DOMESTIC FOOD PRICES & THE MASSES

SHAMSUL GHANI
(feedback@pgeconomist.com)
Mar 1 - 7, 2010

The following lines are reproduced from the Pakistan Agriculture Economy and Policy February 2009.

"A majority of Pakistani politicians and legislators are from rural backgrounds. These political leaders, along with powerful industry groups including the All Pakistan Textile Association and the Pakistan Sugar Mills Association, heavily influence agricultural policy. These pressure groups consider their own particular interest over those of small farmers. Pakistan's agricultural sector is characterized by low productivity, limited investment and a weak extension service. In addition, inefficient resource use, a skewed distribution of farm holdings, a thin land market reflecting insecure tenure, inefficient non-price allocation of water and irrigation systems in a drought prone region, and poor quality inputs and infrastructure continue to hinder the sector."

The excerpts encapsulate an overall agro policy and implementation design of Pakistan. The resurgence of food inflation despite tight monetary stance and reasonably good agriculture output levels is proof of the decisive role of the non-economic forces in the country's economy say agro economy. The unholy alliance of feudal-political forces and their reliance on the policy of status quo has done immense damage to this country.

More alarming is the fact that these forces get new lease of life whenever the country appears set on the road to progress. Their comeback heralds fortuitous tidings for the elitists and days of grueling adversity for the poor masses. The destabilizing traumatic change in the system was brought about by claims that wheat flour was sold at Rs.15 per kg and sugar at Rs.30 per kg. This was a gross economic injustice. The prices should come back to the l990 levels.

The masses, as usual took the bait, and we all know at what prices wheat flour and sugar are being made available these days - exorbitant increase in the prices of rice, economy produces more than double the consumption level notwithstanding.

Food price inflation keeps mounting irrespective of the supply situation. During January 2010, more than 25 food items registered price increase as against only four food items that eased on prices. The main sustenance items that record increase in prices are: eggs 24 percent, sugar 21 percent, maize 11 percent, bajra 8 percent, spices 6 percent, gram and pulses 3 to 4 percent, wheat flour 2 percent, and cooking oil 1 percent.

The export-induced rice price hike in view of bumper crop of around 7 million tons against the domestic demand of less than 2.5 million tons is nothing short of an economic crime. This conforms to the Friedman freak economic theory: don't let the market forces bring the prices down; find new markets abroad.

Although Pakistan is a net agro produce importer wheat-rice combo with induced change in consumption habits can be used to feed the entire nation, even at subsidized prices. It is no shame to subsidize basic food items on which hinge the very sustenance of masses. The entire world is doing that. It was during the previous rule that we did away with the IMF program. With the feudal forces hitting back and the economy going into a tailspin, we were driven back to the IMF doorsteps. The phased removal of agricultural and energy sector subsidies enforced under IMF conditionalities has hit the poor and middle class segments of the society. But who cares. It is not the problem of the ruling elites. If we can squander away billions under "incomes programs" in the shape of phony and politically-motivated dole outs, why can't we do it in a proper economic way through genuine subsidization.

WHEAT AND RICE PRODUCTION DURING THE LAST 5 YEARS

. WHEAT RICE
YEAR AREA (000 HECTARES) PRODUCTION (000 TONS) YIELD (KGS/ HECT) AREA (000 HECTARES) PRODUCTION (000 TONS) YIELD (KGS/ HECT)
2004-05 8358 21612 2568 2519 5025 1995
2005-06 8448 21277 2519 2621 5547 2116
2006-07 8578 23295 2716 2581 5438 2107
2007-08 8550 20959 2451 2515 5563 2211
2008-09P* 9062 23421 2585 2963 6952 2346

In the midst of the global food crisis, a number of countries have taken steps to support the sustenance of their poor masses through rice export ban. Government of Pakistan, on the contrary, took this as an opportunity to rack up profit through increasing rice export. The domestic rice prices shot up because of limited adomestic supply. The price hike enveloped all categories of rice, even the cheapest ones that formed the sustenance of low income groups. The elite segments of the society benefited from this "economic opportunity" while the poor ones got hit under the belly. It will be observed from the statistics shown in the table that FY-09 saw a marked increase in the size of cultivable area and the corresponding wheat and rice production. Is it a step to provide relief to the masses or a ploy to earn still high profits through smuggling and excessive export?

All those who are and have been at the helm of affairs know what the problems of Pakistan's agriculture economy are. What is required is the will to act honestly.

First of all government needs 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 economic policies of neighbors living under similar economic conditions instead of following the dogmas of 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 multinationals 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 agro R&D to increase soil fertility and the respective per hectare yields. The cultivable area should also be increased in line with the growth in population. 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 of economy should grow in tandem. 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 substandard storage facilities. This needs 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 the society, the issues of subsidy, farm tax and price parity can be sorted out with them.