Agriculture Reference
In-Depth Information
4
Public Intervention in Pakistan's Wheat
Market: The Story of Two Agencies
ABDUL SALAM AND MIAN MUHAMMAD MUKHTAR
Public intervention in Pakistan's cereal markets has historically focused on
wheat, the country's main staple and its largest crop. Wheat accounts for 36 per-
cent of the total cropped area and 30 percent of the value added by major crops.
Rice, the main staple in most other Asian countries, occupies a distant second
place, with only 9 percent of the total cropped area allocated to its cultivation.
More than 50 percent of cereal cropland is cultivated by small farmers, who
have limited access to credit and insurance and hence are forced to sell their
crops at low prices immediately after harvest.
1
Because of the importance of
wheat for both consumers and producers, all governments since the country's
independence have maintained control over the wheat market. The interven-
tions have involved procuring wheat at administratively set prices and distrib-
uting at subsidized prices to flour mills and consumers (for details, see Dorosh
and Salam forthcoming).
The objectives of intervention have been (1) increasing wheat production
to attain maximum level of self-sufficiency; (2) maintaining incentives in wheat
farming; (3) keeping wheat prices within the reach of consumers, particularly
urban populations; and (4) containing inflation, as wheat is an important com-
ponent of the food basket used to estimate various price indexes. Available sta-
tistics suggest that the country has been successful in achieving these objectives.
The wheat price stability is ensured, wheat production has increased from 11.70
million tons in 1984/85 to 19.18 million tons in 2002/03, and the agricultural
GDP at a constant factor cost of 1980/81 has increased from Rs 88.2 billion in
1984/85 to Rs 170.5 billion in 2002/03 (Government of Pakistan 2003b).
Nevertheless, achieving these objectives in a cost-effective way has been
a long-standing challenge. The government has taken significant steps toward
liberalization since the late 1980s, but the subsidy bills continued to be large,
and the government has had difficulties adhering to liberalized policies. For
1. The numbers are from the 2000 census of agriculture, published in Government of
Pakistan (2003a). Small farmers are defined as those operating less than 12.5 acres.
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