The axiom, if its not broke, don fix it seems alien to local legislators. Seemingly unconvinced over the otherwise world-recognised effectiveness of the invisible hand of free markets, the countrys government often resorts to intervening in markets without any apparent legit reasoning or planning.
The Sindh governments decision to ban inter-provincial movement of wheat through the imposition of section-144 of the Criminal Procedure Code (CrPC) throughout the province; is just another example of such ad hoc policymaking.
According to the official spokesperson of the Sindh Food Department, wheat production in the province is estimated to have been around 4 million tons. "The provincial governments target for wheat procurement is 1.3 million tons and it will be completed in just over a months time after which the current ban will be lifted," the official told BR research.
Food department officials absurdly argue that this measure will "curb exports of wheat until adequate reserves have been established". However, this rationale appears hollow based on the fact that smuggling or export of wheat could be curbed by effectively curbing movements of the staple between provinces, if not at borders.
Instead, the provincial government has effectively restricted the movement of wheat stocks from agriculturists to millers, causing shortages of the staple food item in Karachi and Hyderabad. These artificial shortages threaten to push up retail prices of flour at a time when government estimates show that there are stocks of about 28 million tons of wheat in the country, (including reserves of 3 million tons from the previous harvest) against an expected demand of 20 million tons.
Moreover, those farmers who wish to sell their stocks quickly to cash-in on their labour are currently left with few choices besides selling to the provincial government at the support price of Rs950 per 40kg. In essence, the support price is acting more like a price ceiling for farmers rather than as the price floor it is supposed to be.
Instead of facilitating farmers and ensuring the smooth supply of wheat flour to consumers in the province; these government-induced distortions will likely create rent-seeking opportunities for middlemen or aarhtis. Yet, lobbies within the government and establishment are adamant on creating barriers within the country trade - one area grossly neglected by policymakers for long.
These rent-seekers are not only snatching the pie of consumers and producers, but also shrinking the cake - a classic example of market distortion. The Competition Commission of Pakistan should probe into the case to safeguard the benefits of players.
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