THE militant farmers have demanded that the procurement price of wheat be doubled and fixed at Rs1,000 per 40 kg from the coming crop. This signals a tussle between the government and the farmers. The government cannot accept Rs1,000 as it prefers a course of moderation which takes cares of both the consumers and the farmers.
The Economic Coordination Committee of the Cabinet with Care-taker Prime Minister Mohammedmian Soomro presiding over a meeting in Islamabad on February 27, fixed the procurement price of Rs510 for 40 kg wheat as the farmers began harvesting their crop in Sindh. A farmers meeting held in Lahore early last week rejected the offer and insisted on Rs600 per 40kg which is 40 per cent more than the procurement price fixed last year. The CEC was willing to increase the price by 20 per cent and fix it at Rs510.
But the farmers have followed a course of militancy and come up with a demand of Rs1,000 for 40 kilograms which, they hold, is the world price. The farmers insist that they will not sell their crop unless they were offered the international prices. The government is in a fix. Earlier Dr Salman Shah, who opted for Rs510 per 40 kg, had said that major price decisions had been announced after consultation with the mainstream political party leaders. The PPP has firmly denied it. And now the issue has to await the new cabinet to grapple with.
At a time when food inflation is at its peak, the government cannot agree to any unreasonable demand for the new wheat price. Nor can it disappoint the farmers who had voted for them. They have to reach a consensus which is pretty tough. In fact, it will be the first economic problem which the new cabinet will confront along with the new prices of oil and gas.
Meanwhile, Iran has reported that its wheat crop has been infected by fungus and the World Food and Agriculture Organisation (FAO) has warned that the fungus can affect the area crops including Pakistan. If the crop is infected, the output may be far less than the target of 24 million tones which is essential to meet the domestic demand.
The government can subsidise wheat but after it resolves the problem of the heavy oil subsidy.. It has too little resource to spare for subsidising wheat. No doubt the revenue collection is better than last year and yet the budgetary deficit has so far risen to 3.56 per cent of the GDP.
It is not known now how much wheat needs to be imported this year. It depends on the size of the new crop. Earlier, it was estimated that two million tones will have to be imported. At a time when the world wheat prices are very high, the official subsidy has to be very large. In anticipation of the high wheat price, Engro has already enhanced the rates of fertiliser while other companies are expected to follow suit. The rise in power rates will enhance the cost of wheat production while rise in oil prices will enhance the transportation cost of food items.
The government will consequently have to raise the procurement prices far above the 20 per cent, but not at the world price which it simply cannot at this point of time. If wheat growers’ demand is accepted growers of other cereals would also demand the same concession and there would be a riot of food inflation.
Subsidising agriculture is simply not an issue of reducing taxes on fertilisers or pesticides; it also involves subsidising of electricity rates for tube-wells and water supply. Now the five large dams are to cost a borrowed sum of $30 billion and the loan has to be serviced by the beneficiaries of the project.
The officials who attended the CEC argued that if the procurement price was raised too high, the sale price would have to be raised equally high which cannot be done in respect of the wheat crop. While the ministry of food and agriculture stood for Rs600 for 40kg, the officials prevailed at the meeting. Since political parties have a large number of feudal lords they will take care of their groups’ interest without displeasing the consumers. The officials argued the rise in support price helped the surplus farmers and not the millions of survival farmers who grow just enough to eat hence excessive rise in support price helps the rich farmers. The farm workers are also not benefited by high support prices. In fact they have to pay heavily for their food though living in the farming areas hence the officials usually are opposed to high support prices unless they belong to the feudal class themselves. So the issue should be handled carefully. The farmers argue they have to pay more because of the rising price of their inputs and quite a large part of that levy on the inputs is in various forms of taxation. If the taxes are reduced the inputs can become cheaper and food production less costly.
THE militant farmers have demanded that the procurement price of wheat be doubled and fixed at Rs1,000 per 40 kg from the coming crop. This signals a tussle between the government and the farmers. The government cannot accept Rs1,000 as it prefers a course of moderation which takes cares of both the consumers and the farmers.
