Agriculture Reference
In-Depth Information
instance, in the wake of 3 consecutive years of poor wheat harvests during 2002-
04, the government reimposed restrictions on movement of wheat to increase
public procurement and build up buffer stocks. In addition, the government im-
ported about 2 million tons of wheat to distribute domestically at subsidized
prices.
A key concern in this context is why the costs of public intervention have
remained high. Is it because of the inefficiency of the implementing agencies,
the parastatals, or is it because their operations are dictated by the central gov-
ernment's policy? This chapter addresses this issue by delineating the role of
public-sector agencies involved in wheat marketing, that is, Provincial Food
Departments (PFDs) and particularly PASSCO. The chapter begins with a brief
history of the evolution of wheat price policies, which is followed by an analy-
sis of the kind of interventions and their effects on wheat price stability. The
fourth section analyzes the costs of intervention, paying close attention to costs
incurred by PASSCO and PFDs in the process. A discussion on the challenges
and emerging issues is presented in the penultimate section; the chapter con-
cludes with a summary and policy implications.
Historical Overview of Pakistan's Wheat Policy
From Independence to the 1970s
Pakistan inherited the provisional rationing system of the British government,
which was introduced during the Second World War in the Indian subcontinent.
Under that system, the Department of Civil Supplies procured wheat and other
foodgrains at a fixed price from growers under a monopoly procurement scheme.
After independence, Pakistan renamed the Civil Supplies Department in the
1950s as the Food Department, dealing only with food items. During 1959-60,
the government fixed domestic prices of wheat at a level higher than interna-
tional prices to boost domestic production. During this period, a ban was also
placed on interprovincial movement of wheat and trading by private traders to
facilitate public procurement.
These policies heralded the beginning of more complex and active public-
sector interventions by both provincial and the federal governments, which in
subsequent years resulted in domestic wheat prices being pushed below inter-
national prices by the beginning of the 1970s (Cornelisse and Naqvi 1987, as
cited in Islam and Garrett 1997). The argument was that the prices were artifi-
cially depressed so that the grain procured could be supplied to urbanites, in-
dustrial workers, and defense forces at cheaper rates and the burden of subsi-
dies on the exchequer could be minimized (Niaz 1995). In the 1960s, the
colonial rationing system was abolished and replaced by the partial provision-
ing of wheat, through which only a portion of the total wheat flour (
atta
) re-
quirement of the household was provided. It was expected that households
