THE Punjab government has recently acquired a $300 million loan facility from the World Bank to reform the agriculture sector in the provinces.

Some of the 13 disbursement linked indicators (DLIs) set for obtaining the funds meant for the Strengthening Markets for Agriculture and Rural Transformation project are bound to hit the rural economy, and have therefore sent a wave of concern among the farming community and consumers as well.

These DLIs included withdrawing the role of the public sector in wheat procurement from Rabi season of 2019 and de-regulating the prices of milk and meat.

The withdrawal of around Rs150bn public sector credit from the wheat procurement process will disturb the commodity market and terribly affect the rural economy

An official of the federal finance ministry says they have opposed the loan agreement — the first tranche of which amounting to $50m has already been received by the Punjab government — fearing that withdrawal of around Rs150 billion public sector credit from the wheat procurement process will disturb the commodity market and terribly affect the rural economy.

The official says that the provincial government is not making public the loan terms as it can ill-afford the reaction it is likely to create particularly during the election year.

Punjab produces around 25m tonnes of wheat. The growers retain about 70 per cent of the produce and offer the rest for procurement by public and private sectors.

Of it, the major shareholder is the Punjab government which procures at least four million tonnes, of which the federal government’s entity PASCO, Sindh and the flour-milling sector each pick around 1.5m tonnes.

Pakistan Kisan Ittehad president Khalid Mahmood Khokhar laments that by committing to withdraw its role in stabilising the wheat market the government is going to avert its constitutional obligation of guaranteeing food security to its subjects, whose major staple food is wheat.

He says that in neighbouring India the number of crops enjoying official support prices has been increased from 26 to 31, and authorities ensure picking up of the produce in case prices drop in the open market.

In Pakistan, he adds, wheat is the only crop with official support price and now this, too, is going to be withdrawn. He fears that the new wheat policy will create uncertain conditions in the market, discouraging the growers from sowing wheat and resulting in shortage of the grain, forcing the government to import the commodity.

Kisan Board Pakistan’s former president Sardar Zafar Hussain believes that impact of the wheat procurement policy change will not remain confined to growers only; it will engulf urban consumers, too.

“For fear of open market uncertainties and high cost of production, the growers will stop sowing wheat and the resultant shortage will push up prices to the disadvantage of consumers’ interests,” he cautions, and advises the government to do thorough research before making any such move for a petty foreign loan.

Governments across the world keep certain kitchen items subsidised in one way or the other to ensure meeting basic food requirements of the people and not leave them up to the mercy of the market economy, he adds.

Some experts do not believe that the government’s decision (taken due to pressure from world lenders) to deregulate the milk and meat sector will help the rural economy. They call it a double-edged sword which should be used wisely as currently the majority of rural households is not engaged in livestock-rearing, but is rather a consumer of livestock products.

Mr Hussain also supports this view arguing that hardly 10pc of rural households are rearing animals. “Although some farmers are engaged in livestock business, their number, for example, in a village of 200 households ranges between 12 and 20 families. The other overwhelming majority also purchases milk and meat from the market and thus will be among the list of classes likely to be hit by the deregulation decision.”

A former agriculture secretary doubts that the government will be able to follow the DLIs in letter and spirit; in the past such reforms could neither be introduced in agriculture nor in any other sector that could affect the electorate of political governments.

“The past governments have been accepting such conditions while taking various credit lines only to express one excuse or the other to the lending agency for their failures to implement the promised reforms,” he says, requesting not to be named.

Published in Dawn, The Business and Finance Weekly, March 5th, 2018