WHEAT: NEW SUPPORT PRICE
Key to harvest a bumper wheat crop/export surplus
By AMANULLAH BASHAR
Aug 07 - 13, 2000
Beside supply of fertilizers, timely rains and favourable weather conditions, a strong support price has always played an effective role in motivating the farmers for harvesting a good wheat crop in Pakistan.
This has been proved not only by the wheat production of 1999-2000 crop estimated at an unprecedented production of 22 million, but the production pattern in the past years also proves it.
According to informed sources, the ministry of agriculture has been directed by the Chief Executive to ensure abundant supply of fertilizers and the favourable price relationship between output and the inputs, which has already played an important complementary role.
In order to achieve these targets, the Agriculture Price Commission (APCom) has been directed to work out the new support price for the fresh crop.
It may be recalled that at the end of 1996-97 wheat crop year, the government had increased the support price of wheat by Rs55 i.e. from Rs185 Rs240 per 40 kg, it helped in increasing the quantity of wheat procured by the government.
The experience of 1999-2000 crop is in fact the response of economic incentives and the balance between output and input prices. It is generally being realized especially in the government policies that the agriculture sector has responded to economic opportunities more spontaneously as compared to the manufacturing sector in Pakistan.
The agriculture ministry has also pointed out to the concerned quarters that only way to attract the farmers to grow wheat cultivation on maximum area for the year 2000-2001 was to give them a fresh incentive in the shape of increase in the support price.
An active consideration for announcing a fresh support price is being given on the recommendations of the agriculture ministry. The ministry has expressed apprehensions that area under wheat cultivation could go down as in the wake of bumper wheat crop in 1999-2000. It was explained that both the federal and provincial government agencies could not make proper arrangement for the procurement of whole-wheat crop from the farmers at fixed support price. Although there were reports about drastic fall in commodity output prices as the farmers were forced to sell their crop at Rs270 per 40 kg against the official price of Rs300. Yet eyewitness account told PAGE that wheat was also sold at a price of Rs365 per 40 kg in various parts of Sindh. This variation in price reports however call for a mechanism which ensures that the growers are paid to their toil properly.
The agriculture ministry said therefore this year the farmers could cultivate wheat to meet their own annual domestic requirements instead of producing surplus crop.
Wheat production in 1997-98 reached 18.694 million tonnes as compared to 16.651 million tonnes during the previous year recording a 12.3 per cent increase in the process. For the 1985-86 crop, the then government had increased the wheat support price by 14.3 per cent from Rs70 to Rs80. In October 1985 wheat production jumped from 11.703 million tonnes to 13.923 million (an increase of 19 per cent) as a result of the favourable response shown by the farmers.
Respectable size of wheat crop has sent strong signals about the depth of agriculture based economy of Pakistan. Country has also received queries for wheat imports from Iran, Indonesia and other friendly countries.
Keeping all these developments in mind plus advantage of saving foreign exchange Pakistan used to spend on import of wheat, the present government is attaching great importance to wheat crop. It is taking steps not only to retain the size of previous year but also to improve the size of the crop this year.
Earlier APCom had informed the government that during 2000-2001 the wheat crop could confront a formidable competition as far as area under the crop is considered particularly from the newly introduced oilseed crops as the growers were getting attractive output prices from the solvent plant owners. Last year, wheat support price was increased from Rs240 per 40 kg to Rs300, which resulted in the record production of 22 million tons of wheat.
The main objective behind making fresh increase in the wheat support price was the fact that the present government at any cost wanted to keep the farmers involved in what production to avoid commodity shortage next year as it happened in the case of sugarcane.
Currently, the commission is however concentrating on various aspects for the purpose. That include domestic demand of wheat consumption, wheat stocks and trade, international prices of the crop, import parity price of wheat, fresh cost of production, nominal and real support price, and impact of increase in the support price on average house hold expenditure.
Informed sources said that cost of wheat production in 1996-97 in Punjab was Rs204 per 50 kg (Rs.5.10 per kg) at farm while for 1999-2000 it was Rs269 per 40 kg (Rs6.72 per kg). Similarly in Sindh the cost of production was Rs201 per 40 kg (6.52 per kg) in 1999-2000.
The proposed increase in wheat support prices seems to be justified specially in view of increase in cost of inputs on various grounds like cost of fertilizer, irrigation water charges and increase in transportation charges etc.