THE Ministry of National Food Security and Research is preparing a strategy to tackle the crisis arising out of falling international prices of agricultural commodities and their surplus domestic production at a higher cost.

It is a tall order for the ministry but given the willingness of all stakeholders, the ills the agriculture sector is suffering from that keep it backward, can be overcome. The surplus production of wheat, rice and other crops create severe stress not only for policymakers but also the farming community which bears the brunt of this anomaly.

The ministry is also working on a new wheat price policy with an objective to reduce the cost of production rather than offer heavy subsidy. Under the new thinking, the wheat support price, which was Rs1300 per 40kg last year may be revised downward, rather than upward.

The higher domestic cost of production has made agricultural commodities less competitive and the current trend is likely to prevail in the coming years

Meanwhile, a high-profile meeting of Agriculture Policy Institute (API), formerly known as the Agricultural Prices Commission, was held on August 18 and 21 to review the situation obtaining in the agriculture sector. Those present in the meeting included API director-general, cotton commissioner, agriculture ministers of Punjab and Khyber Pakhtunkhwa, and chairman of Pakistan Agriculture Research Council, in addition to senior officials of various ministries. Federal minister for food security Sikandar Hayat Khan Bosan, who was in the chair, said, “it is high time to streamline our priorities with a view to devise a strategy to address the core issue of higher cost of production and low yields.”

The higher cost of production has made the agricultural commodities less competitive and the current trend is likely to prevail in the coming years. Despite being the backbone of the economy, the share of agriculture in GDP growth declined from 25pc in 2000-01 to 20pc in 2014-15. This development, says the minister, has warranted devising new strategy to tackle the falling export of agricultural commodities.

The API also reviewed ‘the plight of the farmers’ as the timing of the meeting coincided with a major rally of small farmers in Punjab followed by a prolonged sit-in in front of the Punjab Assembly protesting against what they called step-motherly attitude of the authorities towards growers. There is little doubt that farmers are now finding it difficult to survive in farming, their age-old source of livelihood. They are finding it difficult to bear the cost of cultivating any crop as the prices of fertiliser, seeds, pesticides, etc., continue to increase.

At a time when global prices of farm commodities continue to fall, the rationale for producing crops like wheat, rice and cotton in higher volumes is difficult to appreciate for it is obvious the surplus cannot be exported unless productivity rises sharply. As pointed out by the secretary of food security ministry during the API meeting, the cropping patterns across the country also need to be revised and farmers should be given incentives to raise output of other crops like pulses and oilseed. This can help farmers avoid unnecessary expenses.

Compared to wheat, the case of rice is different. Its price in international market is likely to remain stable in view of normal demand and supply situation. Its domestic production during 2014-15 was around 7m tonnes. The API chief wants intervention price or support price for 2015-16 crop at around Rs1,800 per 40kg for basmati in Punjab and Rs850 per 40kg for Irri paddy in Sindh but at an appropriate time.

Basmati Growers Association (BGA) has endorsed the API’s proposed support price of Rs 1800 per maund for basmati, but says its early announcement would not work for the rice sector which, it believes, is facing a downward trend for the last two years. Besides, the BGA wants a subsidy of $200 per tonne on export and write-off of the interest on two years old paddy stocks they had pledged with the banks.

The API meeting was informed that cotton production has reached around 13m bales and that there is already a carry-over stock of 96,000 bales. The meeting also discussed options for intervention price for the upcoming cotton crop but Karachi Cotton Association opposes any government intervention in cotton trade, saying, “it will distort the commodity’s economy and hurt its exports”.

Referring to reports that the government intends to buy 1m cotton bales to support growers, the KCA said it was not opposed to growers getting due return for their investment and hard work. But buying huge stocks of cotton from the market at higher prices will create unnatural shortage of quality cotton and also inflate cotton prices unrealistically.

According to the latest reports, owing to the high input costs, the area under cotton cultivation has been reduced by more than 4pc, during the last three years.

Published in Dawn, Economic & Business, August 31st, 2015

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