The government decision to increase the minimum wheat support price by 52 per cent to Rs950 per 40kg for the next season from Rs625 is expected to restore its image as a profitable crop and bring back farmers’ focus on it.

“Wheat has suddenly become a profitable, competitive crop for growers, and we will have a record harvest next year given the normal weather conditions and adequate water availability,” a federal food and agriculture ministry official told Dawn last week.

The government is expecting to achieve the wheat output target of 25 million tons for the next crop, more than domestic food requirements.

The previous crop dropped to just above 21 million tons against the target of 24 million tons, forcing the government to import wheat worth Rs60 billion to meet domestic needs.

The failure of the then government to raise the wheat support price in line with the spiking global food prices was blamed for lower than expected wheat production.

The support price was increased to Rs625 per maund (40 kg) from Rs425 only before the start of the harvest.

The new support price, which is stated by the AgriForum Pakistan -- a representative of small to medium sized farmers in Punjab -- to be highest in the region, is going to offer the growers a big opportunity to earn good return on their investment and create domestic surplus.

“ Growers are going to put in a lot of hard work to raise their yield and earn more money - each extra maund of the grains means an additional thousand rupees. We may even surpass the output target for the year,” the federal official said.

The average national wheat output, according to chairman of AgriForum Pakistan Ibrahim Mughal is around 27.5 maunds per acre against India’s 35 maunds.

The per acre yield fell below 25 maunds in Punjab during last season but rose to over 34 maunds in Sindh, according to the federal Ministry of Food, Agriculture, & Livestock officials.

“We expect wheat crop productivity to improve because the new support or procurement price offers the farmers a very lucrative return on their investments,” a senior Punjab agriculture department official, Mohammad Anjum Ali, said.

The Punjab agriculture department has calculated the average wheat production cost at Rs668 per maund, way below the support price.

“The possible upward changes in the fertilisers and other input prices due to speculative activity in the market could spike the average production cost, but the new support price would still remain lucrative to encourage a far higher wheat cultivation than ever,” another official of the same department said.

Mughal agreed with the official assessment of achieving a record wheat harvest next year but warned that the crop size could be as low as 24 million tons due to water scarcity and power shortages.

“India is not releasing our share of Chenab water that will affect wheat sowing in as many as 20 districts in Punjab, and the power shortages and high diesel prices mean that farmers won’t be able to operate tube wells to sufficiently irrigate their fields,” he said.

In addition to water and power shortages most growers would not have access to quality seeds. “We need 350,000 tons of quality, certified seed to produce 25 million ton wheat. But we have only 150,000 ton certified seed. That will affect our wheat output,” he said.

The sharp increase in wheat procurement price is being seen as part of the government strategy to develop agriculture for food security, discourage wheat smuggling to Afghanistan and beyond due to price differential, and pump in money in the rural economy to reduce poverty.

But many look at the support price mechanism as a short-term measure to bolster the agricultural growth, which dropped to just 1.49 per cent during the last financial year from 3.66 per cent in 2007, 6.30 per cent in 2006 and 6.48 per cent in 2005.

“Though the support price increase for wheat is a step in the right direction, it is not a long-term solution to the fundamental problems -- soil degradation, low productivity, water scarcity, high production costs, lack of modern technology, etc -- constraining the growth of our agriculture sector,” said Iqbal Mustafa, a progressive farmer from Bahawalpur and a former head of the Small & Medium Enterprise Development Authority (Smeda).

“Our farm economy is like a cripple who needs regular injections to keep going. Unless we decide to address the fundamental questions obstructing the growth of the agriculture sector, which is more than one-fifth of the GDP and employs over 44 per cent of the country’s labour force, we cannot hope to improve the situation on a long-term basis,” he said.

Besides raising the wheat support price, the government has increased the subsidy on DAP fertiliser to Rs27 billion to reduce the farmers’ input costs as part of its policy focus to develop the rural economy.

Moreover, the State Bank of Pakistan has enhanced the indicative per acre credit limits for both major and minor crops by an average 70 per cent.

The credit limits have been raised by the central bank on the basis of the current prices of the agriculture inputs -- seed, fertiliser, pesticides, fuel, electricity, etc.

“ Farmers will now get production loans for major crops like rice, wheat, cotton and sugar cane at a rate of Rs19,000, Rs16,000, Rs21,000 and Rs30,000 per acre against the previous limits of Rs9,000, Rs8,000, Rs11,000 and Rs18,000,” said a SBP announcement.

“The limits of other crops like potato, maize, sugar beat, tomato, chilly, rape seed, sunflower, canola, gram, moong, masoor, groundnut, flowers, etc have also been enhanced from a minimum of Rs3,000 to Rs16,000 per acre, depending upon the cost of inputs.”

It may be recalled that the State Bank has set an indicative credit disbursement target of Rs250 billion -- up by 25 per cent from last year’s target of Rs200 billion and 18 per cent from actual disbursements -- for the agriculture sector for the current fiscal.

Farmers, however, complain that even the new credit disbursement target fell far short of their cash loan need for the inputs.

Mughal said the agriculture sector’s annual demand for credit had jumped to around a trillion rupees.

“A vast majority of farmers are forced to borrow money at very high interest rates -- from three to four per cent a month --to meet their cash needs for sowing from the middlemen because they couldn’t follow complex procedures and meet criteria of the banks. Moreover, the bankers prefer to lend money to the non-farming sector,” he said.

The anonymous Punjab agriculture department official concurs with him. “Very few new loans are being issued to growers. The formal banking credit is actually being rotated. It suits the bankers who are able to show very good loan recovery rate and get their cut by rotating the credit among the old borrowers. At the end of the day farmers get only a very, very small amount because the major portion of the loans is deducted by banks to recover the outstanding credit,” he said.

Further, the farm credit is seldom used by borrowers for the purpose it is meant for -- to purchase agriculture inputs like fertilisers, seed, pesticides, etc. “Unless banks evolved a mechanism to reach out to farmers needing loans for their crops as well as to prevent misuse of credit, the enhancement of disbursement target or per acre limits will not contribute to the development of the crop sector,” he said.

“That means we need an urgent and comprehensive overhaul and restructuring of the crop sector -- from sowing to marketing -- to make it profitable on a long-term basis,” Mustafa said. “Otherwise we will remain uncompetitive globally.”