Food inflation - a time bomb set to explode

Norman Borlaug, an American agronomist, generally acknowledged as the father of Green Revolution once said, "You can't build a peaceful world on empty stomachs and human misery." Although the food price hike is a global phenomenon, the way it has affected developing countries is seriously alarming.
Out of control food inflation was a primary factor which led to public discontent in Tunisia, which as we know subsequently spread to several other neighbouring countries. Although the demonstrations precipitated the fall of the government, public discontent did not end, as the core issues remained unsolved.
Essentially, food inflation is a phenomenon when consumers have to pay ever-increasing prices to acquire even staple food items. There are various contributing factors behind food inflation, but in Pakistan, it is mostly caused by acute shortages of food items, owing to bad planning and consequential low production. Add to this increasing demand, uncontrolled population growth, changing patterns of consumption, crops destruction by natural disasters such as last year's floods and hoarding and black-marketing, and you have a sure recipe for huge social unrest and potential chaos. So much then for Article 38 (d) of the Constitution of Pakistan, which promises provision of the basic necessities of life, including food for the citizens of Pakistan.
Today Pakistan is the world's sixth most populous country, with an estimated population of around 180 million people, and an annual growth rate of 2.07 percent; amongst the highest in the world. At this rate it is estimated to be about double by the year 2050, making Pakistan the fourth most populous country of the world. It should be quite obvious to our planners that an exponential growth in agricultural output has to be the top priority, if we are to avoid total anarchy. A population will survive without luxuries and even comforts. But a hungry population without food to eat will go to any extent in a primordial reaction to just stay alive. Food security in terms of physical, social and economic access to sufficient, safe and nutritious food can only exist if agricultural output matches the consumption requirements. This is not happening. Take only one staple food crop - wheat. According to the United Nations Statement on Food Security in Pakistan, in about 50 years (1948-2000), the population of Pakistan increased four-fold, but during this same period, the production of wheat, the major food crop, increased less than three-fold. Last year's floods have considerably worsened the condition.
Low productivity or poor crop yield from available land is another aspect, which impacts food security. Many factors contribute to the ever-growing gap between the current yield and the yield potential of major crops in our country. This gap needs to be narrowed and eventually eliminated. It is an absolute imperative for us that agricultural productivity is enhanced through modern farming techniques, including sufficient and balanced use of fertilisers. Although all nutrients are important and play their role in increasing soil fertility, nitrogenous fertilisers are of utmost importance.
Studies suggest that the total urea requirement of the country will surge and become 6,300 kilotons during 2011. If experts are to be believed, Pakistan currently has the capacity of manufacturing 6,900 kilotons of urea. Then what is hindering its production and triggering a price-hike, which eventually results in inflated price of essential food commodities? Even a little research reveals that it is a haphazard policy, making and fixing of wrong priorities.
Urea is produced from synthetic ammonia and carbon dioxide. Natural gas is a major feedstock in ammonia production, as the hydrogen (H) in ammonia (NH3) comes from natural gas. Owing to the growing gas shortage in the country, policymakers at the Energy Summit, held in April 2010, decided to curtail 12-20 percent of gas supply to fertiliser plants. As a consequence, urea prices rose sharply from Rs 850 per bag in December 2010 to the present price of about Rs 1200 per bag. The fertiliser sector received only three days a week gas supply, during the first half of 2011, severely curtailing production. Last month the Ministry of Petroleum proposed a 15-day monthly gas supply cut for fertiliser plants. Already our farmers are experiencing huge production losses owing to non-availability of urea fertiliser at the right time, and if the Petroleum Ministry's proposal is implemented, then urea availability will further decline and prices will escalate further. The final burden will fall on the people of Pakistan, as the vastly increased cost of cultivation will have to be borne by them through increased food prices.
Not only this, shortage of urea will also lead to a slump in crop productivity, as urea off-take will decline. This trend has been observed in the past as well. During April to June 2011, the downfall in urea off-take was 10 percent and 12 percent during previous months. Experts believe that this drop will aggravate the condition of food insecurity as crop yield will descent around 5 percent. As the production target of wheat, our staple diet, is 25 million tons for the year 2011-12, a 5 percent decrease in production would be 1.25 million tons. To fulfil the demand, huge amount of foreign exchange would then be spent on importing wheat. The World Bank estimates indicate that a 40% increase in wheat price would cause 2-percentage point increase in national poverty in Pakistan.
Agriculture is the backbone of our economy. It is providing employment to more than 45 percent of the population. It is baffling to see that these facts are not taken into consideration while devising economic policies, as a result of which a vicious cycle of inflation and poverty ensues. According to the data presented by the Federal Bureau of Statistics, Pakistan's annual inflation went up by 13.92 percent in the fiscal year 2010-11. Experts believe that 40 percent of the population might have been pushed below the poverty line due to double-digit inflation continuing for the past five consecutive years. Prices of non-perishable food items witnessed a surge of 16.07 percent during the last fiscal year and the cost of perishable items increased by 30.87 percent.
The decline in crop production is a major contributing factor to food inflation. For our agriculture to thrive and economy to prosper, timely and adequate availability of fertilisers to farmers must be ensured. The government needs to rethink its policies and formulate a plan through which farmers, who produce food for our nation and raw material for our industries, are able to acquire fertilisers at reasonable prices. Instead of paying billions of rupees in importing urea, steady gas supply to the fertiliser sector must be restored so that they are able to run their operations and produce urea at affordable rates. Food inflation therefore has to be taken very seriously and policymakers have to realise that it a time bomb set to explode with potentially disastrous consequences for our country.