— a success or failure?
By M. Shafi Niaz
THE Federal Committee on Agriculture (FCA) had in October
2005, fixed the wheat target for 2005-06 at 22 million tons
as against 21.6 million tons harvested a fiscal earlier.
This meant an increase of over four per cent in the
production by enhancing over three per cent yield per
hectare and one per cent increase in the area.
help achieve the production target and to improve incomes of
the farmers, the wheat support price was increased by Rs15
to Rs415 per 40kg with the government procurement kept at
around five million tons. It was assumed that the wheat
price during post-harvest period would not fall below the
But it was widely believed that this policy may not be able
to attain the desired results because of the difference in
cost of production and stipulated sale price of the crop.
The average cost of wheat production, including land rent as
worked out by the Agricultural Prices Commission (APCom) was
Rs425 per 40kg in Punjab and Rs406 in Sindh. On the basis of
this, APCom had recommended price at Rs425 per 40kg so that
it should at least cover the cost of production of the
Punjab’s cultivators whose share in national output is about
80 per cent and give a small margin of profit to farmers in
However, the ministry of food and agriculture recommended
Rs415 per 40kg which was approved by the ECC. So with such a
price scenario, one would hardly believe that the expected
targets would be realized. The wheat production cost, as
worked out by APCom was based on the input prices that
prevailed before it submitted its report to Minfal in July,
2005. By the time, the crop was sown in October–November,
the prices of inputs like fertiliser, diesel and wages had
gone up and resultantly, the cost of production exceeded
Rs425 per 40kg as earlier worked out by APCom.
Minfal hoped to meet the target while at some stage the crop
was estimated to surpass 22 million tons. The Punjab
government too, was quoted as having a reserve stock of
about 3.5 million tons which were more than the country
would need during the crop year.
Similarly the Sindh government had fairly good stock
available with them. Both these governments maintained that
due to the available reserve stocks, any further procurement
would put a serious constraint on their storage capacity.
The plan, however, was that the Punjab government was to
procure three million tons and the rest by other agencies
Assuming a surplus that would enable Pakistan to export
wheat, a proposal was considered that India would take wheat
from Pakistan in exchange of sugar.
While the crop was still ripening, the government revised
the target down to 20.5 million tons. The ‘targets’ are
fixed before the crop is sown so that one could accomplish
the same. But when the crop is sown there is ‘estimation’ of
the likely area/yield or production while the target remains
The wheat harvesting started in Sindh by the end of March,
indicating a bumper crop. The price of wheat in Sindh
started falling much below the support price. It was between
Rs350–360 per 40kg. However, the government was not ready to
procure wheat at the support price level. Taking advantage
of this, the trade sucked in as much crop as it could at low
rates. The farmers in a bid to meet their financial
obligations suffered loss. They could not even meet the
In Punjab, the procurement target was reduced to about two
million tons despite storage constraints but later on it was
revised to 2.5 million tons against the three million tons
The bumper crop information and delay in starting
procurement by the Punjab Food Department set prices in the
open market below the support price. This situation
attracted the private trade to buy crop from market/farmer
at Rs365-380 and not Rs415. Punjab farmers met the same fate
as Sindh’s. The information as of third week of May was that
the prevailing market prices have not yet reached the
expected level and the farmers in the Central and South of
the province are agitating against the non-payment of fixed
It appears that the government is unclear about its support
price programme. It proclaims to purchase every grain, if
price falls below the set level which however, is not
implemented. The government seems to be under obligation,
perhaps of international organizations like the Asian
Development Bank and does not intervene and lets the private
sector act freely. This dichotomy hurts farmers.
Let’s assume that if traders are allowed to buy from the
open market they would gladly do so when prices are below
the support price and would also export the commodity if
international prices permit them, or would sell to
mill-owners at the government’s price set for selling
All this happens at the farmer’s cost that lives below the
poverty line. If the government intends having a support
price programme then it should buy the produce from farmers
when prices fall below the declared rates, immediately after
harvest. If the government does not extend timely support,
it should not announce the support price of a crop. The
market mechanism then should be left to operate depending
upon the demand/supply situation.
Wheat which is a strategic crop has now become a political
one. One wonders if the government would take the
‘not-farmer-friendly’ policy. India resorted to this
free-market policy in recent years to which one of their
economists remarked that their government was repenting and
wonders how long it can withstand the farmers’ pressure.
There are reports of some suicides in that country. It’s a
lesson for all.
The latest estimate of wheat production according to Minfal
is 20.5 million tons of which 16.2 million tons is expected
from Punjab and the remaining 4.3 million tons from the
other three provinces. The information coming from Punjab is
that yield per hectare this year will be less by 10-15 per
cent while others report it to be 20-25 per cent lower than
the last year.
The area sown this year is 6.32 million hectare while the
yield per hectare in 2004-05 was 2.59 tons. Taking a more
optimistic view, the yields would be 2.33 tons and 2.20 tons
per hectare if it is less by 10-15 per cent, respectively.
The production in the Punjab should, under these
assumptions, be 14.73 million and 13.90 million tons.
Accepting the estimates of 4.3 million tons production in
the other three provinces, the total production should be
18-19 million tons. If the reserves of about three million
tons are added, the total would be 21-22 million tons.
No definite figure of per capita annual consumption of wheat
is available, but generally it is believed that it varies
between 110-120kg. Assuming 115kg as consumption, the need
for 155 million people would be 17.83 million tons. Adding
to it the likely seed, wastages and poultry feed, the total
would be about 21.5 million tons.
If a minimum of 10 per cent is taken as reserves, the total
need would add up to about 22.3 million tons against the
production of 18-19 million tons and the availability
between 21-22 million tons. These calculations don’t take
into account informal trade with the neighbouring countries,
which at times are estimated at 1.5 million tons. Any
change(s) in the basic data would naturally alter the
deficit situation and would impact the government’s decision
with respect to export/import of the crop.
In view of the prevailing situation, following suggestions
need to be addressed seriously:
i) Whether the government would want to continue with the
support price of wheat? Does it indicate the government
intentions to carry out this policy.
ii) If so, it should take concrete and effective steps to
implement the same from day one, if the price structure
needs such an action. This has not happened this year and so
was the case in some previous years. Lack of effective
implementation makes farmers suffer.
iii) The government fixed support price should not only
cover the cost of production but should allow some margin of
profit, thus helping the farmers in reducing their poverty.
In this exercise, the government has to keep a close watch
on input prices so that these are kept under control.
iv) Crop statistics needs to be drastically improved. The
crop reporting services in provincial governments need an
in-depth review to improve and strengthen their functioning.
The Federal Bureau of Statistics and Minfal should help in
this exercise. There is definitely a large scope for the
improvement of crop estimates, both in-terms of time and
reliability. Let’s caution that the satellite method being
adopted by Minfal would not be able to give data ‘in time’
and with ‘adequate reliability’. It is considered to be
wastage of resources and could add to existing confusion
about the crop area and production.
v) As final production estimates are not available until May
and even thereafter in the case of wheat, the government
should set up an independent committee as it did in May-June
2003. Such a committee should meet and visit fields as
needed and give their likely estimates to the government.
The chairman and members of this committee should not be
those who are directly concerned with the production
process, and in any case not be a minister or secretary of
the concerned ministry.
vi) National requirements should be carefully worked out.
This would help in planning the steps required to be taken
by the government to meet a surplus or a deficit situation.