ISLAMABAD, Sept 10: The government is expected to formally approve policy recommendations of the inter-ministerial committee on core food inflation that sought to allow support prices for major crops on a long-term basis for ensuring better profitability to farmers than to protecting them from falling below the poverty level.

This will be one of the three agenda items the meeting of the Economic Coordination Committee (ECC) of the cabinet will consider when it meets on Tuesday. Prime Minister Shaukat Aziz will preside over the meeting that would also review economic indicators — a usual practice of the ECC. The two other agenda items include a discussion on transportation of local crude oil and deregulation thereof and re-approval of upstream petroleum policy 2007.

The petroleum policy was announced by the then secretary petroleum Ahmad Waqar in July but the ECC had certain reservations over some clauses relating to facilitation to local companies to grow and a right of first refusal for existing operators.

Informed sources said the inter-ministerial committee on core food inflation led by Industries and Production Minister Jahangir Khan Tarin had finalised its report in the third week of last month.

It had decided to link the support price of two major crops — wheat and sugarcane — with reduction in production cost and increased yield per acre for better international competitiveness instead of using it as a tool for sustaining poor farmers at subsistence level.

The committee comprised of ministers for food and commerce, the State Bank governor, the Planning Commission deputy chairman and a representative of the finance ministry.

The committee had recommended for increasing the wheat price on a bi-monthly basis from November onwards. The committee mainly focused on four major items having greater impact on food prices — wheat, sugar, livestock and pulses.

It has reached the conclusion with a consensus that imperfect markets, speculation and hoarding, lack of information of farmers and lack of focus by the governments (provincial and federal) were major causes of inflation.

The committee believes that the provision of support price for wheat has a direct bearing on food inflation and planting levels of other crops. Hence, it should be clearly defined what objectives the support price achieved at the time of each revision and how it cost other crops to create a balance and make farmers internationally competitive.

The committee stipulates that main policy objective henceforth will be to ensure farmers profitability so that the country remains self-sufficient and competitive in the international market. To achieve this objective, the support price will be provided for productivity enhancement or higher yield per acre and reduction through efficient farming practices.

The ministry of food and agriculture will formulate productivity and cost reduction plans in collaboration with the provinces and monitor its implementation, which will include lesser ploughing and sowing costs and lower water requirement techniques.In addition to setting volume targets, the Federal Committee on Agriculture (FCA) will also set yield and cost targets. The committee deplored that yield per acre had increased from 1,080 kg in 2001 to 1,108 kg in 2007 as their cost at the farm level increased from Rs246 per 40 kg to Rs444.

Likewise, marketing expenses increased from Rs10 to Rs16 per 40 kg in six years and cost at the mandi stage surged from Rs256 per 40 kg to Rs460. This could not be allowed to continue and hence the average yields should be substantially increased, the committee said.

It added that the farmers’ profitability balance should be created with other crops so as not to create shortages in production of other crops. It has been decided that wheat would be considered as a benchmark for other food items, by procuring the available marketable surplus at a support price. Likewise, the issue price of wheat by Punjab and Sindh will be determined in the overall framework of food inflation.

The committee recommended that the federal and provincial governments will formulate sugarcane/sugar policy in consultation with stakeholders by September 15 every year. The policy envisaged that sugar should not be imported until the size of sugar season is determined by the end of March, except in case of very abnormally high sugar prices.