May 7 - 20, 20

Food inflation has been galloping in Pakistan during the last few years compelling more than 60 per cent people towards the worst food insecurity as food has become unaffordable to them. The prices of essential items like wheat, rice, sugar, vegetables, pulses, milk, egg, meat etc. have gone up by 220 per cent. Agriculture is considered the mainstay of Pakistan's economy and it is the main source of providing food to the fast-growing population of the country. Pakistan's agriculture growth is 1.2 per cent in 2010-11, which is less than the official annual growth, while the rate of population of 2.2 per cent, a sure sign of decline in per capita availability of food. The country is confronted with food security issues and every year the government is compelled to spend invaluable foreign exchange over imports of wheat, sugar, palm oil and other food items.

In Pakistan, the rise in food insecurity has led to malnutrition. Malnutrition rate in some parts of Pakistan is as high as in Africa. More than half of Pakistan's population is food insecure, anaemic, and malnourished. The population is consuming less than 1,700 calories per day, which is far below international levels.

According to a study by the Department for International Development (DFID), the economic cost of iodine and vitamin deficiency in Pakistan equals to 2.5 per cent of GDP. Rising inflation, especially of food, which is in double-digits for the last several years, is causing severe food insecurity in Pakistan.

The inflation rate rose to a high of 11.27 per cent in April of 2012. From 2003 until 2010, the average inflation rate was 10.15 per cent reaching a historical high of 25.33 per cent in August of 2008 and a record low of 1.41 per cent in July of 2003.

There are various factors fuelling food inflation and making Pakistan vulnerable to food insecurity. Low per acre yield of food crop, high cost of fertilizers, unaffordable bank finances, non availability of gas and electricity, exorbitant rise in cost of transportation of food due to rising fuel prices, insufficient storage capacity and improper marketing of perishable goods, higher post-harvest losses, weaker management, ongoing war against terrorism, rising trade deficit, rising cost of production, rising oil prices, etc are some of the underlying factors nurturing food insecurity, food scarcity and inflation. Besides, there is a water shortage in the country, particularly in southern parts of Sindh and Balochistan, which is becoming a potential threat to South Asia.

Inordinate government intervention in commodity markets is also giving rise to inflation. Pakistan is expecting a bumper wheat crop this year of over 23 million tons but flour millers anticipate increase in price of wheat flour by at least three rupees per kg at a time of wheat procurement following the government's decision to raise support price to Rs1,050 from 950 per 50 kg.

The increase in demand for globally traded food crops is another important reason of increase in food prices. Furthermore, increasing interest of global investors in hording commodity for future contracts has contributed to the rise in food prices recently.

Domestic prices of most of the food items escalate with the rise in their international prices. Notable examples are wheat, sugar, rice, tea, palm oil etc. However, if there is a slump in international prices, the pass-through is largely insignificant. The latest round of increase in prices of fresh and packaged milk and beef and mutton has been triggered primarily because of exports of these items amid higher cost of production of dairy and livestock products due to rising electricity and fuel oil prices.

Pakistan is facing food security challenges due to population growth and inefficient irrigation. The food price index has an extremely high correlation to oil prices and with oil prices up it is going to be difficult for food prices not to follow suit.

Energy prices affect the production of fertilizers as well as costs related to food distribution and farm machinery use. Bulk of essential goods arrives on diesel operated vehicles from up country and interior Sindh to Karachi. A large number of small vehicles fitted with CNG lift the commodities from there for distribution to various city markets. Now diesel price is soaring at Rs107 per liter. Massive hike in CNG and petroleum prices result in enormous jump in the Sensitive Price Indicator.

Above all, there is a lack of political will to enforce competition laws and ensure a disciplined pass-through of international price movements on domestic price-line, and contain hoarding, smuggling, and other malpractices.

There is no appropriate mechanism to protect consumer from undue price hikes making it difficult to keep food prices at reasonable levels.

The government should adopt appropriate food security policies and develop a mechanism to control essential food prices to provide relief to millions of poor people of Pakistan who are pushed in the clutches of poverty and hunger. They have to envision a prosperous and hunger free Pakistan with food security for every household. According to a recent report by the State Bank of Pakistan, the equitable distribution of land and the provision of constitutional rights to farmers is a must to ensuring food security in the country.

An objective policy framework is inevitable to check food inflation and accelerate the rate of increase in per-acre yield of food crops. A balance is needed between the pressing needs of feeding a fast-growing population and earning foreign exchange through exports. The buffer stock and storage of all food grains and edible oils is needed to be enhanced substantially to meet any price fluctuation by increasing supply at the time of price rise as has been done by India. Research and effective policies regarding agricultural resources, policies for water irrigation, skilled labor, technology, transportation and marketing can help reduce the risk of severe hunger-like situation and improve food security.