Successes and Failures of Wheat Market /Price Policy in Pakistan: What are the Alternatives?
This paper aims to describe the current wheat policy and evaluates the current policy in light of its original objectives of food security and price stability. The paper uses percentage of undernourished and average calorie deficit of the malnourished as indicators of food security and variation in the farm gate price of wheat relative to other South Asian countries as a measure of price stability. The results based on FAO data show that policy has failed terribly in achieving the first objective of food security whereas it did a satisfactory job towards the objective of price stability. Finally, the paper recommends some alternatives for the existing strategy.
Since, wheat is a staple crop in the context of Pakistan and it is believed that wheat price has a direct impact on consumption decisions of millions of poor people and through these decisions on food security. For this imperative role of wheat in the life of urban and rural poor, food price policy in Pakistan has attracted and continues to attract huge attention. Sadly, due to such strong tie-up between wheat prices and prosperity of the deprived, wheat pricing in Pakistan has been more influenced by political consideration rather than economic rationale. Pakistan has pursued interventionist policies in almost whole of the agriculture sector but the extent to which the outcome diverges from the open market equilibrium varies greatly across different agriculture commodities. The impetus behind these interventions in the wheat market was to achieve two objectives: a) Food security for a greater proportion of the population. b) Shield domestic producers from price variations in the world markets.
The purpose of this paper is to critically analyze the wheat price policy and the factors that shape and guide the formation of this policy as well as the impact of different pressure groups and stake holders. In addition, the paper evaluates the extent to which the government has been able to meet its original objectives of ensuring food security for the consumers and price stability for the producers. The accomplishment of the first objective is measured through the trends in the number of undernourished and average per capita calorie deficit of the undernourished over time, as they are widely accepted measure of food security. The success of the second objective is estimated by computing the variation in the domestic price and comparing it to the volatility observed in the world price. Once, the degree of the accomplishment of this policy is established, we identify some of the shortcomings of following such a policy and how few groups such as flour mills, retailers and food departments have become unintended beneficiaries of this policy. After weighing the strengths and weaknesses of the current policy, some recommendations are proposed to improve and better enable the current policy to achieve its actual objectives. Moreover, alternative approaches and policies are suggested that can fulfill the above objectives more effectively.
The paper is organized into five sections. Section 1 provides a brief history of agriculture price policy with special focus on wheat. Section 2 outlines the current policy of wheat pricing, procurement and distribution. The successes and failures of wheat policy in light of its original objectives are highlighted in the third section. Fourth section recommends some improvements in the existing strategy and delineates few alternatives. The conclusion is given in the fifth section.
Section 1: History of wheat Price policy
To understand the current policy for the procurement and marketing of wheat it is indispensable to know how this policy has evolved over the years. The history of wheat policy can be divided over three phases. The first phase is over the 10 year period from 61-71 mostly during Ayub’s...
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