LAHORE: The government partly deregulated the agriculture and trade sector but did not create institutions necessary for such a transition, with the result that farmers, especially smaller ones and consumers are suffering.
There is a consensus among experts that the so-called deregulation process has been patchy and half-hearted. According to them the major beneficiaries of the liberalisation process have been industrialists, processors and the middlemen, and it happened at the cost of consumers and small farmers.
Since the government partly deregulated the agriculture sector under donors' prescription and pressure, it could not take a holistic view of the consequences and create institutions necessary for such a transition.
Without creating a legal and administrative setup to regulate the farm sector and trade, the government is now in a total chaos. Profits, as determined by industrialists or the middlemen, have become the defining characteristic of the market, and the common man is suffering as a result.
Qamar-uz-Zaman Shah, a well-known agriculturist from Sindh, says the government does not feel tired of repeating of a break from the International Monetary Fund (IMF) or the World Bank but it neither restored subsidies on agriculture inputs nor abolished taxes on them. Both the steps were taken on the recommendation of these institutions and have rigged terms of trade against the farmers.
The government keeps taxing farm inputs to meet its financial obligations but has not increased prices of outputs, as world prices of outputs are heavily subsidised. The failure to create equilibrium between prices of input and output has been haunting farmers and farming sector alike, he said.
Since the government has no mechanism to control trade of commodities once they reach the market, cartels of middlemen, industrialists and other profiteers benefit. These cartels control markets; they create artificial shortages and increase prices.
The government has had a standard solution to meet such eventualities i.e. to import every commodity for keeping price stable. In most of the cases such a recipe fails because of lack of official control over the markets. The hoarders keep hoarding till government gluts the market with the imported items and price crashes. It has been happening for the last many years because the government does not have a policy of its own; it reacts to pressure from donors and international financial institutions.
Since there are no strong consumer protection bodies to keep check on profiteering either, the consumer and grower suffer heavily, he lamented.
"The government used to subsidise agriculture inputs to varying degrees and fix a support price of outputs before it decided to undertake the structural adjustments plan," says Iqbal Mustafa, a renowned agriculturist and expert on the sector. The new vision demanded a new set of legal and administrative institutions, which, unfortunately, were not created. The government had not only withdrawn subsidies on inputs, but also started taxing them. But it kept a lid on prices of outputs through a support-price mechanism. This created distortion in the open market. Since there was no legal and administrative check on trade ethics or profit margins, the traders started minted money.
Dilating upon his point of view, he said that the government decided to liberalise wheat trade without creating Commodities Exchange Commission or warehousing laws. Commodities Exchange Commission could have provided some sense of security to the farmers by fixing rates for future trading and warehousing laws could have restricted hoarding. But neither was done, with the result that farmers went into panic selling without knowing the future price and everyone went into buying and hoarding. Resultantly, artificial shortage gripped the market and price went substantially up. The panic-stricken government took a policy U-turn and allowed duty-free import of wheat to stabilise market, sending wrong signals to investors and the private sector. This is how lack of holistic vision has afflicted the agriculture sector, he said.
Shah Mehmood Qureshi, the chairman Farmer Associate Pakistan (FAP), is of the opinion that one really does not know what has been deregulated and what not. During the last five years, agriculture has not been a priority area with the official planners, except for taxing it one way or the other.
There is a clear dichotomy in what the government claims and how it handles markets. One day, it claims that the wheat trade stands partially librated and it won’t be part of it. But, it still fixes prices, instructs the State Bank to recall money from investors and allow import of cheap duty-free wheat.
It has always fixed prices of fertiliser as it provides subsidised raw material to the manufacturers, but, in practice, it could not control market prices, which have fluctuated according to the wishes of manufacturers. The cartelisation of economy has distorted everything. In the absence of a regulatory mechanism, industrialists and other cartels have become powerful enough to dictate markets according to their profit motives. They have also rigged the entire market mechanism in their favour with the government watching as a hapless spectator. Unwilling or unable to control market manipulators, the government has rather been terming it as a part of its reform agenda, when actually it is administrative and legal failure, and asking people to sacrifice for the time being, he claimed.
"The government still controls seed, fertiliser and implements (tractor) sector," says Malik Afaq Tiwana, former member of Advisory Board and chairman AgriMall. Though some of the new seed companies have been allowed to work, but research is still monopolised by the government and any new varieties are only released to its provincial arms.
Prices of fertiliser are also in government’s control, at least legally. So is the case of tractors. In fact, it is an official preference to remain part of the market, which is creating problem. Maize market is best example how a free commodity market could run efficiently. The government intervention is part of the problem, rather than solution, he insisted.
Aman Ullha Khan of Hafizabad, a small farmer tilling ancestral land, says that big farmers are shielded to some extent by the size of their land holding in the new-found priorities of the government. But, small farmers lack even that shield. They are the worst sufferers as they lack any financial cushion.
They do not have holding capacity, so they are forced to sell their crop as soon as it is harvested. They have to sell also because they have to clear bank dues or risk arrest. It happens when the fresh crop hits the market and price is at the lowest ebb. Once the crop reaches the middlemen, the cartelisation takes control of market and price goes up.
The small farmers also lack access to credit in new liberalised setup. Privatised banks now no more meet their social obligations by providing loans to small farmers, as nationalised banks used to do. Access to credit is crucial to viability of small farming, which has disappeared in new milieu, he lamented.
