Procurement is not a very uncommon word for Pakistans agricultural economy. First it was wheat, and now its sugar, the procurement of which has been touted as being the ultimate panacea for providing relief to small farmers.
Any fervent reader of these columns would know that procurement is far from being a feasible option particularly for its market-distorting characteristic and also because of the benefits accruing to unintended recipients more often than not.
Under the pretext of benefiting the small, poor farmers, whove not been paid the amount due to them for this years sugarcane produce, sugar millers are beseeching the government to procure as much as 0.4 million tons from them.
The scenario becomes a tad clearer when one looks at the production estimates for sugar for this year, hovering close to 4.1 million tons, nearly equal to domestic consumption of about 4.2 million tons.
Therefore, on the back of ample supplies, expectations of rational sugar prices in the coming months of the year are not much of a surprise.
Industry players have linked millers plea for procurement with the less-than profitable sugar prices for industrialists. Though procurement prices will be determined through open tenders, it is expected that they will hover around the current market price.
By securing a reasonable price with the government now when the market price is between Rs65-70 per kg, millers are alleged to cash in before the supply-lead price decrease commences in the coming months.
To the millers claim that timely procurement would ensure availability of some buffer for the future, one would beg to contend that 0.4 million tons of the commodity are already available with the TCP, covering up for any strategic reserves.
Therefore, it seems quite plausible that the entire exercise of sugar procurement will end up fattening the pockets of the millers more than helping the poor farmer for real.
The procured sugar is housed in the mills only, perhaps due to the less-than-sufficient storage space in the country for agricultural commodities. Eyeing this, many in the controversial industry claim that millers and government officials collude to hoard the commodity and release it at much higher rates when prices are jacked up using the infamous crime of the sugar industry - artificial shortages.
This remains a rife controversy, nevertheless, and not one backed by substantial evidence.
Besides, only the most inane will deny that sugar is not the most important of commodities for sustenance and food security. Procurement of the commodity to ensure ample supplies in future seems to favour the sweet-toothed more than the malnourished and food-deprived.
Overall, procurement ends up deforming the market scenario with disproportionate supplies and forced price dynamics.
Ultimately, the already fiscally constrained government ends up paying for the procured commodity using tax payers money, which loads up the wallets of millers rather than benefiting either consumers or small farmers.
Perhaps a better strategy would be to ship out the commodity if production surpasses demand and import it if the reverse happens. Eventually, this will help align domestic market prices with the global market, and bring overall efficiency to the industry. Too wishful, did you say?
Comments
Comments are closed for this article.