Already vexed by a number of unfavourable developments like rising poverty and unemployment, ordinary and poor households in the urban centres, the country should be prepared to take another hit as the government has increased the support price of wheat by a hefty margin of 8.4 percent from Rs 1200 to Rs 1300 per 40 kg. Additionally, a regulatory duty of 20 percent has also been imposed on wheat imports in view of the steeply falling prices of the commodity in the international market since May, 2014. The basic idea behind these two steps is to protect the farmers from the increase in prices of agricultural inputs and the likely damaging effects of a steep drop in global prices of wheat. Besides, the agriculture sector has suffered various kinds of setbacks and its relative share in overall GDP has been declining over the last many years. The government envisions the agricultural sector as the engine of growth and the panacea for most of the ills of the economy and, as such, very much inclined to offer the needed incentives. Agriculture is, of course, a key sector of the economy and with its strong backward and forward linkages is the main source of livelihood for a vast majority of population and plays a pivotal role in promoting exports and food security. The twin actions of the government, it could be easily argued, would enhance the incomes of the farmers and insulate them from foreign competition. However, the two decisions could also be termed as politically motivated, taken essentially to garner the support at the grass-root level, especially at a time when the PTI and PAT are accusing the government of many wrongdoings and the PML(N) as a party is losing popularity.
While the government could claim credit for protecting the farmers/agriculture sector, the hike in support price of wheat and imposition of regulatory duty on its imports is highly unfair for ordinary consumers in urban areas of the country who spend a large part of their incomes on wheat and wheat products. In the absence of the government decisions, these consumers could expect a lower price of wheat, spend the saved money on their other necessities and have some relief from the gruelling experience of ordinary life. The government's claim that its decisions would protect the interests of ordinary farmers could also be questioned on the ground that subsistence farmers who are in majority, generally hold the wheat stocks for their own consumption and have hardly any surplus to sell in the market. If at all some of the subsistence/ordinary farmers have some surplus wheat, they find it difficult to dispose the surplus stock at the minimum support price since the procurement machinery of the government generally caters to the wishes of large landowners with political clout who enrich themselves further at the cost of government exchequer. Also, it has been generally observed that if the procurement price is raised, fertilisers, pesticides and other inputs become more costly and the profits of middlemen swell, resulting in minimising the level of net income intended for the farmers. Some of the analysts could argue that the decision was made at a time when overall inflation was comparatively at a low level but it needs to be pointed out that inflation was presently subdued mainly due to certain pending decisions to raise the price of energy and reduce subsidies. Inflationary pressures would re-emerge when the reform agenda agreed with the IMF is implemented. Also, if wheat is produced in abundance in the country due to high support price and its international price continues to be depressed, the surplus stocks could only be sold in the global market by offering huge amounts of subsidy, which the budget is least able to bear at the present juncture. Besides, the country would not be able to reap the benefit of comparative advantage in production if the price of wheat is kept artificially high by prescribing support price, which is not in line with the world market. Using certain economic arguments, it could be easily proved that in a situation where the price signals are manipulated and the market is distorted, factors of production are not optimally employed and the productivity of the economy is not at its full potential. We are aware that the government has to walk a tight rope and achieve so many objectives simultaneously but adequate availability of farm inputs like fertilisers and seeds, improved irrigation, energy and mechanisation and timely supply of credit may have been better alternatives to increase productivity in the agricultural sector and improve the living standards of the farmers rather than an increase in the support price of a particular product, which may only shift the acreage under various crops.
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