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Functioning of the food and fibre market
Siraj-ul-Hasan
The food and fibre market system in Pakistan works with the participation of both public and private sectors.
In the public sector, the functions of the system are shared by the federal and provincial governments, which relate to agricultural administration, crop prices and procurement, and data collection and dissemination.
These are performed through a number of departments, directorates and autonomous and semi-autonomous bodies as are specified below:
Agricultural administration: Although agriculture is by constitution a provincial subject, the federal government performs it by developing a policy framework in consultation with the provincial governments. At the federal level it is the ministry of food, agriculture and livestock (Minfal) which is headed by a cabinet minister.
Agricultural Price Commission is another important organization of Minfal. The ministry works in close cooperation with the Planning Commission. Besides, there are number of semi-autonomous bodies, and most prominent among are Wapda, the ADBP - now renamed as the Zarai Turraqiati Bank of Pakistan (ZTBP), and the Pakistan Agricultural Research Council(PARC).
One of the most important functions of the federal government is to provide and manage the food security. This is done through emphasis on fixing production targets and making every effort to arrange and supply the inputs. Any shortfall is met through imports under various trade agreements. The government keeps a watch on production and in case of a pessimistic production outlook, arrangements are made to import food grains and other essential commodities.
The involvement of the public sector in the manufacture, storage, and distribution varies. Most of the imports and local supply is handled by the government. Their retail marketing and sales (about 80 per cent) are done through private sector.
Production, storage and distribution of seeds are also in the public sector although private sector has now been encouraged to enter into this area. The Punjab and Sindh Seed Development Corporations produce recommended variety of seeds through the registered growers which is then distributed through their own retail outlets.
Water is a major input, and its resources are developed by the government. About a quarter of the total water available at the farm gate is made available by the tubewells in the private sector.
Crop prices and procurement: Crop prices and procurement programmes were started in early 1950's. Over the time these covered all major crops like wheat, rice, cotton, and even the non-traditional oilseeds such as sunflower, safflower and soyabean. Among minor crops potatoes and onions were covered.
The marketing of wheat, rice, cotton and sugarcane were handled through the Rice Export Corporation of Pakistan (RECP), and the Cotton Export Corporation (CEC), which have now been disbanded and their functions are being performed partially by the Trading Corporation of Pakistan (TCP). The Pakistan Central Cotton Committee advises the government on various matters of cotton marketing. A cotton grading institute also started working some two years ago.
Data collection: Various agencies, both at federal and provincial levels, are engaged in data collection and dissemination. Crop production estimates are prepared by the Crop Reporting Service in Punjab, the Bureau of Statistics in Sindh and the Statistical Sections of Agriculture Departments in the provinces of the NWFP and Balochistan. These estimates are sent to the federal ministry where these are consolidated. Their publication is the responsibility of the Federal Bureau of Statistics (FBS). The arrangement for collecting harvest prices are, however, very weak.
Most of the data is collected on the daily, weekly and monthly basis. However, many commodities experience seasonal shifts in supply and demand that are not actually reflected in the reported prices. In general, flat price trends across a crop suggest that the true price levels are not being reflected due to either the non-representative samples or the mis-quoted prices. The methods for averaging prices over time are also flawed because of the non-monitoring of quantities being sold in various markets' at various times.
Private sector functions: The functions performed by the private sector in the food and fibre system are enumerated and specified in brief as under:
1. Production: Production of agricultural commodities is a private activity. It benefits from public investments in supporting infrastructure and services but responds directly to investments in farm capital.
Agricultural technology introduced so far seems to have reached a plateau. Further increases in production will probably be not so fast and easy as public policies and investment programmes attempt to secure a much wider adoption of the proven technological packages. It will also be useful to improving the technological package. The present package is characterized by tractors, cultivators, tubewells, plant protection and improved seed supported by relatively stable prices. This has served usefully in the case of four major crops (wheat, rice, cotton and sugarcane) but the gap between potential and actual achievements is still wide.
The private sector plays a very important role in providing various agricultural inputs. About 30 per cent of the fertilizer is manufactured in private sector. The importance of a sound seed programme capable of supplying quality seed to the farmers cannot be over-emphasized. Despite its vital importance, the percentage of improved quality seed in the total is pretty low.
2. Transportation: The private sector largely contributes in transportation. In far-flung areas where means of transportation are scarce or defective, farm products are generally sold in primary markets. These markets are capable of absorbing small quantities and the large quantities perforce are moved to secondary markets. All transport between villages and markets or villages to sugar mills, cotton ginneries and rice husking mills is done by private carriers.
3. Storage: Farmers and village level traders have little developed storage capacity. Marketable surpluses of small farmers is difficult for them to withhold for better prices. Grains are stored in earthen containers, in pots and jute bags or underground pits. It is estimated that the producer gets up to 65 per cent of the consumer price for non-perishable commodities and about 25 per cent for perishables.
Storage capacities present in markets can be attributed to the private sector alone. Private sector carries credit in providing storage arrangement for the perishables as a number of firms have constructed cold storages in and around fruits and vegetable markets.
4. Processing: At present all the flour mills are in private sector, along with rice husking and the sugar mills. Other industries include jute goods, cotton ginning, cotton textiles and milk processing.
5. Trading/marketing: Marketing structure ranges from free operations to substantial government intervention by way of fixation of floor prices, procurement quotas and prices, export quotas and credit control. A large number of commodities are in private sector with no restrictions on their movement and prices. Spices and condiments, sugar, pulses, tea, fruits and vegetables, milk and eggs are some examples.
There is a lack of proper physical marketing facilities in the private sector. There is no inadequacy of wholesale markets, warehouses and cold storages, and the means of transport and processing facilities.
Lastly, it may be stated that the foreign trade (exports and imports) of most of the agricultural commodities is largely done by the private sector with limited public involvement.
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