November 26, 2007	Monday	Ziqa’ad 15, 1428

The common man who has been subjected to liberal economic agenda, multiplying his cost of living for the last many years, may find it even hard to survive the latest shock-- the government’s refusal to declare new wheat procurement price.

By refusing to announce a procurement price, the government has left every stakeholder of wheat production, trade and consumption, “confused and clueless.” The farmer does not know what he would get next season for its produce and how much he should invest by buying exceptionally expensive fertiliser and pumping out costly underground water. And what makes his investment secure?

The trader is baffled about the benchmark price. How much should he lend to the farmer for the crop? These middlemen lend an estimated Rs400 billion out of total requirement of Rs600 billion with only Rs200 billion coming from the formal sector. What limit would make their investment secure is any body’s guess.

The consumer would be badly hurt if the wheat would also be going the rice, maize and fruits’ way, which have all spun out of his economic reach. If the staple food also becomes scarce or go further out of his reach, where would the lower strata of the society go?

The government with unfailing fidelity to the donor-driven agenda of minimising its role in wheat trade, has been doing so faithfully ever since the current set-up came to power in 1999. During these years, it had removed one of the two factors that have been bedrock of wheat trade for the last eight decades. The Britishers created provincial food departments to ensure food supplies – which were i.e. government procurement targets and a minimum (support) price to save farmers.

For the last seven years, the government has been withdrawing from wheat trade, cutting its procurement targets and creating space for private sector. But it has not been able to achieve the stated goals of withdrawal i.e. price stability and market efficiency. It failed on both accounts, and failed miserably. It could neither check the prices nor cartelisation of traders, millers and middlemen, turning the entire wheat market dangerously volatile.

The net result of the seven-year reforms agenda, which is still continuing with the same vigour and commitment, is that wheat market has now become treacherously volatile, dangerously uncertain and hugely inefficient.

Defeating the stated goal of the reform agenda, flour price has gone up by 300 per cent during these years. A 20 kg flour bag available at Rs90 in 1999 has now gone up to Rs310 in most parts of the country. Both-- the Punjab government and the State Bank of Pakistan-- have accused traders and the millers’ “cartelisation” and taken some action against them. The Punjab government has been sealing flour mills for dishonesty in wheat grinding.

Instead of learning from emerging realities and adjusting their policies, the policy makers, terming it a “transitionary period,” have not only stuck to their policy but took the extreme step of withholding support price this month and pushed the entire wheat trade market into a blind valley.

There are reports that beyond commitment to donors, political agenda of an election year had stopped the Economic Coordination Council (ECC) from taking the decision, even after sitting on recommendations for more than a month.

According to official circles, the Punjab government had recommended a price of Rs515 per 40 kg. The ministry of food, agriculture and livestock had asked for Rs500 per 40 kg, and so did the National Assembly’s committee on agriculture. But the pressure from the parent party – Pakistan Muslim League-Q – forced the ECC to hold the decision.

The PML-Q through increasing wheat price at this stage would upset its election plans in the urban areas, where floating vote bank makes a decisive chunk. If that vote bank falls prey to opposition’s campaign of rising flour price-- which is sure to make an election issue-- its chances would be compromised. Thus, it prevailed upon the government to defer the decision.

Additional pressure was exerted by sugar millers’ lobby which, unfortunately for wheat growers, makes a big part of the government, cabinet and the ECC. It maintained that if such a big jump is granted in wheat price, most of the growers may opt for wheat instead of cane putting their business under economic pressure. Both these lobbies have prevailed upon the top decision makers to defer the announcement, said a bureaucrat who is aware of the background lobbying.

As result of absence of any official price, farmers fear that it would be fixed by market forces which would be highly vulnerable to speculative pressure and cartelisation. If crop size is healthy and the private sector refuses to buy, or at least go slow, the price is bound to crash. Once it crashes, there would be no stop to slide.

If the crop is not big enough, what would the government departments be doing, when asked to procure seven million tons. Will they be competing with the private sector, which can afford much higher price. If they procure at much higher price, at what price would they be releasing to millers next season?

In both cases, where would the consumer go? In either case, it is a nightmarish scenario for the common man. Take the case in the backdrop of other supplementary food crop and the magnitude of the crisis becomes even more horrible. Rice is being sold at Rs70 per kg with an increase of 100 per cent price as compared to last year and maize at Rs600 per 40 kg as compared to Rs350 per 40 kg last year. The less one talks about fruit, the better.