In reserve, for rainy days
PASSCO may well surpass the 2 million tonne target set for this year
Presently, the wheat procurement drive led by the Pakistan Agricultural Storage and Services Corporation (PASSCO) is in full-swing. The Corporation is buying wheat at 235 centres in the allocated 15 tehsils of Punjab -- with a token presence of 19 centres in Sindh (Khairpur) and 14 in Balochistan (Dera Allah Yar). So far, PASSCO has procured 1.629 million tonnes of wheat against an initial target of 1.5 million tonne.

Grain drain
Wheat production in Sindh suffers because of the usage of a variety called 'Bakhar' that is prone to rust
By Shahid Shah
Growers in Sindh are not able to enjoy the Rs 950 support price of wheat set by the government, as the crop has been hit by a disease. Additionally, the increased interference of the middlemen who pay less to the grower and sell at the support price to the government is a hitch.

Out in the open market
This year, Pakistan's wheat produce exceeds the local demand. But procurement is a big problem
By Aoun Sahi
Pakistan boasts of a bumper crop this year -- mainly due to the timely sowing of 70 percent of seed between Oct 25 and Nov 30, 2008, favourable weather and 16 percent more area under wheat cultivation than last year. The prime minister's timely announcement of Guaranteed Minimum Price (GMP) of Rs.950 per 40kg encouraged the farmers to bring 21.4 million acre more in Punjab under cultivation.

The man in the middle
The role of the middleman is hard to eliminate without the government introducing agriculture reforms
By Waqar Gillani
The story of wheat in a developing country like Pakistan is, in fact, about the 'middleman' -- locally called 'Aarhti' -- who takes advantage of the dismal state of the vast majority of small farmers. Incidentally, the middleman has his way because there is a lack of governance.

Growing issues
The poor farmer is left to suffer at the hands of the wheelers and dealers
Muhammad Riaz, 55, is one of the hundreds of thousands of small farmers from the rural Pakistan who must sow wheat every year, despite myriad of problems he has to face. God knows, the sweltering summer heat isn't one of them.

As the country is in the grip of a worst humanitarian crisis, we decide to focus on wheat because it fulfils a basic human need and people wherever they are need it and not because we thought the other issue was unimportant.

Despite odds like fertiliser and water crisis, we have had a good crop this time. As the weather remained on our side, we increased the area under wheat cultivation by 16 percent, even though the yield itself did not increase. Our neighbouring India has more than double the size of our yield.

One detailed look at the developments that preceded the wheat crop and what lies ahead shows that even a good crop may not solve all our problems. The price of wheat in Pakistan is a lot less than the international market as a consequence of lowering of international prices as well as the increase in the support price of wheat internally.

The government may have to be the major buyer (it already buys almost 60 percent of the crop) but it does not have the resources nor does it have the storage facility. The storage is one real problem that the government will have to contend with; in the past too this has caused some portions of the crop to rot badly. This time too the government is trying to hire private storage facilities on rent. PASSCO has decided to go for open storage for 100 percent of the crop it has procured.

So, decidedly, fixing a higher support price, a wise decision on the part of the government, is not enough. There are so many issues that go with it. We have water issues. We do not have certified seeds and in the case of Sindh, it has cost us heavily this time. We have issues with fertiliser, a major chunk of which is imported and the prices are fixed under the sole profit motive.

Essentially it is an imperfect market where government intervenes only partially. The areas which are under private control are unregulated. So the government which claims to keep wheat supply in its own hands is helpless. It lacks a vision too. So if it supports wheat, like it did this time, and the area under wheat cultivation increases, it affects some other crop which the government may have to import.

So what we need is not individual wheat or rice policies but a comprehensive agricultural policy that precludes the possibility of the crises that we face today. We need to invest in local research in order to reduce our dependence on other countries. As an agricultural country, this is the least we expect from our government.

Staple concerns

The deepening wheat-and-flour crisis could be attributed to our distinct inability to formulate timely and appropriate policies. That's precisely what happened to the country in the last months of the Shaukat Aziz government when some political figures managed to dishonestly obtain a sum of over Rs 6 billion by hoarding -- and then smuggling -- wheat to the neighbouring countries, ignoring the local needs. All this mess was later attributed to poor policy-making.

The country had received a bumper wheat crop of 23.5 million tonnes in 2007, against the target of 22.5 million tonnes. However, taking advantage of the 2002 wheat export and import policy based on free market concept, some political figures succeeded in swindling the government by exporting and smuggling about 2 million tonnes of wheat to neighbouring countries and then importing substandard wheat to earn billions of rupees.

In May 2007, it was decided that around one million tonnes of wheat would be exported to India while the government had already allowed exporting up to 500,000 tonnes to the neighbouring country.

Similarly, over 1 million tonnes of wheat was exported -- rather smuggled -- to Afghanistan, with Shaukat Aziz officially approving the export of 500,000 tonnes to the war-torn neighbour.

Working in utter void, in the absence of a wheat export or import policy, the government failed miserably to overcome the wheat and flour shortage to be inherited by the caretaker set-up led by Muhammadmian Soomro.

As chairman of the cabinet's Economic Coordination Committee, Soomro approved maintaining stability in the wheat and flour prices by banning export of wheat flour to Afghanistan through the private sector.

However, the step failed to overcome the wheat shortage as the flour smuggling to Afghanistan continued unabated.

The next year was even more difficult for the country, under the fledgling coalition government of Yousaf Raza Gilani, as it missed the wheat production target of 23.3 million tonnes by 1.5 million tones. The wheat-deficient provinces of NWFP, Sindh and Balochistan were left with no option but to depend on either Punjab or the imported wheat.

Sindh, which needed 4.8 million tonnes, was allowed to export, without any proper export policy, 2.5 million tonnes wheat to meet its shortfall of 1.35 million.

The NWFP, which had produced little less than one million against its target of 1.16 million, remained the hardest-hit federating unit. The Frontier's wheat requirement stood at about 3.38 million facing a shortfall of over 2.22 million to meet its flour needs, while over 1.2 million tonnes of wheat and flour were smuggled to the neighbouring Afghanistan through the province.

Similarly, Balochistan, another wheat-deficient province, faced a shortfall of one million tonnes as it could produce just 0.86 million tonnes against its annual need of 1.2 million tonnes. Having no storage facility, the province remained wholly dependent on Punjab.

In all, the country faced the wheat shortfall of 3.99 million tones, forcing the government to allow the import of over 2.5 million tonnes of "substandard and low-gluten" wheat.

The price of the essential item resultantly recorded an unprecedented hike as it started selling at the retail rate of Rs 39. In some cases and, in the wheat-deficient districts across the country, the police resorted to baton-charge to disperse the flour seekers.

However, this unmatched agony of the nation failed to move the smugglers and profiteers who continued to make millions through illegal shipment of wheat and flour to India, Afghanistan, Iran and onwards.

As pointed out by former chief secretary Sahibzada Riaz Noor, in April last year, about 1.4 million tonnes of wheat was smuggled to Afghanistan from the NWFP at the expense of its own local needs. In a bid to help ease the flour crisis in Afghanistan, Prime Minister Gilani agreed to allow the export of 50,000 metric tonnes of wheat to its neighbour in May last year amid wheat shortage at home and continuous wheat smuggling to the war-ravaged country.

Making it an excuse for its unlawful measures, the Punjab government continued with its ban on the inter-provincial movement of wheat and flour which aggravated the situation in the wheat-deficient provinces. The ban remained in place for the entire first year of the new government, bringing the flourmills and the flour industry in the wheat-deficient provinces to a grinding halt. But the Punjab government turned down requests of the millers and the directives of the prime minister to lift the curbs.

Contrary to all traditions and norms, the NWFP was not allowed by Punjab to procure one million tonnes of indigenous wheat as it used to do in April every year. It was promised 0.7 million tonnes of wheat through the Pakistan Agriculture Supply and Storage Company (PASSCO).

However, the promise was not fulfilled and the province continued to face wheat and flour shortage till April 18, 2009, when Punjab notified the lifting of ban on the inter-provincial movement of both wheat and flour for two obvious reason -- surplus production and the all-time high support price fixed by the PM well ahead of the crop's sowing season.

In a bid to support the troubled agriculture sector and to boost wheat production in the country, on Sep 29 last year, the PM announced fixing the support price for the current wheat crop at Rs 950 per 40 kg against its old maximum guaranteed price of Rs 625 per 40 kg.

The PM package has seemingly achieved its target as it has impacted the wheat production considerably well. It compelled Punjab to lift the ban on the inter-provincial movement of wheat and flour on April 19. The largest wheat-producing province has now started working out a mechanism to export the surplus wheat. However, the federal government is reportedly not ready to buy any such idea and it has started work on a wheat export policy to siphon off the five million tonnes surplus supply for better purposes. The policy is in the pipeline and the Ministry of Food and Agriculture, the Ministry of Commerce, and Revenue authorities have been holding meetings for the past two months or so with stakeholders to map out wheat export policy as the country has the storage capacity of only 3.5 million tonnes.

According to Naeem Butt, Chairman, All Pakistan Flourmills Association (APFMA), although the support price boosted wheat production, it also turned the idea of wheat export to India and even Afghanistan and other countries infeasible.

Elaborating his point, he says that at the moment there is no wheat export policy of the government and the APFMA, in its meeting with the authorities concerned on Feb 28, sought the formulation of any such policy before April 1.

Butt says the government foresaw wheat production of 24 million tonnes while we had a production of 25 million tonnes against our yearly requirement of 23 million tonnes.

However, he adds, it would be quite difficult to export the surplus five million tonnes of wheat as our rates are much higher in the region. We offer $300 per metric tonnes while the countries we intend to export our product to offer $200 for the same quantity of the commodity.

So far, 7.5 million tonnes of wheat have been procured by different quarters while in total about 11 million tonnes of wheat is still up for procurement.

According to Naeem, in another policy-formulation meeting, held on April 30, a proposal was submitted to the government asking it to drop the idea of exporting wheat and outline a policy for the value-added export of wheat products like maida to Afghanistan, India, Central Asian Republics, UAE and other countries where we can compete.

He says a summary in this connection has been sent to the prime minister whose decision on the same is being anxiously awaited.

Independent observers opine the emerging situation in Fata and Malakand Agency, in the wake of the security forces' operation which among other necessities has raised the demand for flour to be distributed to about 2 million affectees, necessitates a review of the measures taken so far by the stakeholders before a wheat export policy is formulated.

Presently, the wheat procurement drive led by the Pakistan Agricultural Storage and Services Corporation (PASSCO) is in full-swing. The Corporation is buying wheat at 235 centres in the allocated 15 tehsils of Punjab -- with a token presence of 19 centres in Sindh (Khairpur) and 14 in Balochistan (Dera Allah Yar). So far, PASSCO has procured 1.629 million tonnes of wheat against an initial target of 1.5 million tonne.

"We are hoping to surpass the 2 million tonne target this year. An estimated 0.204 million jute bags are still with the growers. We are also expecting 0.45 million jute bags from the manufacturing factories in the next two weeks," says Abdul Majid Chaudhry, General Manager PASSCO, while talking to TNS.

He adds that the main role of the Corporation is to facilitate the federal government in providing food security at the national level. "Wheat is procured by us at the support price fixed by the government and then supplied to the deficit areas such as Balochistan, NWFP, Northern Areas, Azad Jammu & Kashmir, defence forces and international agencies, including World Food Programme."

Entrusted with the responsibility to provide food security, the Pakistan government set up PASSCO, a federal agency, in 1973. Its main role is procuring wheat and other agricultural commodities like gram, paddy/rice, onions, sunflowers and potatoes. Besides, says GM PASSCO, "We intervene in the open markets to ensure that farmers receive the support price for their commodities."

This season, the open market price of 100 kg of gram was approximately Rs 2200, "but we intervened, and assured farmers to buy the produce at the minimum price of Rs 2500 per 100 kg. Within days the price in open market increased to Rs 2700 per 100 kg. So, the corporation also works as support price implementing agency and in the process tries to minimise the role of middleman," reveals Chaudhry.

Additionally, PASSCO maintains the strategic reserves of wheat to meet any emergent situation. "We store the safeguard stock at the centre to deal with a form of food crisis. The quantity of this strategic reserve is variable and is decided by the federal ministry of food and agriculture."

This year, the main problem faced by PASSCO is the limited storage space. "In the last few years, around 80 percent of the total wheat procured from Punjab used to be stacked in the open and covered by tarpaulins and polythene sheets. But this year more than 99 percent of the procured wheat is kept in the open because the godowns are filled with 3.5 million tonnes of rice."

-- Aoun Sahi

Growers in Sindh are not able to enjoy the Rs 950 support price of wheat set by the government, as the crop has been hit by a disease. Additionally, the increased interference of the middlemen who pay less to the grower and sell at the support price to the government is a hitch.

The disease, known as 'rust', has attacked the wheat variety called 'Bakhar', causing great damage to the grain. In some cases, the grain is missing and only the weeds are to be found in the harvest.

Bakhar is a Punjabi variety, sown before the local Sindhi varieties, but it is vulnerable to the atmosphere of Sindh. Dealers from Punjab sell it to growers in Sindh on credit as well as commission basis, says Abdul Majeed Nizamani, President Sindh Abadgar Board.

Bakhar was sown in more than 50 percent of the land in Khairpur and Naushero Feroze districts. It was also sown in Ghotki and other upper-Sindh districts as well as parts of Balochistan. Progressive growers had opposed it, he adds.

The government has revised its target to 23.5 million tonnes from 25 million tonnes for 2008-09, but the disease is likely to hamper that, especially in Sindh.

On the other hand, unavailability of urea is likely to affect the production of other local varieties. Sindh had a sowing target of around one million acres. The growers lauded the government's move to increase the produce by increasing the support price to Rs 950 per 40 kg, but they remain worried as last year's bumper crop of sugarcane and this year's paddy have paid little dividends and the support price is not maintained.

Pakistan's total wheat consumption is around 18.75 million tonnes while the production last year was nearly 18.2 million tonnes. Hoarding, smuggling and production of bi-products commonly cause wheat shortages with the result that the prices of wheat flour shoot up.

Last year, as per Pakistan Agricultural Resource Centre, the country's wheat production was 23.5 million tonnes.

Besides, the middlemen have entered into the wheat procurement business and are buying wheat from the growers at rates lower than those fixed by the government at Rs 950/40 kg as support price.

The government of Pakistan recently revised the target from 25 million tonnes downwards -- to 23.5 million tonnes -- but Punjab increased its procurement target. Currently, Punjab has set the procurement target of 4 million tonnes. Initially, it was set at 3.1 million tonnes and then gradually increased to 3.5, 3.7, 3.8, and now 4.0 million tonnes.

A Sindh Food department official tells TNS that Sindh procured 1.07 million tonnes against a target of 1.2 million tonnes. "We shall be meeting our target in the next 15 to 20 days."

So far, Sindh has no plans to raise the procurement target. Director Food Sindh, compared with Punjab, says there were fewer complaints by the growers against the middlemen and their problems were resolved in due time. "We'd give Rs 30 for the old bags, too, if someone had not received the new 'empty' bags by the food department."

With regard to 'rust' that attacked the 'bakhar' variety, he says the department never got a single complaint. However, he concedes, some variety was lost in the wait of the grain.

According to market sources, the middlemen are buying wheat at around Rs 870/40 kg at some places in Sindh and at around Rs 900 in Punjab against Rs 950.

Pakistan boasts of a bumper crop this year -- mainly due to the timely sowing of 70 percent of seed between Oct 25 and Nov 30, 2008, favourable weather and 16 percent more area under wheat cultivation than last year. The prime minister's timely announcement of Guaranteed Minimum Price (GMP) of Rs.950 per 40kg encouraged the farmers to bring 21.4 million acre more in Punjab under cultivation.

The government revised the target of 25 million tonnes to 23.3 million tonnes. "Even though we are producing more than our demand, it still reflects negligence on the part of the policy makers," Ibrahim Mughal, Chairman Agriforum Pakistan tells TNS.

He adds that the actual area under wheat cultivation this year was 22.6 million acres, 1.2 million acres more than what the government expected. However, despite the best weather conditions and an increase in the cultivated area, we have not been able to produce more than 25 maunds per acre which, by any standard, is very low."

The government's initial wheat procurement target country-wide was 5.7 million tonnes (3 million tonnes from Punjab food department, 1.5 million from the Pakistan Agricultural Storage and Services Corporation (PASSCO) and 1.2 million tonnes from Sindh). "The initial target of 5.7 million tonnes would not have met the demand of 64 million people living in cities or those who consume bagged flour. At least 8 million tonnes of wheat is required to meet their demand. So, the government must double the wheat procurement target. Also, this year the private sector refused to procure wheat due to the high price," he says.

"There are no serious buyers in the market. Therefore, at least 50 percent of farmers in my area are unable to sell their produce. The officials at the food department and PASSCO procurement centres have already met their targets and are not interested in procuring more wheat. And the price in the open market is comparatively low at Rs 820 per 40 kg," Muhammad Ismail Malik, President Farmers Development Association, Ahmadpur Sharqia, Bahawalpur tells TNS.

A majority of growers are forced to store their stock in private stores -- and are hoping to export some quantity. Resultantly, a large number of tractor trolleys and containers have lined up outside wheat procurement centres in Bahawalpur.

For the last month or so, Punjab's food departments have been unsuccessfully trying to make the procurement process easy for the farmers. "I've been waiting for my turn for the past five days," says Muhammad Ghani, 45, a farmer from Nurpur, Bahawalpur.

"It may take another three days to sell my produce," he says, pointing to the container full of wheat parked on G T road. "Farmers who know influential politicians are able to sell their wheat in a day or two. At this point, I'm even willing to bribe the officials."

According to a survey conducted by Punjab Lok Sujag and South Asia Partnership, farmers of Punjab have over 10 million tonnes of wheat available for sale from a total of 20 million tonnes produced. This is a quarter more than the procurement target of the two government departments -- Punjab Food Department and PASSCO. Although the food department has raised the target from 4 to 6 million tonnes and federal government's PASSCO has increased to 2 million tonnes, these departments are already overburdened with lack of finances, gunny bags, storage capacity and human resource, the survey states.

The survey further stresses that even if the departments fully meet their present targets, around two million tonnes of wheat will still be available for the private buyers "who are in no mood to offer the farmers the support price fixed by the government".

Abdul Majid Chaudhry, General Manager, PASSCO, says the corporation has procured more than 1.5 million tonnes from the 15 tehsils of Punjab. In the past, it bought a maximum of 0.8 million tonnes of wheat from here. "However, the Punjab food department that has a presence across the province had procured only 4.5 million tonnes till May 14. Rather, they have adopted a go-slow policy -- and are instead forcing the corporation to procure maximum amount of wheat."

He admits that farmers are facing problems at the procurement centres but "we are trying to do something about it."

Irfan Elahi, Secretary Food Department Punjab, claims the department is trying to facilitate the farmers by making the wheat procurement process hassle-free and quick. "More than 70 department employees have been suspended for being negligent and criminal cases have been registered against 24 officials." Also, he says, the department is "committed to procure the wheat till the last grain in Punjab." He adds the department was also considering exporting the surplus.

The wheat price in Pakistani market at present is approximately 100 US dollars higher than the international market. Yet, the federal government and the Punjab government are planning to export surplus wheat this year.

Experts speculate that the international price of wheat will fall. This, they say, is the main reason why the private buyers are avoiding procuring wheat from the open market. According to a report of International Grains Council (IGC), the wheat stocks across the world are estimated to touch an eight-year high of 171 million tonnes in 2009-10. The price of the commodity in the international market at present is not more than 225 US dollars per tonne while the rate of Pakistani wheat is around 332 US dollars per tonne.

Interesting, Pakistan is still in the process of importing wheat. According to an official of Punjab Food Department, vessels carrying 170,000 tonnes of wheat reached the Karachi sea-port last week. "125,000 tonnes of wheat from Ukraine will reach Karachi in another day or two," he says.

These consignments were ordered to meet the local wheat shortage three months ago at more than 350 US dollar per tonne."

"The government must first meet the local demand of 21 million tonnes and another 1.5 million tonnes for sowing next year, before it decides to export. Additionally, Pakistan needs 1.0 to 0.5 million tonnes for poultry and cattle feed. Afghanistan will need between 0.5 and 0.6 tonnes, which will either be exported or smuggled from Pakistan," says Ibrahim Mughal.

According to him, Pakistan will have no more than one million tonne of wheat in surplus which should be kept as buffer stock. "The government should rather export wheat products and bakery products, because these products are likely to fetch a better price."

The story of wheat in a developing country like Pakistan is, in fact, about the 'middleman' -- locally called 'Aarhti' -- who takes advantage of the dismal state of the vast majority of small farmers. Incidentally, the middleman has his way because there is a lack of governance.

The middlemen act like private investors who control and manipulate the whole wheat market -- every single year. The farmers are an easy prey because they don't have enough resources to be able to fully take care of their crops.

In villages, the middleman's role has a social -- and moral -- significance in that he can buy the entire crop of small farmers on a mere verbal commitment because he has been a financier of sorts who helps the farmer from sowing through harvesting the crop and also on other occasions.

"Sometimes, this is a mutually agreed role and sometimes it amounts to an exploitation of the farmer because he doesn't have resources," says Muhammad Rasul, a farmer from district Okara.

The middlemen comes to the farmers' help in times of need -- for instance, when the government is not offering help -- but they get the fruit of their 'investment' by getting the wheat from farmers on their own set rates instead of rates fixed by the government, "this year at Rs 950 per maund."

The middleman hardly ever pays the actual price of wheat to the farmers, Rasul adds. Sometimes, the farmers have less storage capacity and are forced to sell their wheat as soon as possible on lower rates.

In Punjab, the largest wheat growing province of the country, this role is becoming increasingly dominant. For its part, the government is making efforts to bring it to a minimum level.

Irfan Elahi, Secretary, Food, Punjab, tells TNS, "The government has increased its wheat collection target from four million tonne to six million tonne this year."

He says it is difficult to completely eliminate or regulate the middleman 'phenomenon'. However, the government does offer easy loans with lower interest rates to the farmers at the time of sowing, through agriculture banks.

Justifying the role of the middleman, renowned economist Kaiser Bengali says, "He is the sort of distributor who has a necessary part in the production of economy in a country like Pakistan.

"This role cannot be eliminated. Some people dub it as exploitation, but this is just because of the imperfection of the market.

"We don't have roads, information network, and infrastructure in villages. When the farmer has no option, he will rely on the investor and distributor like the middleman to get seeds, fertilisers and transportation facility to sell their product.

"It is not right to disregard the middleman because distribution is a necessary part of economy. This happens in the monopolistic market situation. You will find a bigger role for the middleman in south Punjab than in central Punjab because in remote rural areas the middleman is connected with landlords like a chain," says Bengali.

The solution, according to him, lies in improving governance, bringing agriculture reforms and facilitating the farmers by the government.

Muhammad Riaz, 55, is one of the hundreds of thousands of small farmers from the rural Pakistan who must sow wheat every year, despite myriad of problems he has to face. God knows, the sweltering summer heat isn't one of them.

Riaz tells TNS how "a true farmer will always like to cut the crop with his own hands. He is used to working in the hot weather and it doesn't bother him."

A resident of Chak 19, Fordwa, of tehsil Hasil Pur, district Bahawalpur, in South Punjab, and married with two kids, Riaz says he owns four acres of land where he sows wheat. But, his yield this year -- 156 maunds -- doesn't quite compare to his brother's 236 maunds from an equal piece of land.

The reason, Riaz says, is the fact that his brother is better off financially and could, therefore, "afford better-quality seed which I couldn't because it can only be got in the black market and at very high rates".

Riaz's other major concern is non-availability of water, "In the entire process of sowing, water is the most essential part. Everything including fertilisers and seeds would go to waste if the crop is not watered properly."

The next thing a farmer has to do is to get hold of 'Fard' -- the official receipt of land claims -- from the revenue department's 'patwari' (a lay official) against which they can get fertilisers such as urea. Sadly, the poor farmer cannot achieve this without having to grease the palm of the patwari -- the key figure -- in the process.

Then there is the issue of the availability of 'bardana' (gunny bag). The bags are already distributed among the ruling political bigwigs, their supporters and favourites, leaving the farmers to suffer and grumble.

"Everything is politically and socially maneuvered," Riaz says, lamentingly. "That's why, this time over, I am not going to sell my wheat but I'll save it for my family."

He further says that even if someone plans to sell his wheat, the government's buying markets are far away from the rural areas and transportation also costs too much. Most of the time, the farmers are trapped by middlemen selling their crops at relatively lower prices in order to rid themselves of all problems and get money on the spot.

-- Waqar Gillani