THE government’s decision to raise domestic wheat support price for the next harvest by 14 per cent to Rs1,200 per 40kg has its pros and cons. It will encourage farmers to grow more wheat to reap a record output of 26 million tons next spring. The hike in the cereal’s price will not only offset the surge in input costs but also increase the growers’ margins, which should help cut rural poverty. Additionally, it will make the country more food-secure than ever in the past in terms of availability and bring down the food import bill. But is higher crop production alone sufficient to reduce food insecurity? More than half the households, including subsistence farmers, in the country remain food-insecure despite a rapid increase in grain production during the last few years on higher-than-global domestic wheat prices. It means surging prices, especially of wheat, have put food out of the reach of most people. The new crop will be 80 per cent dearer than the one harvested in 2008, restricting the access of more people to enough food. Thus, while giving price incentives for increasing food production, the government should evolve a mechanism to feed everyone. Food inflation isn’t the only disadvantage of higher wheat price. It will put additional burden on the cash-strapped government that would be required to borrow greater funds from banks for its wheat procurement operations to keep the market from dipping, and pay heavier costs for the storage of grain. Moreover, the higher price may encourage farmers to bring more land under cultivation keeping them from becoming more efficient.
While the decision has its economic value, it will also help raise the ruling PPP’s stock in the rural areas of Punjab and Sindh in an election year. With a considerable number of people in rural Sindh angry with the PPP over the new local government law and many in south Punjab frustrated by its failure to create a new province for them, increasing support prices is perceived as a move to help the party win back a large chunk of its unhappy voters.