The price support policy was originally recommended by the US economist, John Kenneth Galbraith, to Pakistan's planning department in the mid 50's for only five years, to keep food price very low so that industrialists were able to accumulate capital and put up industries.

It was actually a policy to suppress prices of agricultural products. This has been admitted in various official reports stating that prices of wheat and other commodities were kept low during the First Five Year Plan so that commerce and industry would get cheap labour. But the policy recommended for five years only continued for the 50 years at the cost of farmers.

At present, the farmer does not make any profit on wheat prices. He even does not get proper wages for his labour. The example quoted below shows how a farmer does not make any profit in the presence of support prices.

Cost of cultivation: The figures below in terms of tractor hours, fertiliser inputs, herbicides and labour requirement are based on studies of Sindh's planning department but the prices are taken as prevailing currently.

(1) Time spent on seed-bed preparation and drilling by 50 H.P. tractor:

* One deep ploughing. 11/2 + hours

* Two harrowing total. 2 hours

* Drilling of seed.1/2 + hours

Total 4 hours

(2) Cost of above at Rs 250/hour Rs1125 Seed at Rs.350/maund. Rs 350 Fertiliser:

* DAP 65 kgs at Rs 650 per bag of 50 kgs. Rs 845

* Urea one bag at 1st irrigation Rs 350

* Urea one bag at 2nd irrigation Rs 350

* Potassium sulphate per bag Rs 650

* Herbicides Rs 450

* Herbicide application with sprayer Rs 250

* Labour for herbicides Rs 250

* Harvesting charges (average) 30 maunds yield Rs 850

* Threshing charges including extra labour Rs 1,000

* Water rate charges Rs 142

* Land tax Rs 300

* Transport charges during cultivation Rs 350

* The farmer's and his family's labour, working for 6 months and handling five acres compensated at Rs5,400 per month or Rs4,500 per acre Rs 5,400

Total expenditures Rs 12,907 (or say) Rs 13,000

The farmer can get Rs350 per maund of 40 kgs, if his yield is 37.0 maunds per acre. And this does not include any profit on his capital (land), interest on annual production investments and management charges. Since he never gets these returns, he reduces his inputs by:

* restricting deep ploughing and seed bed preparation to one harrowing only; * drilling with borrowed bullocks and his own labour; * using cheap poor quality seed; * using less fertilisers than optimum; * using less herbicides and by manual labour; * using only family labour; * avoiding periodic and precision land levelling; * Avoiding watercourse improvement.

A farmer's yield then is reduced to about 15-20 maunds/acre and he retains most of it for his own domestic use and seed for the next year and sells away the rest to pay for borrowed inputs. In general, this is the way he barters his family labour for,wheat he needs and for no profits.

This has resulted in rural poverty, low yield, neglect of land as natural resource, etc. The aim of getting high yields, therefore, is defeated for ever. Should the farmer get the same prices as imported wheat, his income from 30-35 maunds/acre would be about Rs15,000-17,000. The farmer is convinced that it is uneconomical to grow wheat and thus produces quantity only for his own domestic use.

The price policy from 1950 to 2004 has given the farmers 40 to 50 per cent less than the international prices as shown in the table below. The figures in the table are worked out by taking into account the depreciation of Pak rupee from year to year since 1950 and calculating back the various years' support price with 1950 price. Current price is the lowest in the past 54 years:

Under the present support price policy (to be precise, 'suppressed price policy'), there cannot be any transition from subsistence farming into commercial farming, as the cost of the additional inputs will not be compensated by the additional returns from additional yields.

As compared to this, the international prices of wheat as reported in Dawn (10h January 2004) are:

(i) American, Argentinean and Australian wheat - $224 to $230 per ton and freight $16-20 per ton. The cost comes to Rs14.50 to Rs15 per kg or Rs580 to 600. ex-go-down in Pakistan, Rs650 per muand. (ii) Local price at farm gate- Rs350 for 40 kgs or Rs8.75 per kg. (iii) Subsidy on imported wheat has to be Rs7.25 per kg to keep local prices low. (iv) Fungus-free wheat is available from India at $170-175 per ton and assuming the same freight it comes to $190 per ton C&F Rs11 per kg or Rs450 per 40 kgs. The fob price will be Rs120 per kg or Rs480 per maund. (v) A large quantity of wheat is smuggled into Afghanistan every year. Prices in Afghanistan are about Rs550 per muand or 40 kgs.

The Pakistani farmer has to bear Rs200 per maund as smugglers' profits. The net result of all this is that the wheat production is down and wheat is imported at about double the rate as paid to the farmer.

This makes industrial labour available at cheap rates and enhances profits of industry but keeps rural and urban labour as well as the farmers very poor. Similar calculation can be made for the cost of production of different crops from 1950 onwards. In brief, the price policy is essentially anti-farmer and causes rural poverty.

Migration to urban areas: Rural unemployment and insecurity combined with poverty is forcing farmers to sell most of their produce at 40-50 per cent of the international prices, and has led to unprecedented migration from rural to urban areas, resulting in more and more 'kuchcha abadis'.