of the food riots in 1997. Why? Read below.

An estimated 18.5 million tonnes of wheat is produced in the country this year. The production in addition to a carryover stock of 3.5 million tonnes would be enough to meet the domestic consumption requirement of 21 million tonnes. Allowing the private sector to export wheat it has already been actively associated with the wheat trade barring exports would result in unethical procurement practices the main victims of which would be the farmers, particularly the small and medium ones. This is so as these farmers are traditionally dependent on credit, not so much in cash but rather in inputs seeds, insecticides, pesticides at all stages from sowing to harvesting. From year to year, and all cropping seasons in between, they remain indebted to creditors in their respective localities. Needless to say these creditors play a vital role in the agri economics and enjoy immense power and influence over the farmers. One can easily imagine the creditors' sway and the capacity over the farmers to force self-serving deals.

Informed sources told PAGE that small and medium farmers across the country are induced to off load their individual wheat harvests much below the official support price of Rs 300 per 40 kilogram. The enhanced participation of the private sector in wheat trade with the deregulation of exports is a cause for concern for another reason: The government has earlier announced that it would increase wheat procurement by one million tonnes, from the usual 2 million tonnes to 3 million tonnes. This means that the bulk of the new wheat crop of 15.5 million tonnes would be procured, stored and exported by the private sector. The immense control the private sector is allowed to enjoy after the deregulation of the wheat trade is seen by the observers as a cause for grave implications and concerns.

Sources told PAGE that the village creditors alongwith unscrupulous elements in banks as well as in insecticides, pesticides and fertiliser suppliers and sellers are forcing the farmers to sell their wheat crops much below the official support price of Rs 300 per 40 kilogram. The farmers are forced to dispose of their wheat stocks much below the support price, in many cases for as low as Rs 220 per 40 kilogram. The unethical practice, sources say, is supported and backed by the private sector.

The unethical alliance between the banks/ inputs suppliers and the private sector is thus depriving the farmers a chance for fair return on their back-breaking hard work. The sources said that the private sector, by its very nature, is interested only in making a killing oblivious to fair compensation to the farmers.

While the logic of the government to permit the private sector to export wheat can hardly be questioned given the failure of its agencies to attract foreign buyers and find new markets for the commodity, the immense control and the power which it gives to the private sector can have serious implications in the months to come.

The question is: What's the guarantee that the private sector which has already resorted to unethical practices to procure wheat way below the official support price from the farmers would not resort to similar tactics to make a windfall from the export. Afterall, wheat trade and particularly exports offer highly attractive financial incentives for the private sector.

The fact that the wheat traders and exporters have been promised loan facilities from the banks to finance the procurement and storage of the commodity makes the situation even worse. Money, particularly as big as it is in this case, can attract all sorts of people including many unscrupulous elements who do not care the least about the ethics.

Given the excess supply the logic behind allowing the private sector to export wheat makes sense. However the greatest cause of concern is that it does not allow the government to effectively check and control to ensure that the farmers receive the minimum procurement price fixed by the government. It would have a direct impact on the production of wheat in the years to come as farmers denied the minimum official price can hardly be expected to cultivate a commodity which don't offer a chance for fair returns.