wheat crisis

Written by Muhammed Zulqarnain 6:31 pm Articles, Current Affairs, Pakistan, Published Content

Harvest of Hardship: Understanding Pakistan and its Wheat Crisis

Agriculture is crucial for Pakistan’s economy, and the wheat crisis has only highlighted the significance of the agricultural sector for food security and livelihoods. Muhammed Zulqarnain explains that the crisis was exacerbated by the government’s import of wheat, which led to a surplus stock and delayed procurement from domestic farmers. The farmer community has been up in arms, demanding that the government address their concerns and meet the wheat procurement quota at a supporting price.
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He writes on a diverse range of topics such as geopolitics, economy, social inequality, governance, and other important current affairs stories in national and international spheres.

What is being seen and reported in the news regarding farmers’ protests in Punjab is a crisis of great magnitude on account of its potential repercussions on socio-political stability. At the heart of this “wheat crisis” stands the decision taken by the Pakistani Government to reduce the quota for wheat procurement from the farming community.

The “wheat crisis” has been part of the national headlines for a few months now with locals protesting in Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan (GB). Considering these widespread episodic protests regarding the wheat subsidy in AJK and GB, another protracted controversy over this delicate issue would not be in the favor of the nation or the government.

In hybrid economies such as Pakistan’s, government intervention in the market through centralized wheat procurement processes serves a two-pronged purpose. First, it ensures that the national demand for the crop is met efficiently. Second, farmers are protected from the downsides of the free market. Thus, wheat procurement by the government is a mechanism for price stabilization.

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Interestingly, the farmers’ agitation against unfair state policies is not restricted to Pakistan only. For instance, farmers in India also staged massive demonstrations, that descended into violence, against a “farm law” just two years ago. They objected to a new law that left them at the “mercy of corporations” in the bid to secure profitable prices for their produce.

Agriculture—A game changer for Pakistan?

Agriculture is the lifeblood of Pakistan—it employs around 37% of labor, sustains the country’s populace, and fuels its economic engine. Without ensuring a flourishing agricultural sector, food security is a distant daydream. Furthermore, agriculture is intertwined with the livelihood of millions of small-scale farmers in Pakistan who comprise most of the rural population.

Wheat is also an important staple crop and an indispensable component of the daily diet of the 240 million population in Pakistan. It also contributes to almost 2% of the total GDP (gross domestic product). 

Fortunately, farmers have enjoyed a steady rise in wheat production over time. This year, at harvest time in April 2024, wheat again became a bumper crop. 

According to the Pakistan Institute of Development Economics (PIDE), “A significant increase in wheat production has been observed in the past four decades, that is, from 11 million tons, in 1980 to 25 million tons in 2020.”

This year, favorable weather conditions in the Rabi season (October-April) led to the output of 30 million tonnes of wheat as opposed to the 26.2 million tonnes produced in 2022.

How Did the Wheat Crisis in Pakistan Start?

Pakistan experienced devastating floods in 2022, dampening wheat production and supply and risking a shortage in the market. To mitigate the supply shortages, the caretaker government imported wheat crops through the private sector.

According to the Ministry of National Food Security and Research, “Between September 2023 and March 2024, more than 3.5 million tonnes of wheat were imported into Pakistan from the international market, where prices were much lower.” As a result, the federal and provincial divisions were already holding 4.3 million tonnes of wheat in reserve when farmers started harvesting their produce this year.

Under normal circumstances, the Government of Pakistan procures almost 20% of wheat produced by farmers annually. It procured 5.6 million tonnes of wheat from farmers in 2023, out of a total of 28 million tonnes. 

However, the provincial government in Punjab slashed the wheat procurement quota to merely 1.4 million tonnes—far below the usual 6 million targets—arguing two concerns. First, storage capacity issues due to full stocks and second, financial non-violability, claiming above-normal moisture in the harvest.

Farmers’ Response

This sudden policy shift enraged the farming community. They staged protests across the province against the decision to reduce the provincial procurement quota and an inordinate delay in grain purchases.

A surplus stock of wheat, hoarded by imports, threatens the commercial interest of farmers as they sell wheat at a lower price and invest the profit in other crops such as cotton. This surplus is at the disposal of the provincial and federal governments and is at the heart of delays in procurement from domestic farmers who were desperately looking to sell their produce. 

Under the banner of Pakistan Kissan Ittehad (PKI), farmers in Punjab, the breadbasket of the country, demanded the administration to meet the target of wheat procurement quota of 2 million tonnes at a supporting price of 39,000 per kg. According to Khalid Khokar, the President of PKI, farmers are also likely to incur losses of Rs. 400 billion otherwise. 

Farmers’ woes were further exacerbated when the government unilaterally replaced the manual process of registering as a wheat tradesman with a digitalized one. Many farmers found themselves in troubled waters as they lacked adequate digital literacy and education to tackle this challenge. 

If the government does not raise the target quota, price stability will be disrupted thus incurring financial losses to farmers as they are forced to sell at a lower price. They will have no alternative, but to sell their bumper crop for less than the supporting price in the open market or to the private sector. The market-determined wheat price has declined to a staggering Rs. 3,000 to 3,900 per kg which is 25% less than the supporting price.

Government’s Response

The Government has taken several steps to placate farmers. It, initially, directed Pakistan Agricultural Storage and Services (PASSCO) to increase the procurement target to 1.8 million tonnes of wheat—an increase of 0.4 million tonnes from the initial procurement target. Nonetheless, it was rejected by farmers as peanuts. 

Simultaneously, the Punjab Government has also announced interest-free loans of Rs. 150bn to farmers as compensation for their losses. However, the matter is yet to be settled.

Lessons to Learn from the Economic Crisis

Like many other perennial problems concerning poor governance and planning in the history of this country—such as the questionable contracts with IPPs (independent power producers)—the current food crisis also indicates a lack of foresight and prudent policymaking, rendering the wider public interest at risk. 

Despite a rising trade deficit due to high imports of commodities, the decision to procure surplus wheat is a glaring case of maladministration and bad governance. It is equally unjust to the farmer community which plays a significant role in ensuring food security for the country.

Similarly, it also indicates the loopholes in guaranteeing security and order. For instance, an Intelligence Bureau (IB) report stated, “The farmers’ protests may cause a major law and order situation in coming days.”

Unfortunately, this is not an isolated incident of inadequate planning as there are various precedents of bad governance in other key sectors that have incurred economic losses and precipitated social unrest. 

The lessons from this crisis are primarily rooted in “poor planning and management”. For example, Gilgit-Baltistan also reeked of dissent due to the massive protests and demonstrations that took place in January 2024 after the government decided to cut down wheat subsidies. 

Way Forward

The government needs to lend an ear to the farmer’s demands by increasing its storage capacity and exporting it to neighbors such as Afghanistan. It would be, otherwise, tantamount to an “economic murder” of farmers. 

Provincial governments that do not fulfill their needs through local production must also be encouraged to procure wheat from farmers in Punjab. For instance, Khyber Pakhtunkhwa has already proclaimed to procure 0.3 million tonnes from Punjab. 

Lastly, the private sector with adequate storage capacity and warehouses must be incentivized to avert a full-blown wheat crisis.

The nation owes to its farmers for their determination and hard work, they cannot be risked antagonizing through exploitation and a surmounting wheat crisis. 

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The views and opinions expressed in this article/paper are the author’s own and do not necessarily reflect the editorial position of Paradigm Shift.

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