Wheat Price Policies in Pakistan: Should there be a Subsidy?

In: The Pakistan development review: PDR, Band 31, Heft 4II, S. 1157-1171

Abstract

In the 1980s, Pakistan's wheat policies taxed its producers
and subsidised its consumers. Moreover, the post-rationing, open-ended
system of releases has increased the burden on the government budget.
The Government now faces severe shortages of resources at a time when
human capital and physical infrastructure must be developed and
maintained. This paper reviews wheat price policies in Pakistan
and,patterns of wheat consumption over time, and makes recommendations
for policy changes. Wheat is the dominant rabi, or winter, crop.
However, about half the wheat is grown after cotton. Most of this wheat
is planted late and yields substantially less than it could if planted
earlier because the producer price and profitability of wheat are
depressed by government policies. While cotton prices are also depressed
by the Government, cotton, and in particular a fourth picking, remains
highly profitable, even with new, earlier varieties. CIMMYT studies have
shown that wheatcotton farmers are rational in planting wheat late,
given the prices they receive. 1 The average wheat yield has risen since
the Green Revolution, due to the adoption of HYVs. However, the yields
of HYVs have not risen, After they harvest their wheat, farmers can sell
it to the Government (namely to the Pakistan Agricultural Storage and
Services Corporation (PASS CD) or the provincial food departments) at
the procurement price, or to a private trader at the market price. Thus
two prices prevail in the market at any given time. Wheat moves through
both channels primarily because of differences in quality.