Outcome of the policy

As discussed previously, the federal government had enhanced wheat support price to achieve two objectives; increase in production of wheat and income support to the small farmers. The government has been successful in achieving an increase in yield though on costs outweighing the benefits. But claims for income support to small farmers need discussion in depth.

During preparation for this report I have collected statistics from District Pakpattan; the smallest rural district in Punjab holdings of farmers. The figures tell you a compelling story:

Holding Range (Acres)

Number of Farmers

% of Total Farmers

1-5

253583

90.38

5 to 12.5

22509

8.02

12.5 to 25

3417

1.22

25 to 50

890

0.32

Above 50

164

0.06

 

280563

 

Source: Self Collected information from Revenue Dept. Dist. Pakpattan

 

It is interesting to note that majority of farmers are holding small pieces of land (5 acres or less). In fact, they are more than 90%. Generally, they don’t cultivate wheat on every part of their land. They cultivate fodder for their livestock and vegetables for their own use at a part of their land. It is possible that they may substitute wheat for vegetables, but they can’t afford to replace fodder for their cows, buffalos, and goats. Wheat on remaining land is enough to meet the annual needs of their family, but no marketable wheat is left with them. Even if they produce some surplus, they don’t have means to package and transport to the government procurement centers. Under the circumstances, the majority (90.38%) of farmers don’t get any benefit from the policy of wheat support price.

As per the Government the farmers having holdings of 25 acres or less do get the benefits of the scheme. Even in that case, only 9.24% medium-sized farmers (better off) are benefited from the government’s price support policy.

But the real beneficiaries are farmers having more than 25 acres of land, but they count only 0.38% of the total farmers. Most of these people don’t cultivate their lands themselves. They have either inherited farmers from their forefathers or give away their lands on contract or meager shares to farmers. They enjoy direct cash benefits of support price as well as an increase in the price of their land.

A serious question arises in the situation. When don’t 90.38% farmers get any benefit from wheat support price, how the government can gain any political support? In fact landed aristocracy has been dominating Senate, National Assembly and Provincial assemblies in Pakistan. It is to their benefit to enhance minimum wheat support price in the name of poor/small farmers.

The claim of the District Government Muzaffargarh that the procurement is a way to sustain the market price of the wheat is neither understandable nor economic. At the maximum, they can claim that the government is procuring surplus wheat to ensure minimum support price.

Other Impacts of Enhanced Support Price

There are a number of other issues involved in the policy of wheat support price. A few of them are:

1-      The World Bank in “Food Price Watch,” Feb 2011, has suggested that higher wheat prices have strongly impacted purchasing power of the consumers and has outweighed benefits reaped by the small and medium level farmers. The report also suggested that the government’s pro-poor policies including wheat support prices have not yielded good results as poverty has increased by 1.9 points between June-December 2010. The World Bank noted that the Punjab Government`s subsidized `Sasti Roti Scheme` was started with a lot of hope but could not sustain due to financial problems and mismanagement. Similarly, Benazir Income Support Program (vouchers to the poor) also failed to make an impact on the lives of the poor. (Reported in “The Nation”)

2-      The high support price for wheat compels the farmers to use excessive fertilizers and pesticides. This trend is increasing air pollution as well as the surface of the land and groundwater. Furthermore, excessive cultivation of crops does not provide the due break to the land which it needs to maintain its capacity. It is also causing soil erosion. On the other hand, due to poor management of environmental protection, the pollution problem is aggravating in the country.

3-      Government of Punjab has been holding 5.167 MMT wheat in stocks, and the new grain is soon to arrive. The Federal government decided to export 2.0 MMT of grain from the whole country. The Punjab government was allowed to export 1.2 MMT from which Punjab government could export only 0.8 MMT (“The Nation”, April 10, 2011). The Chief Minister Punjab has directed that efforts for the export of wheat should be continued during wheat procurement drive 2011 and Food, Agriculture and Industries departments should evolve an effective strategy for this purpose with mutual consultation. This announcement of the Chief Minister may be contradictory to the decision of Economic Coordination Committee (ECC) reported on April 12, 2011, in English newspaper “Daily Times” in which Punjab is going to procure 3.5 MMT of wheat.

4-      Another impact of the minimum wheat support price is on the redistribution of income from consumers to the better off farmers and large landowners, instead of the poor ones. It is a widening gap between better off and the poor farmers. Furthermore, the small farmers can’t afford to leave their land uncultivated even without price support. So the increase in cultivated area, as we have seen above, is in the ownership of the big landlords.

5-      The burden of the support price is proportionately high on the lower income consumers while the benefit is more for, the better-off farmers who produce more wheat than the small farmers. Hence, the wheat support price defeats government’s announced objectives on the one hand and creates problems for the consumers and the small farmers on the other hand.

6-      Before submitting this report, I was reading a report in a Pakistan English daily, “The Express Tribune” dated 22nd April 2011. The report is an interview of the President Kissan Board who highlights that the government is delaying the purchase of the surplus and small farmers are selling their crops to intermediaries on market price of Rs.800/- to Rs.840/-. The President Kissan Board also alleged that the policy is being implemented in a way that benefits the farmers with large holdings."


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