REASONS OF HIGH FOOD INFLATION

SHABBIR H KAZMI
(feedback@pgeconomist.com)
Oct 11 - 17, 20
10

Pakistan faces two serious threats 1) food insecurity and 2) very high food inflation. Not only are lower segments of society finding it increasingly difficult to meet the ends but a large percentage of population is also suffering from malnutrition, leading to declining resistance power against contentious diseases.

One often wonders why the economy is classified as agrarian when nearly one third of its human resource is involved in agriculture and still millions of uncultivated acres face food insecurity threat. The reply is simple, over the decades focus has remained on manufacturing but that too has led to highly inefficient manufacturing units and non-performing loans running into billions of rupees. Giving attention to manufacturing units was right but ignoring agriculture has made the country heavily dependent on imports.

Pakistan has been a major exporter of rice but self-sufficiency in wheat production has been achieved only recently. The country imports over $2 billion edible oil and import of pulses is on top of that. Cotton output has hovered around 12 million bales as against the capacity to produce 20 million bales. Achieving higher cotton output also enhances indigenous production of cottonseed oil for human consumption and oilcakes for feeding cow and buffalos. A little attention on cultivation of sunflower and canola could have helped the country in achieving self-sufficiency in edible oil.

The key reasons for not achieving self sufficiency are 1) inadequate availability of water, certified seeds and insecticides/pesticides; 2) financial institutions reluctance in extending loans to farmers; 3) absence of modern storage facilities; 4) poor farm to market roads and markets completely in the grip of middlemen.

Though dozens of agriculture research institutes are operating in the country, they have not been able to develop high yielding varieties. Yield of various crops in Pakistan is almost one-third of the global average.

Pakistan is among the top five cotton-producing countries of the world but the difference in yield is colossal. This is attributable to 1) cultivation of varieties more susceptible to virus and insect attacks; 2) inadequate application of fertilisers; 3) use of adulterated pesticides and insecticides; 4) inefficient crop management and 5) freefall of cotton prices in case of a bumper crop.

This year Pakistan aims at producing 25 million tonnes wheat. Some of the experts have already started saying that the probability of achieving the target has gone down after the floods but a few experts say the country can produce two million tonnes above the target provided farmers get soft-term credit for the purchase of certified seeds and fertilisers. To give an incentive to farmers the government is considering fixing wheat support price at Rs1,000 per tonne. If Pakistan succeeds in achieving 27 million tons wheat production the country can join the club of wheat exporting countries. Saudi Arabia is an example to emulate, which was like a desert but has attained the status of wheat exporting country.

One of the serious impediments in this feat in wheat is limited storage capacity. According to experts, Pakistan has wheat storage silos, which can store 10 million tonnes, at the maximum. The remaining quantity has to be stored either in open or unsuitable warehouses, which render wheat not fit for human consumption. The State Bank of Pakistan (SBP) has announced financing facility for the construction of modern and state-of-the-art wheat silos.

Globally canola oil is being used to produce bio-diesel, which shocks many Pakistanis. In Pakistan, the price of canola oil is almost double the price of diesel. Pakistan should try to imitate Canada in the production of canola. Lately, when minister for agriculture suggested that farmers should cultivate canola, some of the quarters opposed it and considered it an attempt to switch over from cultivation of wheat to canola. Wheat is food and canola is weed, which can be cultivated on inferior quality land. It is encouraging that SBP has also announced policy for extending specific loans to canola growers.

Maize is the most ignored crop of Pakistan. It seems growers are still not fully aware of the benefits of maize cultivation. Use of corn, corn flour, corn oil and its plant as fodder allows use of every part of plant. Maize can be cultivated on average land with least management and the crop is ready within 120 days. However, balanced application of fertiliser, particularly higher doze of DAP helps in improving yield.

Pakistan is also among the top ten milk-producing countries of the world but production of dairy products has remained highly negligible. The concept of packing milk in tetra packs has yielded two immediate benefits 1) decent price for milkmen, 2) hassle free use, and 3) increasing shelf life of milk.

Production of dried milk has also helped in bringing down import bill of powdered milk. Experts say tetra packs still use only 10 per cent of the total milk produced in the country.

Above stated are only a few examples to achieve food security. Over the years fertiliser manufacturing companies have been playing very important role in educating the farmers. Balanced used of fertiliser has helped in improving yield but lot more remains to be done. However, the country has once again become a net importer of fertiliser. Pakistan needs to add another one million tonnes urea manufacturing capacity at the earliest. Import of urea not only erodes foreign exchange reserves but also forces the government to pay billions of rupees subsidy on imported urea.

The security of loans can be ensured through crop insurance. Pakistan has completed the first phase of insuring credit with reasonable success and now banks and insurance companies have to enter the second phase of providing comprehensive crop insurance. However, the target cannot be achieved without participation by the government. Corp insurance involves a cost but it is an expense worth undertaking for the good of farmers and the country.