The impending phasing out of the wheat support price in Punjab, mandated by the International Monetary Fund as part of its recent bailout package, marks a critical juncture for Pakistan’s agricultural policy. For decades, the wheat subsidy system has been a double-edged sword, ostensibly designed to support farmers but ultimately entrenching an unsustainable cycle of debt and inefficiency.
The Punjab Government’s decision to abolish its provincial food department in favor of a new autonomous body suggests an attempt to realign agricultural practices with fiscal realities. However, the real question is not just about restructuring but about rethinking the very foundation of our wheat procurement strategy. Since its inception in 1968, the wheat support price has served as a crutch for a system that encourages overproduction and reliance on government intervention.
In 2023, the government set a wheat procurement target of 40 lakh tonnes at a price of Rs3,900 per maund. This translates to an astronomical Rs394 billion required upfront, funded primarily through commercial bank loans at exorbitant interest rates. The burden on the public purse is staggering: with monthly repayments soaring, the accumulated circular debt reached Rs757 billion by 2020. This vicious cycle not only jeopardizes fiscal stability but diverts funds from critical development projects.
Proponents of the subsidy argue it provides security to poorer farmers and ensures cheap flour in the market. Yet, this narrative is increasingly untenable. Research consistently demonstrates that market-driven pricing mechanisms better empower farmers by allowing them to respond to real market signals rather than artificial price floors. A vibrant agricultural sector thrives on competition and innovation, not on guaranteed prices that distort supply and demand.
Moreover, the government’s habit of procuring excess wheat exacerbates inefficiencies. Stockpiling leftover grain incurs significant handling, storage, and transportation costs, further draining public resources. The abandonment of the wheat support price would compel farmers to adapt, incentivizing more efficient practices that could ultimately enhance productivity and profitability.
As Pakistan navigates its economic challenges, abolishing the wheat support price should be viewed not merely as a concession to the IMF but as an opportunity to liberate the agricultural sector from decades of dependency. Embracing market principles will not only foster resilience among farmers but also enhance food security in a more sustainable manner.
The time has come to sever the chains of subsidy addiction and allow Pakistan’s agricultural sector to flourish on its own merits. The future of farming in Pakistan depends on it.
