DOMESTIC FOOD PRICES

PROBLEMS AND SOLUTION

SHAMSUL GHANI (shams_ghani@hotmail.com)
Mar 10 - 16, 2008

There has been much talk about parity between domestic and international food prices. The proponents see the parity solution as panacea for all our economic woes. The recent fixing of wheat support price of Rs.520 per 40 kilograms by the Economic Committee of the Cabinet has been severely criticized by them. Domestic growers are made to compare import price of US$ 650 per ton to the domestic price of US$ 215 per ton. The growers are demanding to fix the wheat support price at Rs.1000 per ton. Supporting editorials have been written underplaying the impact of higher wheat support price with the bookish interpretation of support price hike advocating that inflation caused by such hike will only be of a short term nature and the effect will be neutralized in the long term. The fact that in our country prices of essentials never rise to stage a reversal has been totally disregarded; leave alone the spiral effect of such an increase.

Incentives for upward price adjustments in the domestic prices of milk are being worked out by suggesting a 100 per cent increase in the procurement price of milk for large dairy establishments like Nestle, Heleeb etc. This will mean increasing the existing procurement price from Rs.25 per liter to Rs.50 per liter. How the lower middle class urban population and those living below the poverty line will be affected by such bookish measures is never taken into account. The rice price hike in face of a bumper crop of 5.5 million tons as against the domestic demand of 2.2 million tons has been triggered by such bookish economic measures. It is not surprising if people are demanding a ban on rice exports to correct the situation. To avoid an outright ban situation, at least prudent measures can easily be taken to ensure reasonably priced rice supply to the domestic users. Some quarters advocate formation of India specific policies to deny any resultant benefit to the neighboring country. This paranoid approach should be done away with and we should focus on providing relief to our masses without caring for any resultant benefit that may accrue to any one else. We should not even hesitate to emulate neighboring countries' economic policies if these are beneficial to us.

The much advocated price parity stance fails to take into account the gaping per capita income disparity. Without increasing the income level of our masses to the international level, it is criminal thinking to suggest food price parity as it will benefit only the haves and crush the have-nots. True, our per capita income level can not, even in the distant future, be raised to the international level. Then, sooner we forget about the food price parity the better. The Agri Forum chairman Mr. Ibrahim Mughal rightly thinks that we can not eliminate rural poverty or even reduce it substantially by raising the prices of domestic produce to the international level; such a measure would benefit only the big landholders and middlemen. This sounds convincing as 75 per cent of the farming families hold less than 12.5 acres of land. Our caretaker finance minister is a staunch supporter of the price parity option making the disparity responsible for the recent flour crisis created by the smugglers and hoarders. But then, whose responsibility it is to check smuggling and hoarding? The caretaker government will do well to take care of the peaceful power transition and leave the sensitive economic issues to the incoming elected people instead of applying their failed feudal remedies.

SOLUTION LIES IN FAIR AND PRACTICAL MEASURES

Instead of looking for simple arithmetical solutions, we should focus on the rout causes that are known to every one who is or has been at the helm of affairs. What is needed is the will to act honestly. Can we do the following?

First of all we need to introduce radical land reforms to ensure a much wider farmer base by doing away with the land concentration in few hands. These reforms are due since the very inception of this country. The land holding size should be standardized without creating classes among the farmer fraternity. The question of subsidy should be resolved in line with the successful policies of our close neighbors living under similar economic conditions instead of following the dogmas of our overseas advisers.

The cost of input to the farmer should be reasonably minimized to provide him a sustenance level to begin with and then to help him grow with the growing economy. All unfair subsidies and fiscal benefits allowed to the multi nationals responsible for providing inputs like seeds, pesticides, DAP, chemicals etc. should be withdrawn. Local farm input producers should be encouraged to increase their capacity and production to offer lower prices to the farmers. The government should provide free of cost water and electricity to the farmers.

The government in league with the private sector should invest in agri R&D to increase soil fertility and the respective per acre yields. The cultivable area should also be increased in line with the growing demand for production. Conversion of agriculture land for commercial use should be banned forthwith. The growth of industrial sector should not be at the cost of agriculture sector. The two sectors should grow in unison unobtrusively. Heavy investment in modern farm technology should be made and the primitive or not-so-modern farming methods should be gradually phased out.

The farmer fraternity should not be treated as a backward segment of the society. They should be provided with all social amenities especially quality education facilities to develop them into a modern family of entrepreneurs. This is the only way to stop their exodus from this all important sector. This in turn will lessen the population pressure on urban areas.

Proper wastage control measures should be taken to eliminate the reported 25 to 30 per cent produce wastage caused by sub standard storage facilities. This will need construction of a sufficient number of grain silos on modern lines. Building of proper infrastructure to afford the farmers an easy access to the market will diminish the role of extortionist middlemen.

The broadening of farmer base and elimination of class syndrome with equal opportunities to the hardworking lot will make them feel motivated to achieve a constantly higher level of growth. Making them feel free from the decades old exploitative stranglehold will do wonders to their production capability. After they find themselves established as an important and respectable segment of society, we can discuss with them the questions of subsidy, farm tax and price parity.