Food security: Support price mechanism takes toll on poor

Published on The International News, by Amir Zia, March 27, 2011.

Finally the World Food Programme WFP has raised a red-flag over the abnormally high food prices in Pakistan, which is making life tough and bitter for majority of ordinary Pakistanis. Wolfgang Herbinger, WFP’s director in Pakistan, painted a grim picture about the food security situation in the country, where malnutrition levels are on the rise despite good agricultural crops.

One of the key reasons for the food-inflation remains the government’s decision to increase the wheat support price by more than 120 percent that indeed benefited big landowners, but proved a blow for the majority of people, especially belonging to the poor and fixed income groups. 

But even before the WFP director made remarks on Pakistan’s food security in Geneva earlier this week on the sidelines of an international conference, there were rational voices in Pakistan that had been highlighting the issue.

In recent months, The News’ opinion pages carried several articles by leading economist and former advisor of the finance ministry Dr Ashfaque Hasan Khan, who questioned the people’s government “criminal” move of pushing the wheat support price to 950 rupees per 40 kilogram from 425 rupees in the early 2008.

“Empirical evidence suggests that a 10 percent increase in the support price of wheat increases the general price level by three percent. The more than 120 percent increase in the support price of wheat has pushed food prices up by 32 percent,” he told the scribe, explaining his point-of-view. “The support price mechanism has long lost its utility and remains beneficial only for big landowners. Today, the domestic wheat rates have surpassed international prices” … //

… The thesis of some top government functionaries that big landowners only go for cash crops and it is the small farmers who benefit from an increase in support price is flawed and misleading.

According to Dr. Ashfaque Hasan Khan, the small farmers do not produce surplus marketable wheat and they remain unable to benefit from the government procurement centres because of their limited reach and delay in payments.

It is an irony for the country that despite a much-touted agricultural base and good wheat production, the basic food staple remains unaffordable for a vast number of Pakistanis. One of the options, which the government may now consider to beat food inflation and help the poor, is to keep the wheat support prices capped over the next couple of years. This will help gradually reduce the inflationary pressure. However, the ideal stance, in line with the free-market mechanism, would be to allow the market forces to determine prices of every commodity.

But will the vested interest allow the government’s financial managers to follow a sensible course? The record is disappointing so far. (full text).

Links:

L.A. County Tops U.S. Hunger Study;

Sustainable programme needed to tackle food security 96, Prof Sefa-Dedeh;

Insecure about food? Idaho Foodbank offers landmark of local hunger study;

India Journal: How to Achieve Food Security;

Amid Hunger Concerns in Drought-Plagued Kenya, IFAD President Urges Support to Food Security Efforts;

Johann Hari: How Goldman gambled on starvation, July 2, 2010;

Food Speculation The Main Factor of the Price Bubble in 2008, Briefing Paper, by Peter Wahl, 16 pdf-pages, not dated.

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