The government must deregulate prices of farm products to make it comparable with international agricultural products, Dr Salman Shah said. Talking to Business Recorder here on Friday, Dr Salman Shah, former finance minister in the military regime of General Pervez Musharraf(retired), said theoretically the wheat support prices were determined by keeping cost of production in mind but in reality prices were fixed on the pressure of influential farmers with big landholdings.
"Time has came that the government must deregulate farm products instead of providing indirect subsidies, for example, providing facilities like technology transfer to farmers, timely provision of water, seeds, pesticides and develop modern means of marketing the products," Shah said. He added that when the government sets a wheat support price above the international price it encourages smuggling of the commodity into Pakistan and when support price is below the international market smuggling of the commodity out of Pakistan to other countries occurs.
According to a senior official of the Ministry of National Food Security and Research, the farm product markets are not only imperfect but also fragmented in Pakistan. During the post harvest period the price of farm commodities in the open market generally tend to crash to the disadvantage of growers.
The official added that support prices are meant to safeguard the interest of growers, and act as minimum guaranteed price especially during the post harvest period when the market price tends to crash particularly in years of bumper harvest.
According to official documents available with Business Recorder following are the objectives of the support price of any commodity in Pakistan: (i) A minimum guaranteed price as a safeguard; (ii) essential for food security of staple diet; (iii) to protect farmers in case of crashing prices in post harvest; (iv) protecting small farmers from exploitation by middlemen; (v) seasonal nature of agricultural production; (vi) price stability and sustainable production; (vii) in-built incentive for farmers; and (viii) poverty alleviation.
Before 2001 the support price policy programme covered wheat, sugarcane, cotton, rice, gram, onion, potatoes, sunflowers, soyabean and canola. In 2001, it was decided to continue the support price policy for wheat, sugarcane, rice and cotton crops only. Later on it was decided in the meeting of the ECC held on September 23, 2012 that the support price policy of wheat rice paddy and seed cotton will be determined by the federal government while provincial governments will consider fixing the support price of sugarcane.
The Agriculture Policy Institute (API) performs in-depth analysis considering different parameters before formulating support price policy proposals for any crop, which include short- and long-term changes in the area, yield and crops production, domestic and global demand, supply, stock and price situation, international prices, export or import parity prices, cost of production, comparative economics of competing crops, nominal and real support market prices, profitability in the use of fertilisers, parity between input and output prices, impact of proposed price on the other sector of economy, economic efficiency in domestic production and improving productivity and marketing. Presently, the government has fixed the wheat support price at Rs 1,300 per 40 kgs, while international wheat prices are hovering around $250 per ton or around Rs 1,000 per 40 kgs. This shows that a Pakistani consumer is paying Rs 300 additional to purchase 40 kgs of wheat.
The officials of API rejected the impression that the local wheat prices are set on the pressure of influential farmers and said that recently some of the influential landlords urged the government to further enhance the wheat support price, but the government refused to entertain their demands.