Oct 11 - 17, 20

While rupee continues to show its weakness, monetary policy reliance of the central bank on bookish approach to control inflation fails to produce desired results. Consumer economics seems trapped in a vicious circle. A weak rupee is pushing commodity prices upward. State Bank's obsession with a high policy rate continues to increase the cost of doing business. The sum effect is that the consumer finds himself in an inflationary condition that is not showing any sign of abatement. The State Bank policies during the last two years or so have neither been able to check the free fall of rupee, nor have they been effective in controlling inflation. Anyway, State Bank can at least boast of having the highest interest and inflation rates in the region. Circumstantial factors have also added a lot to the misery of poor consumers. The flood factor has played havoc with the prices of commodities, especially food items.


  FY11 FY10 FY09 FY11 FY10 FY09
CPI 13.23 10.69 25.33 2.51 1.70 2.14
SPI 15.22 9.03 33.85 2.86 1.68 2.34
WPI 19.22 0.26 35.73 2.62 2.21 2.45

During high flood period when communication was either totally broken or temporarily blocked, food item prices knew no bounds and kept rising in accordance with the supply situation as well the appetite of market forces for profits. In the absence of any effective price control mechanism and administrative monitoring, the prices of vegetables soared unbelievably high. Although garlic is imported from China, its prices suffered the same fate as those of the locally produced vegetables. Low-income consumers being a disarrayed and very ineffective force witnessed this mayhem from the sidelines as the limited supply found its way to the kitchens of the affluent and large income groups. Tomato, potato, onion, garlic, and chilies are the basic vegetables/spices that form part of a wide range of dishes. Their inevitability to the Pakistani cuisine makes them take the bloodiest of price hits whenever supply crisis arises. With the improvement in supply conditions, the price fever is about to settle down to the normal.

The seasonal price hikes resulting from circumstantial upheavals aside, Pakistan's horticulture like agriculture is a feudal property and is, therefore, infected with the diseases of corruption, mismanagement, and exploitation. A few years back, a Ph.D thesis by Fateh Mohammad Mari summed up the problem in the following words:

"The results of this study indicated that the vegetable production system is partially efficient, while the marketing system is moderately efficient. Strong spatial price linkages across markets for onion, tomato, and chilies reflected frequent flows of price information while the difference in prices at different locations was due to transportation and transaction costs. High marketing margins of different actors in supply chain of the vegetables and different prices at different times were due to imperfections in marketing system and structure for onion, tomato, and chilies. An important role may therefore be envisioned for government as facilitator and promoter of an efficient production and marketing system."

Couched in soft and technical language, the findings of the study boil down to the following stark realities:

1. We have an imperfect marketing system.

2. High marketing margins result in higher food prices.

3. Government has failed to play its role in correcting the marketing imperfections.

The production and marketing systems of agriculture and horticulture sectors are defective per se. Unless these systems are corrected, attain food security goals are difficult. According to FAO, "food security exists when all people, at all times, have physical and economic access to sufficient, safe, and nutritious food to meet their dietary needs and food preferences for an active and healthy life."

Amongst a number of economic approaches to improve food security, the following three modern day approaches are more relevant:

- Westernized View: This approach advocates maximisation of profits for the farmers to enable them to reinvest in the agro business with a view to expansion and modernisation. The successful expansion and modernisation will enhance the risk taking capacity of the farmer and prepare him to make further reinvestments. Since he knows well what is good for his business, the farmer should be left alone to choose from the various production tools and techniques available to him. This purely "corporate style" farming is advocated by the majority of western countries and international agencies.

- Food Justice: This view assumes that the world agriculture produces and has potential to produce quantities of food that can feed the entire world population irrespective of economic constraints or social biases and inequalities. It further assumes that food is a basic human right and that food crises are created not by the food shortage but by the exploitative attitudes. This idealistic approach is chiefly advocated by the world NGOs.

- Food Sovereignty: This approach underlines the role of multinationals that use their financial and political clout to acquire the really productive agro assets of the developing nations, leaving the unimportant and marginal assets for the majority of subsistence farmers who find it difficult to improve and expand their business and get out of the hunger and poverty trap. It also holds food as basic human right and advocates that every nation should have food sovereignty.

Viewing Pakistan's position in this background, one can say that none of the three approaches fits well in our case. Westernized view does not apply, as majority of farm community comprises either small size holders or sharecropping tenants. The minority of large size holders earns huge profits but never cares to reinvest them in agro business expansion and modernisation projects. Incremental production, if any, is more likely to be shifted to international markets to fetch higher profits. Food justice theory does not apply as feudal lords and exploitative forces dominate Pakistan's entire agriculture sector.