THE wheat and sugar crises have highlighted the need to debate factors which led to the current situation as well as measures to avoid its recurrence. We need to recognise the imperatives of having well-defined objectives for food and agriculture segments.

The principal objective of the food policy is to ensure an adequate supply of essential food items at affordable prices to consumers. Agricultural policy is concerned with increasing farm production and productivity.

The performance of the crop sector during the last two decades has been erratic at best. This has been caused by the neglect of research and development activities and the deteriorating terms of trade because of the higher costs of farm inputs vis-a-vis output prices.

In the wake of the 18th Amendment to the Constitution, the Federal Ministry of Food Security is responsible for national food security while provincial governments are concerned with increasing farm production.

Food security is an important goal of national policy. But it must be treated separately from agriculture because its development requires a conducive environment for investments.

Farm output prices must not be held hostage to the food policy narrative based on lower prices of staple food crops if otherwise warrant an increase.

It is imperative to ensure competition in the market and avoid any measures, which to force growers to sell their produce to government-designated agencies only

The choice of policy instruments is a function of the objectives to be achieved. We try to explain this point by explaining the differences between the three price policy instruments used in the context of food and agricultural policy in Pakistan.

Support price

Fixed by the government, the support price is meant to provide a floor to market prices and is relevant during the harvest season of a given crop when producer prices are under pressure. In case market prices fall below the support price, the designated agency must intervene and purchase the surplus and continue to do so till market prices stabilise at the support price level.

However, if the market price is above the support price, then there should not be any compulsion on the growers to sell their produce to the government agency. Farmers’ sale to government agency has to be voluntary.

Procurement price

If the government wants to purchase the commodity for food security or other needs it must acquire it at the procurement price which is different from the support price.

If the market price is above the support price, then the designated agencies must not force growers to sell to them at the lower rate.

In this context, it is important that the decision-making forum of the government is well equipped and served with robust information and data on crop size, stocks, market prices, domestic requirements and likely developments in global markets.

Indicative price

As a nominal quote, an indicative price is neither firm nor binding. Currently, in vogue in the marketing of sugarcane, it is a source of a lot of confusion and needs to be abandoned in favour of support or procurement prices, whichever one is more appropriate for the policy in question.

Wheat procurement operations

The support price for wheat for the 2019-20 crop has been fixed at Rs1400 per 40kgs. As the weather throughout the crop season has been good we should expect a bumper wheat harvest, barring unfavourable climatic conditions during harvest and post-harvest season.

In case the market price falls below the support price, the government designated agencies, i.e. Pakistan Agricultural Storage and Services Corporation and provincial food departments must have sufficient resources lined up. These include procurement centres in producer areas, the supply of bardana, storage and transport arrangements.

The development of standard operations procedures is also important for the guidance of all concerned to ensure the achievement of the objectives of the program.

In this context, it is imperative to ensure competition in the market and avoid any measures which lead to forcing growers to sell their produce to government-designated agencies only.

Finally, a word for the finance people. Nothing comes free. The implementation of any government policy will require resources which must be provided to the relevant agencies. This is important to ensure the credibility of the government and its policy.

The writer is a former chairman of the Agricultural Prices Commission

Published in Dawn, The Business and Finance Weekly, April 27th, 2020