Is there a solution to the wheat crisis?

February 2, 2020

Maladministration allows certain people to make a quick buck before the government machinery moves in to address the problem

The rising prices of flour and disappearance of the commodity from many parts of the country require corrective action by the government. The blame game between different tiers of the government will not solve the issue. Policymakers and analysts should look at the issue from a food security perspective rather than as a problem that only has administrative and logistical aspects.

In a country where 39 percent of the population is poor (roughly 80 million, not counting the 20 million who have fallen into poverty during the last 2 years); 20 percent are deprived of all aspects of health, education and living standards; 68 percent of the households are unable to earn enough to secure nutritious diet; three quarters of the population depends on wheat flour alone for 72 percent of their daily caloric intake; where annual per capita wheat consumption is 124 kgs — one of the highest in the world — an unprecedented increase in wheat flour prices in recent weeks is indeed a big blow.

The average per capita caloric supply during the last decade has improved. It stands at 2430 kcal, above the minimum threshold of 2,350 kcal. Increased production of cereals has improved average daily caloric intake of Pakistanis marginally beyond the recommended daily intake of 2,350 kilo calories (kcal) per adult equivalent. However, the fact remains that among the urban poor, the averages intake barely touches the 1,786 kcal (undernourishment level).

The rural poor are slightly better off with an average intake at 1848 kcal. Yet since 55 percent of the rural population is poor, the caloric deficiency is a serious burden for the rural population as well.

Another approach to look at the issue arising due to unprecedented hike in wheat flour prices, which is a more realistic approach, is the percentage of household monthly expenditure on food. Households with lower incomes tend to spend a higher percentage of their monthly expenditure on food than those with high incomes.

Across Pakistan, on average a household spends 49 percent of the total monthly expenditure on food. Thus, poor households — and those which spend a higher proportion of their monthly expenditure on food — are particularly vulnerable to food price inflation which is the prime shock affecting food security in the country. It’s pertinent to note here that a majority of households in Pakistan are market-dependent to meet their needs: 79 percent for cereals, 92 percent for vegetables, 50 percent for milk and 70 percent for meat intake.

According to a study, jointly commissioned by the Planning Commission and World Food Programme, malnutrition is costing roughly 3 percent of the GDP. The study also points to the fact that the cost of malnutrition in Pakistan is 704 billion rupees annually.

This government, too, often highlights the challenge of malnutrition in its policy statements yet it has done very little to overcome it. One analysis shows that Pakistan needs an estimated Rs193 billion investment in 7-8 years to overcome the challenge of malnutrition. The money can be made available if the government decides to slash the annual direct and indirect subsidies provided to the agriculture sector, which amount to Rs450 billion, by approximately 10 percent.

Wheat is the staple food in Pakistan, cultivated on 60 percent of the agricultural area during the rabi season. It accounts for an estimated 10 percent of the value-added in agriculture and 2 percent of the GDP. The production during the last three years has fluctuated, registering the lowest during 2018-19. However, this was enough to meet the national needs by combining strategic reserves (which according to USDA Grain Report were between 2.2 to 3 million metric tonnes).

The decision to import wheat in the wake of the crisis on zero duty, therefore, has come under heavy criticism because people want to know the status of wheat reserves lying with PASSCO. What will happen to the local produce if imported and local wheat lands in the market at the same time?

It’s important to know that the government buys a quarter of the total wheat produced in a year driven by both food security and market intervention objectives followed by the private sector which procures 15 percent of the production; a small fraction is used for making animal feed and the remaining (about 58 percent) produce farmers retain to meet their household needs and for seed.

We must realise that the flour crisis is not the first of its kind. Such crises are mostly cyclical and so have been their administrative solutions which allow people and communities with vested interests in food shortages to make some quick bucks before the government machinery moves in to address the problem. These crises, indeed, have their origin in the fact that the state has left the food markers at the mercy of arhtees (middlemen and commission agents) just as it has handed over the economic management to the International Monetary Fund (IMF).

Without replacing this mechanism with something more helpful in ensuring food security and the nutritional needs of the poor, no government will ever be able to find a permanent solution to the problem.

The writer works at Sustainable Development Policy Institute (SDPI) and can be reached at [email protected] Views expressed by the writer are his own and do not necessarily reflect SDPI’s official stance

Is there a solution to the Pakistan's wheat crisis?