Wheat occupies nearly 38 per cent of the total cultivated area of the country. Out of this around 48 per cent is cultivated by the below subsistent level farmers who face extreme financial difficulties for using the recommended doses of inputs in wheat and other crops.
If to this are added subsistent level and small farmers then the total cultivated area increases to 68 per cent which is a dismal situation for obtaining sustainable production of wheat and other food grain crops.
Under the given situation, the increase in wheat support price from Rs350 to Rs400 per 40kg for 2004-05 will not bring the desired results as subsidies have been withdrawn with an increase in fertilizers, pesticides and seed costs.
The situation is further compounded by the IMF dictates to extend 15 per cent GST on the fertilizers and pesticides, while no such dictates have been accepted by India or any other country.
The fixation of support price by the government encourages growers to enhance their production level which is never achieved. The best example is evident from the fact that the increase of wheat support price from Rs14.47 per 40kg in 1965-66 to Rs350 in 2003-04 left the country importing the commodity during all these 31 years.
There still exists a gap of 72 per cent between the actual and potential yields. The yield of Pakistan's Punjab which produces 78 per cent is 2,515kg per hectare as compared to 4,563kg per hectare in Indian Punjab which, though is smaller, but contributes nearly 70 per cent of the total wheat production in India. Thus the government could neither achieve food security nor could protect the common man from paying high price for wheat/flour.
Despite the presence of support price, the farm gate price in most of the years had been below the support price as bulk of the produce is marketed by small farmers who are forced to sell their produce soon after harvest to meet family expense and spend on the following crop.
Procurement agencies like the flour mills, commission agents, stockist, food departments and Passco buy wheat at low rates at the time of harvest from those farmers who have no other alternative such as withholding their stock till the availability of fair prices.
Nearly 80 per cent of the produce is thus marketed and purchased from such farmers at below production cost. About 10 per cent of the produce is retained by big landlords having private storage facilities who wait to fetch better prices afterwards.
Again, the IMF directed the government not to bear the storage costs for wheat procurement with the private sector given the chance to procure the entire crop. As a result of this policy during 2003-04, large quantity was hoarded by the genuine and non-genuine components.
Though the government had increased the support price from Rs300 to Rs350 per 40kg but the private sector paid up to Rs370 per 40kg at early harvest and Rs400 in later stages thus creating artificial wheat/flour shortage.
As a result, the food departments and Passco could not achieve their procurement target of 5.7 million tons reserves to supply to other provinces in case of shortages. Consequently, the government was forced to import 1.5 million tons of wheat so far against its earlier claim of importing only 0.5 million tons of wheat.
Every year wheat production targets are fixed and to achieve the targets, increase in support price is considered an important option which is not always achieved. For example the production target for 2003-04 was fixed at 20.1 million tons and the support prize hiked from Rs300 to Rs350 per 40kg.
This, even could not be achieved as the production was round 18.7 million tons against the national requirement of nearly 19 million tons. This low production was attributed to high temperature in March and rainfall at harvest in Punjab which reduced the production target of 16.1 million tons to nearly 15 million tons.
Similarly, productions remained below the target in other provinces, as well. Mismanagement of the government's policy and marketing system are other major causes of this shortage.
For instance, wheat movement from Punjab and Sindh to other provinces was banned to enable the food departments and Passco purchase 5.7 million tons as they had the lowest ever reserve stock of 160,000 tons for meeting requirements of other provinces in times of shortage.
The politically influential mill-owners of Punjab took advantage of this ban. They earned billions by not only hoarding but also smuggling the commodity to other provinces and Afghanistan.
It is not understandable that on the one hand the government is importing 1.5 million tons of wheat to meet domestic requirements, while on the other it allows huge quantity of flour to cross the western border daily.
Besides, there is unofficial and illegal smuggling of both wheat and flour. As a result the price of 40kg wheat in the local markets has soared to Rs450 in the NWFP, Rs500 in Queta, Rs480 in Karachi and from Rs420-425 in Punjab. The common man is the ultimate sufferer.
It is an independent analysis that the government's objective to increase production by hiking support price is hard to be met this time also, unless other constraints are not removed.
For example, wheat support price increase from Rs112 in 1990-91 to Rs350 in 2003-04 saw significant increase in fertilizer prices which nullified the increase effect.
For instance, the price of sulphate of potash increased by 420 per cent, ammonium sulphate by 305 per cent, ammonium nitrate by 213 per cent, single super phosphate by 210 per cent, di-ammonium phosphate by 208 per cent and urea by 110 per cent. Increase in the prices of pesticides, and quality seed further compounded the situation. Likewise, water scarcity during the Rabi season at canal heads was another impediment.
As a result, the country imported wheat for 11 years in the last 14 years. Bumper crop production in 1999-2000 not only enabled exports but also left the country with enough reserves for two years.
However, due to mismanagement there exists the lowest ever carryover stock of 160,000 tons. In 2003-04 neither production target could be achieved, nor reserves could be built up. These reflect on the poor government policies.
The government has again increased the wheat support price from Rs350 per 40kg to Rs400 for 2004-05. The question arises if the private sector could offer more than Rs400 in 2003-04 as against the support price of Rs350, then they may again offer higher than the recently announced support price for hoarding and smuggling across our borders, besides exporting flour to Afghanistan as was officially allowed last year to earn billions. This could again hit the common man in the event of increased flour prices, besides creating deficiency.
Keeping in view the aforementioned realities, the policy makers should realize that increasing the support price alone is not sufficient. This must be supported by controlling the input prices and ensure timely availability of the unadulterated inputs, give subsidies to farmers, and ensure required surface water during the Rabi 2004-05. Hoarding and smuggling by the politically influential should be discouraged.
Priority should be given to reserve stock. After meeting the requirements, any surplus stock, if exists, could be exported to Afghanistan, Iran, and Kazakistan. The government must also consider consolidation of land holdings and implement a ceiling beyond which no further fragmentation can be made as has been successfully done in India and several other countries.
Again, instead of involving the private sector, the government itself should study the economics of exporting. However, the best strategy is to attain sustainable wheat self- sufficiency by removing various constraints on the basis of previous experience.
A crash programme to attain self-sufficiency by increasing wheat production should be developed and implemented at the grassroots. Its implementation should be monitored and evaluated for timely removal of various constraints and taking strict disciplinary action against those concerned departments, officials involved in corruption, inefficiency and mismanagement.
