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Dissatisfaction over increase in wheat support price      
By Aamir Kabir

An increase in wheat support price has always been a debatable issue in our country and the current Rs50 per 40kg hike to Rs400 is is not an exception. The government is of the firm opinion that this move would help in improving production and achieving self-sufficiency. But, can mere price- enhancement help achieve these goals is a question being widely discussed among the farming community.

The government's perception is that the rise in support price will encourage higher investment and promote productivity, thereby benefiting the majority of population living in rural areas and safeguarding the interests of consumers by making supplies available at reasonably stable prices.

Independent analysts are of the opinion that the objective of the government to enhance production through this process has neither been achieved in the past nor could be this time. As is evident from the table below, increase in support price did not show any significant impact on either yield or on area during the reported period of 1990-2004.

It is worth mentioning that the decision of farmers to grow more wheat depends on the overall prices of cropping patterns. It does not depend on the relative price of wheat compared to other crops but on the relative price of wheat inputs to other crops. The farmer does not look at one price but he calculates the relative prices of various crops that he can grow and also the expected profit margin. So it will be wrong if one assumes that the decision of farmers to grow any crop depends upon the support price alone.

It is due to this reason that farmers' organizations have termed the government's decision 'not enough'. They have complained that the government was importing wheat from Australia, the United States and Canada at Rs506 per 40kg, but was not willing to pay its own farmers the same price. They say the support price increase is insufficient to offset the increased costs of fertilizers and the water shortage.

In 1999-2000, the government raised the wheat support price from Rs240 to Rs300 per 40kg. Therefore, growers were given a 25 per cent raise in a single year. The country harvested a record production of 21.8 million tonnes of wheat in 1999-2000, which was not only sufficient for domestic demand but there was also an exportable surplus.

Then there was no increase for following three years in the official procurement price. Therefore, our policy-makers increased the wheat procurement price in year 2003-2004 to Rs350 for 40kg, anticipating that the increment would again do a miracle for them. But, the result was not as expected as the wheat production fell fairly short of the target during 2003-04.

Agricultural analysts say that mere increase in price cannot boost production because other important factors like the subsidized electricity and fuel to overcome irrigation water shortage to run tubewells, availability of fertilizers and herbicides in abundance and at affordable prices, and finally an assurance that the growers will get the officially announced procurement price price of their produce play a vital role in motivating farmers to go for maximum output.

Therefore, besides increasing the support price the government must also pay attention to maintain the cost of production by watching critically the availability and prices of agricultural inputs as increasing the support price only is no solution. Further, the most important requirement for achieving the desired wheat production severe water shortage will not only affect the wheat-sowing process but could also force farmers to lose interest in investing in this crop.

It is estimated that the government will provide around Rs5 billion subsidy on one million metric tons of wheat imported recently to meet domestic needs. If this huge amount is spent on schemes which can either help improve water availability or oblige farmers through some special package, it can repeat the miracle of record high wheat production.

For an agricultural country like Pakistan, failure of producing enough wheat to feed its population is a matter of shame for the whole nation which needs to be tackled sensibly not politically, if we are interested to regain the repute of a truly agrarian state. Currently, wheat consumption stands at nearly 19 million tonnes per annum according to the internationally agreed data, which says that a single person consumes nearly 126-kg flour annually.

According to a report, the population of the country would exceed 151 million by the end of the current year and 165 million by next five years. Therefore, wheat requirement by the end of this year, after adding storage losses and safety stock, stands around 20.65 million tonnes and by the year 2009 to 21.85 million tonnes. In order to achieve these targets we will have to manage things rationally and wisely, not just by playing with the support price.

The rationale of the policy of minimum support price is easily explicable. The Green Revolution called for considerable outlay, on the part of the producers, on high yielding varieties of seeds, fertilizer, water, pesticide and so on, necessitated a stepping up of per hectare yield.

But higher output, the law of the market suggests, leads to a lowering of market price. To save the enterprising farmers from possible loss, it was decided to institute a minimum support price to ensure an adequate profit for the farmer after fully covering his cost.

In order to achieve these targets, there is a need, on the part of the government, to draft a comprehensive wheat policy through extensive participatory dialogue of all stakeholders covering not only the minimum support price but all other inputs like fertilizers, pesticides, certified and high yielding seeds, water, etc., and focusing on overall cost of production.

The growers on the other hand need to understand also the social element of wheat pricing policy. The government happens to be the main supplier of water from the irrigation system, at a subsidized price; the government also supplies fertilizer at a price lower than the cost of production and, of course, it takes the initiative to supply the farmer with high yielding varieties of seeds, again at throwaway prices.

The farmers should, therefore, in exchange be agreeable to hand over to the government agencies a part of their produce at government announced price. For the sake of the nation, farmers should, however, remain satisfied with a price for the procured part of output which normally remains less than the prevailing market price. 

The DAWN

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