Farmers’ anxiety

Published April 24, 2024

WHEAT prices in Punjab have plummeted far below the minimum support price owing to a bumper harvest, reckless imports, large carryover stocks being held by the food department, and a collapsing international grain market. While a record wheat crop is a matter of comfort for the province’s new political leadership, the crashing prices must worry farmers. Various farmer organisations have already demanded immediate government intervention to stabilise the market. The rates being offered by flour mill owners and stockists for the new crop have already dropped to Rs2,800 per 40kg compared to the official support price of Rs3,900 in south Punjab due to the food department’s absence from the market. The conditions demand that the government ditch this year’s truncated wheat purchase target of 2m tonnes and ensure its continuous presence in the market to use it as a lever to stabilise prices.

The decades-old policy of heavy government intervention in the wheat market — from setting the minimum support price to purchasing a major portion of tradable surplus from farmers — has indeed helped increase domestic production to meet national needs. However, this policy has its drawbacks, which far outweigh the benefits. Besides spending billions on wheat procurement and storage every year, the province is compelled to maintain a heavily staffed food department at the cost of other essential expenditure. This policy discourages farmers from diversifying into value-added crops, forces urban consumers to frequently pay a premium on the commodity’s international price, and has led to the establishment of a surplus flour-milling capacity that makes big bucks from ‘subsidised wheat quotas’ from government stocks. The government must completely deregulate the wheat economy by linking the country with the global grain market. It should support farmers by reducing production costs and improving yields, and via increased BISP cash transfers. It may be difficult initially but will ensure that the long-term food security objective is met without creating a financial burden on government budgets.

Published in Dawn, April 24th, 2024

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