Agriculture Reference
In-Depth Information
would supplement this provision by purchases on the open market to meet their
needs (Alderman, Chaudhury, and Garcia 1988). Under this revised rationing,
the government established a monthly quota of wheat flour per household mem-
ber, which was provided to consumers at a subsidized price through ration
shops. The ration shops were privately owned but licensed by the government
and controlled largely by PFDs.
With increased procurement, and the heavy burden on the Food Department,
the government introduced some institutional reforms in the early 1970s. Several
institutions dealing with the processing and marketing of farm commodities were
nationalized and new institutions—such as PASSCO and Ghee Corporation of
Pakistan (GCP)—were established as public-sector enterprises. PASSCO was
assigned the task of constructing warehouses, marketing wheat and other grains,
and implementing the support price program for various crops (Box 4.1), while
GCP was entrusted with managing imports and the processing of edible oils, as
well as promoting the production of the oilseeds in the country.
2
The 1980s and Later
As the government's wheat procurement increased, so did the system of wheat
rationing. By the end of the 1970s, this heavily subsidized distribution system,
painstakingly built up in the preceding two decades, had become a burden on
the government (Cornelisse and Naqvi 1987). During 1974-85, the Pakistan
government spent a cumulative amount of Rs 36 billion on the system, equiv-
alent to US$2.3 billion in 1985 prices (Alderman, Chaudhury, and Garcia 1988).
Furthermore, it also became evident that the system provided ample avenues for
corruption. Ration shop owners produced fraudulent cards, charged inflated
prices, adulterated wheat flour, and underweighed when selling to consumers.
Similarly, consumers also took advantage of the system by acquiring more than
one ration card or exaggerating the number of household members. All such prac-
tices added to the subsidy bill borne by the exchequer. In a bold move in 1987,
the government abolished the rationing system but continued procurements at
administrative prices and distribution through flour millers at subsidized prices.
However, the policies that facilitated the public system, such as restricting
private trade and credit facilities, continued many years after the 1987 reform.
In fact, the restrictions on movement of wheat across the provinces were lifted
only in May 2001, in an attempt to ensure wide product availability and to help
farmers market their produce. Also, as part of the government's ongoing eco-
nomic reforms, in 2001 the State Bank of Pakistan allowed—for the first time—
2. Apart from these two agencies, Rice Export Corporation and Cotton Export Corporation
were also established as public-sector monopolies in response to many complaints about the mal-
practices of the private sector in the exports of these two important commodities. These corpora-
tions were also subsequently entrusted with the task of ensuring the support prices of these com-
modities to farmers.
