2004 May 03 Monday
Pakistani Provincial Governments Wrestle With Pesky Market Forces

The Punjab provincial government in Pakistan is preventing shipment of wheat out of the province and between districts in the province.

The Punjab government says it stopped traders in 18 out of 34 districts from selling wheat in a bid to prevent hoarding and ensure prices were not inflated, but the move has angered officials of Balochistan, the North West Frontier Province (NWFP) and Sindh. The government imposed a similar ban last year but lifted it after protests from the other provinces. Punjab Food Secretary Shahid Hassan Raja explains, "The other provinces should support Punjab's decision because it is in their best interests. Otherwise, they will have to buy wheat for US $206.9 to US $241 per metric ton, but now the Punjab government will be able to provide them wheat for around $151 per metric ton."

A recent decision by Pakistan's central government to prevent the import of Australian wheat may have been motivated by a desire to make profits from the resulting price run-up.

KARACHI: The rejection of 15 lakh tonnes of Australian wheat by the Ministry of Food, Agriculture and Livestock (MINFAL) — a decision that skyrocketed the flour prices in Sindh to Rs 20 per kg and earned at least Rs three billion profit to wheat black marketers in late February — is now shaping into a major scandal for the Jamali government, according to interviews with related officials, informed sources and documents available with this correspondent.

The Islamic religious party that is in control of the North West Frontier Province demands that the central government supply it with wheat.

PESHAWAR, May 1: The Jamiat Ulema-i-Islam (F) has held Punjab responsible for wheat crisis in the country and asked the Centre to meet the NWFP flour requirement on propriety basis.

Nearly half of the NWFP flour mills have stopped operating due to lack of wheat.

NWFP also grows wheat but its total produce can hardly meet even 25 percent of its requirement. It is therefore showing signs of extreme nervousness over Punjab’s policy of not allowing its wheat to be exported out of the province. One NWFP minister is so angry at this that he has threatened to stop the supply of hydel power to the Punjab if the latter does not lift the ban. Out of a total of 260 flourmills in the NWFP, 100 have closed down because of insufficient inflows of wheat. The NWFP government has tried to assure Punjab that it will not allow the smuggling or hoarding of wheat if Punjab allows it to buy wheat. Balochistan, too, is up in arms. Nawab Akbar Bugti has also threatened to cut off gas supply to the Punjab if it persists in its refusal to supply wheat to Balochistan.

Note that the Punjab government is afraid that if it allows unrestricted selling of wheat to NWFP then at least some of that wheat will be exported to Afghanistan. Of course if that happened it would generate more money for Pakistani farmers giving them an incentive to invest to increase production. Well, can't have that. At the same time the federal government is trying to block import of foreign wheat. In the minds of central planners both imports and exports can be bad at the same time.

Some commentators in Pakistan claim that the central goverment needs to tame those pesky market forces.

Analysts say that a harvest of 20 million tonnes is sufficient for the country’s requirement provided the government can plug smuggling through porous borders with Afghanistan and central Asia. It is also required to evolve a strategy aimed at countering the moves of ‘market forces’ in an effective and meaningful way.

How many other countries mess up their agricultural markets in this fashion so routinely and so drastically? It sounds like the farmers of Pakistan can grow enough wheat to satisfy their markets. But the government intervention surely must be holding back the modernization of Pakistani agriculture. The uncertainty and price fiddling caused by government intervention has to serve as a disincentive for investment in agricultural modernization.

The United States has an assortment of agricultural barriers that seem pretty mild by comparison. For instance,milk products regional markets are structured around subsidies. But it is my understanding that shortages in one region can be met by shipments from another region. There are not barriers to trade so much as barriers to production and subsidies for production. Ditto for the US and peanut growers.

Share |      By Randall Parker at 2004 May 03 08:19 PM  Economics Political

farrukhsaeed said at January 23, 2005 10:52 PM:

hello ,
my name is farrukh saeed . i want to know daily prices of punjab's wheat in karachi...
thanks alot

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