n Pakistan must increase wheat productionTHE director of the World Food Program in Pakistan, Wolfgang Herbinger, has drawn attention to an urgent problem: the link between food insecurity and the support-price regime for key food crops. As Herbinger explained: “The crop outlook is not bad, but the food security situation remains difficult because prices remain so high.” He has cited wheat in particular as a culprit for increasing food insecurity in the country – the present government has increased the official wheat-procurement price to Rs950 over the course of its term so far, a 50 percent increase. Herbinger is absolutely correct. A series of myopic, self-serving decisions by the federal cabinet have made it more difficult for poor Pakistanis to obtain basic foodstuffs derived from key crops, writes the Dawn in its editorial. The central issue here is the price-support regime sponsored and implemented by the government. Consider just the case of wheat. The basic logic of the state offering to buy a few million tons of the crop each year at a guaranteed price announced before the sowing season is to encourage production. And on wheat, the country is admittedly doing fairly well – with surplus production this year helping to protect against the unprecedented floods of last year. But – and here's the rub – is there any evidence that the support price actually works in terms of incentivising farmers to produce wheat? The empirical data, according to economists, suggests that it does not. Other than encouraging some production at the margin, by leading some farmers to switch to wheat or to try and produce wheat on less-fertile land, for example, there is little evidence that a state-guaranteed purchase price encourages production. Which means that the cost of the incentive – an inflation tax on consumers, who must pay more for wheat so that the farmers are “encouraged” to produce – is unjustified and unwarranted. Consider that there are far more consumers of wheat than there are producers, and many of those consumers happen to be the poor who Herbinger indicated are growing more vulnerable to food insecurity. So why does this happen? The short answer: landed interests are either directly in power or have great sway over what the federal cabinet does. With big wheat, sugarcane and rice producers having so much political clout, the interests of the ordinary consumer and the poor are no match. But the State Bank is believed to be pushing for a compromise. Rather than directly financing the support-price regime, the government could opt for a regulatory role. That would reduce the inefficiencies and level of corruption in the support-price regime. But will the Economic Coordination Committee listen? __
