THE Punjab food department has failed to procure four million tonnes of this year’s wheat from farmers and ended up buying a little over 3.6m tonnes.

The reason, according to media reports, is the failure of the department to initiate the procurement drive on time and inform farmers that those interested in selling wheat to the provincial government needed to apply for it formally.

It is the same case with the other provinces. Delayed or below target procurements, despite an adequate crop size, are examples of the mismanagement of the wheat economy in Pakistan.

For the past few years, there has been a surplus wheat output but due to a lack of proper storage facilities hundreds of thousands of wheat grains kept rotting and could not be used for consumption at home or be exported.

The repeated increase in support prices of wheat during the past 10 years or so has sometimes resulted in exports remaining low, despite production surpluses, as high domestic prices made them less competitive.

On some occasions, millers even resorted to imports as the landed cost of imported wheat was below domestic prices. The subsidised sale of wheat to wheat millers via provincial food departments has long served as a tool for corruption for officials dealing with quota allocations rather than a relief for end-consumers.

Wheat and sugarcane crops have the potential to change the fate of the local food industry and the entire spectrum of food exports. Sadly though, a large part of this potential remains untapped.

In the past, the Pakistan Flour Mills Association has recommended to the federal and provincial governments to do away with this subsidy and instead link it to performance-based incentives. But so far, there has been no change.

Last year, sugarcane growers and sugar millers were engaged in a bitter quarrel over the payment of dues to growers by the millers and the issue was finally resolved, after causing much damage to the economy, on the intervention of the Supreme Court.

According to growers, some of them incurred crippling financial losses as the millers delayed sugarcane procurement, while the millers claimed that fresh milling amid a large carryover stock of sugar created a glut in the market resulting in a price crash and subsequent losses to individual mills.

At the heart of these two seemingly unrelated developments lies the perennial problem of a near absence of implementation of policies related to agricultural output governance and value chain management.

Perhaps it was this that prompted the Competition Commission of Pakistan (CCP) to send to previous federal and provincial governments on May 7 a set of recommendations to boost the efficiency of the sugar sector.

The CCP recommended abolishing the support price of sugarcane and advocated the idea of letting the market determine the price based on supply and demand. It said that “if sugarcane (support) price needs to be set, it should be based on independent and reliable data, taking stock of divergent conditions and factors prevalent in different areas and should also factor in applicable support price of other crops such as cotton.

“Where support prices are set, the government must act as an underwriter and ensure complete and timely payments to the farmers,” it added.

In addition to this, the Commission recommended that quality considerations should determine any support price rather than weight. The government should also encourage and take research and development initiatives to reduce the cost of producing sugarcane and increase its quality.

The Commission also recommended that millers should make their processes more efficient with incentives to encourage the optimal use of their by-products and reduce the overall cost of sugar production.

This will help make them internationally competitive and enable them to make timely payments to farmers. It urged the provincial governments to review the legislative framework and encourage open competition in the sugar sector.

To control price hikes, the CCP recommended that the Trading Corporation of Pakistan should keep a minimum reserve of sugar, but this measure should only be used sparingly as it could affect the free market mechanism.

The CCP also recommended that all the relevant government departments should be cognisant of the sugar supply situation at all times to utilise export opportunities on time. The Commission suggested constituting a stakeholders’ committee to discuss ways and means of implementing its recommendations.

One wonders though why the CCP floated such valuable recommendations just three weeks before the end of the previous federal and provincial governments’ tenures. Sugarcane and wheat are two of the four major food crops in Pakistan and their contribution to the economy is huge.

Wheat and sugarcane crops have the potential to change the fate of the local food industry and, by extension, the entire spectrum of food exports. Sadly though, a large part of this potential remains untapped.

Value-chain improvement is taking place at a painfully slow speed. Up till 2010, sugar and wheat exports remained low as outputs were not always in excess of local demand. But for the past few years, this has not been the case.

However, neither the exports of the two items have shown any visible increase in the per-unit price nor have their value-added by-products received a boost.

Published in Dawn, The Business and Finance Weekly, June 19th, 2018