According to a Business Recorder report from Islamabad (July 3), quoting official sources, stiff opposition from the Finance Ministry to the Ministry of Food, Agriculture and Livestock's summary at the last meeting of the Economic Co-ordination Committee, has deprived rice farmers of better price for their produce.
The Food and Agriculture Ministry had proposed an increase in 'intervention price' for paddy by 13 percent for different categories, arguing that the government was so far only announcing indicative price (reference price), and without any commitment to intervene in the market.
In view of the increase in the cost of production, due to price hike in farm inputs and services, the proposal was initiated by the Agriculture Price Commission, and was backed by the Planning Commission, Commerce Ministry, and other relevant departments.
The Finance Ministry opposed it and is stated to have taken the stand that the government did not want to interfere in the market mechanism. More to this, Dr Ashfaque Hasan Khan, Economic Advisor to Finance Ministry, is reported to have said that the government would not involve itself in the matter as it related exclusively to the private sector.
The news report also had it that the export of rice might come close to $1 billion in the outgoing financial year, as compared to $525 million in 2003-04. The plea for intervention price will appear to have been motivated by the prospect of rice exports in 2005-06 outstripping the $1 billion mark of the previous year, for the purpose of prompting the farmers to grow more rice.
However, committed as Pakistan is to restructuring its economy on the market based system, the government has to quickly and resolutely withdraw itself from all obligations to intervene in the market, leaving it entirely to the private enterprise. Unfortunately progress in the desired direction, seemingly because of one compulsion or the other, has remained too slow, particularly in the agriculture sector, thereby retarding its growth. Whatever shifts and changes have been made so far in pursuance of Agricultural Reforms, have been nullified by subsequent measures, evidently to tide over one difficult situation or the other. At the same time, it will also be noted, this approach has more often proved counter-productive in a number of ways, primarily on account of uncertainties invariably accompanying the enabling measures so far adopted. Needless to point out, frequent deviations from the chosen path have marred the prospect of ensuring needed increase in productivity and operational efficiency in the country's agriculture sector.
Reference, in this regard, may readily be made to a subsequent news report (July 4). Quoting sources in Finance Ministry, it has pointed out that ECC, which had earlier lauded Minfal for its handling of the wheat situation, this time noted that it had failed to come up to expectations in implementing the wheat policy, thereby forcing the federal government to allow duty and tax free import of the commodity.
It is, however, another matter that Minfal attributed the current worries to public sector's failure to build up a strategic reserve of 0.9 million tons. It has also been pointed out that Minfal, in its summary, had said that a difference between the guaranteed price and procurement price, variable and dependent on market conditions, could be used to build up the stocks.
Further, while the market price was in line with or above the guaranteed minimum price, the public sector did not offer a higher variable price in accordance with the market trend.
The ministry is also stated to have pointed out that a clear distinction had to be made between operational and strategic reserve. Operational reserve would be released to flour mills on as needed basis, whereas strategic reserve would be used selectively to intervene in the market, enabling the provinces and Passco to stabilise prices.
Moreover, it is reported to have told ECC that the procurement target of operational reserve had been exceeded by 0.1 million tons, but strategic reserve could not be procured in the desired quantity due to the public sector's failure to offer market based price.
As against this, the private sector vigorously participated in the effort to procure wheat with mills and traders borrowing Rs 11 billion from the State Bank to buy two million tons, as compared to 1.31 million tons purchased last year from borrowing Rs 10.26 billion. Reportedly, the private sector also procured an additional quantity of wheat from its own resources.
All in all, it will be noted that the mixed economy approach, which many developing countries have long pursued, has completely lost its relevance to the situation as now developing in the global scheme of things. As such, the decision of the government to distance itself from market-related matters is quite in conformity with the need of the hour.