In the past week alone, the economic wizards of federal government have twice sat together to deliberate commodity support prices. Price for 40kg wheat has been increased to Rs1365 per bag, whereas indications of similarly good tidings for rate of sugarcane were also pronounced by official social media account.
There are various ways to look at these happy tidings. On one hand, wheat and sugarcane prices were last increased to Rs1300 and Rs1800 per 40kg respectively circa 2014-2015 and had since remained stuck there. Those coming at it from a farm economics angle must see it as a welcome development; after all, input prices of fertilizer and pesticides increased significantly during the intervening years.
Are there political-economic considerations involved in the fixing of support prices? Of course. Consider that the price-control/low target inflation-obsessed PML-N had every reason to reign in food crop prices, keeping support prices largely unchanged in its tenure.
In sharp contrast, prices of the two crops had witnessed an increase by 53 percent (wheat) and 112 percent (sugarcane) during the preceding five-year PPP-rule, catering to party’s rural vote bank – although exacerbated by overarching trends in global commodity prices at that time.
So, where does PTI stand? Ostensibly on the right side, considering that the support price enforcement mechanism is broken and any upward revision in official rate takes its sweet time to trickle down to farmers. But is this the tabdeeli farming segment signed up for? Let’s consider.
PTI’s promise for an agri-revolution was not one of incremental gains and reversal of ‘exploitations’ by past governments, but to transform the sector by ‘unleashing its potential’. How? By “expanding produce markets” and enforcing a “transparent market clearing mechanism to get fair market prices for farmers”. In its 2018 manifesto, the party committed to make this happen by “deregulating the seed market” and making the “crop mix more market driven”.
Whether the freshly fixed support price is now closer to what a market-driven commercial rate would have been is a subject best left to a later column. What is more significant, however, is that few steps have been taken for the action plan set forth in the manifesto. Instead, the tabdeeli government appears to be going down the same road oft travelled by the ‘parties of the status quo’.
Is that another U-turn? Yes. And irrespective of whether the latest revisions are reflective of changing cost of on-farm production or not. History shows that any upward revision in a government-fixed price floor - no matter how weakly enforced - comes to dictate farmer crop preferences in the following seasons. Does that signal a ‘more market-driven crop mix’, as the manifesto promised? Let’s not insult the readers by spelling out an obvious answer.
The motives behind the change of heart are obvious. Both wheat and sugarcane production has declined by 9 and 23 percent from peak output levels touched in FY17 and FY18, respectively. Amid rising input costs, the optics of two consecutive contractionary seasons look awfully bad. Thus, it is fair to assume that the tabdeeli wizards felt pressed to act; and acted urgently.
But the latest optics are not all good either. Consider that while the federal government stopped short of announcing a support price for sugarcane, according to chief minister Punjab’s twitter account the meeting was chaired by the Prime Minister himself, with representations from ministries of Finance, Commerce, Planning and MNFS&R, among others.
For one, sugarcane support price has been a purely provincial domain, vested in provinces since at least 2009. Second, it stands to reason why a crop with less than ten percent average share in both aggregate area and number of private farms is so important to warrant a inter-federal-provincial moot, when the cotton crop – with its over twenty percent comparable share - is set to miss its output target by over one-third, yet remains missing from the agenda?
These questions, while relevant, are nevertheless tactical. The overall policy concern – and one that should be a source of worry for the hopefuls of change – is that agricultural policymakers continue to tread the same road. If the potential farm economics is to be unleashed, then the application of commodity price floors – particularly for selective crops – must at least be put to debate.
It is hoped that the recent tabdeeli at Planning and MNFS&R will prove more meaningful than the tinkering of optics through rate-fixing and right questions will be asked.