Ensuring fair price for farm produce
By Tahir Ali Khan
“RATHER than bringing my tomatoes to this far away market to
sell it at a price which even cannot cover the
transportation expenses, I better destroy the crop in the
field,” said a farmer who had brought the commodity from
Sindh to the vegetable market in Mardan.
A truck-load of tomato could fetch him barely Rs35,000 while
his expenses on its transportation were Rs65,000. This is
often witnessed in case of most crops in Khyber Pakhtunkhwa,
especially those which are not covered by support price
To get the badly needed money or sell perishable items,
small farmers try to dispose of their produce quickly. The
agro-based mills/factories and commission agents, who
usually work as cartels, reduce demand to depress prices.
Farmers are forced to sell their crop below the cost of
production in times of prices crash.
Without minimum guaranteed support price for some crops,
farmers suffer in years of good crop as well.
The scope of price support system should be enlarged to
cover more crops like maize, horticulture. The support price
should be determined after consulting all stake holders and
taking into account multiple factors—-the cost of
production, domestic and world prices, parity prices,
domestic and international demand and supply situation,
comparative economics of competing crops, real market
prices, profitability of input use, impact of support price
on other sectors of the economy and the incidence of poverty
in a particular region etc.
An agricultural costs and prices commission is needed to be
set up in all provinces to provide data and the basis for
fixing support and procurement prices of agricultural
The support/procurement price system is needed to promote
equity, productivity, price stability, and agricultural
development and to ensure a fair return for the produce.
Initially eight crops – wheat, cotton, rice, sugarcane, some
oilseeds, gram, onion and potato – were covered by the
support price system. However, under the pressure of
international lending agencies, it was restricted to four
crops – wheat, cotton, rice and sugarcane in 2001. The
procurement prices for wheat and rice are implemented
through Passco, for cotton through Trading Corporation of
Pakistan, and for sugarcane through sugar mills.
Support price is the minimum guaranteed price which the
growers are offered when the market price tends to fall
following a bumper crop. And if the market price is better,
they could sell their produce elsewhere. This policy usually
encourages farmers to grow price-supported crops.
Support price in the country was determined by the
Agriculture Prices Commission from 1980 to 2000. The
commission was initially an autonomous body. Then, under
goading from the lending agencies, it was made an attached
ministry of agriculture ministry and later converted to
Agriculture Policy Institute (API). The Agricultural
Development Commissioner has the additional charge of API
Chairman. The reports prepared by API, however, are hardly
considered by the government.
After the Cotton Export Corporation and Rice Export
Corporation of Pakistan, responsible for cotton and rice
respectively, were closed, the task of implementing the
support price of cotton was left to the Trading Corporation
of Pakistan and that of rice to Pakistan Agricultural
Services and Storage Corporation (Passco). After the
disbandment of Agricultural Marketing and Services Limited,
there is no agency to procure potato and onion. Same is the
case with oilseed crops after the closure of Ghee
Corporation of Pakistan.
Despite trends of liberalisation and deregulation, the
system of guaranteed minimum price is used in many countries
to stabilise prices of farm produce. India too has the
Agricultural Costs and Prices Commission, set up in 1968, to
ensure a minimum guaranteed price to growers for their
The support price system needs to be revamped. While big
farmers benefit disproportionately and consumers are often
badly hit, the poor farmers do not benefit much from it.
Tobacco is an important cash crop. But its weighted average
price (Wap) is dismally low. According to Haji Niamat Shah
Roghani, a farmer, calculated the cost of production of
tobacco in 2010 at Rs165 per kg while its Wap notified by
the Pakistan Tobacco Board was Rs98.
“The price should have been over Rs200 per kg on the back of
escalating prices of inputs. Tobacco growers should be
meaningfully involved in price determination. While the cost
of production of per hectare tobacco was fixed on the basis
of 3000kg per hectare yield, companies made purchase
agreements with farmers on the basis of 2100kg PHY which
goes against the interest of the growers,” he argued.
Maize is another staple food crop which doesn’t have a
support price and public procurement mechanism. The
government should announce a minimum support price, and
procure maize from farmers.
Again, though the official minimum support price for
sugarcane was Rs125 per 40 kg, local millers offered up to
Rs338 per 50 kg to farmers.
“It speaks volumes of the government’s indifference and lack
of information on the ground realities. Look at the price
fixed by it and the one offered by mills,” said a farmer.
Globally, five types of prices – monopoly, procurement,
support, free-market, and administrative prices – are being
used for agriculture produces.
Monopoly prices are fixed by the government below the market
prices and the producer is compelled to sell his produce to
government or its designated/authorised agencies. This
policy is rigid and harms the farmers but is pro-consumers.
From 1950 onwards, Pakistan opted for the procurement price
system in which the farmers were free to sell their produce
in the open market but the government reserved the right to
purchase the produce anytime at a fixed price. The price
thus fixed is generally lower than the market price.
Free market prices are beyond government control and are
fixed by the dynamics of supply and demand. In this system,
the farmers benefit in a poor crop year when supply
decreases and demand increases, but invariably suffer in a
bumper crop year when the supply and demand position is
Administered prices: These are the prices which the
government administers for the benefit of producers as well
Courtesy: The DAWN