Agriculture is pivotal to Pakistan’s economy, contributing 23 per cent to the gross domestic product (GDP) and employing 37.4pc of the labour force. With 70pc of the country’s exports directly or indirectly linked to agriculture, disruptions in this sector can have profound economic impacts. Recent protests by farmers, sparked by governmental policies and market conditions, have thrown the sector into turmoil, exacerbating the ongoing challenges of inflation and low foreign reserves.

Here’s a deep dive to make sense of what’s going on.

Why are the farmers protesting?

The unrest began after the Punjab government slashed its wheat procurement target by roughly half, saying that there was a carryover stock of 2.3 million tonnes already available. In this case, carryover means a stock of wheat available in storage facilities.

This caused an uproar among farmers as market prices plummeted to between Rs3,000 and Rs3,100 per 40 kilogrammes — significantly below the Rs3,900 per 40kg minimum support price (MSP) set for wheat for the 2024-2025 season — in regions such as Punjab’s Pakpattan and Sahiwal. This disparity prompted major agricultural unions, including the Pakistan Kissan Ittehad and Kissan Ittehad, to urge farmers to hold on to their produce rather than offload it at the current market price.

Additionally, the government continued to avoid procurement, explaining that the grain was carrying “higher moisture than normal due to rain”, adding anxiety among the already forlorn farmers.

Adding fuel to the fire, the government also changed the procedure for applying to sell wheat to the food department by launching a mobile application — instead of the traditional method of paper applications — to procure gunny bags used to pack and transfer wheat to procurement centres — without realising that farmers in Pakistan are not tech-savvy and perhaps this was not the right time to force them into learning new tricks.

Khalid Khokhar of the Kissan Ittehad said that the farmers’ demand of the government is to stop excessive imports of wheat. He accused the caretaker government of causing a loss of over Rs400 billion to the national exchequer by importing $1 billion (approximately Rs277 billion) worth of wheat, and that too, amid a severe foreign exchange shortage.

“I cannot even describe how these farmers are suffering right now,” Khokhar said at the time.

Government’s response

The blame game in this “scandal” is quite complicated. Punjab Food Minister Bilal Yasin “claimed” in the provincial assembly that the caretaker government was responsible, while also promising a fact-finding investigation. PTI, the main opposition party, also accused the caretaker government of “corruption” for allowing wheat imports but neither offered any evidence.

However, the opposition — Jamaat-i-Islami (JI) and PTI — have also lashed out at the Punjab government for not purchasing wheat from farmers, with JI Emir Hafiz Naeemur Rehman warning that if the provincial government persists with its “anti-farmer” stance, his party will stage a sit-in outside the Punjab chief minister’s office.

In her government’s defence, Punjab Chief Minister Maryam Nawaz claimed that by not purchasing wheat her government has plugged a channel of massive corruption reported in wheat procurement every year, denying altogether that any wheat crisis existed in Punjab.

Meanwhile, on the Khyber Pakhtunkhwa side, provincial Food Minister Zahir Shah Toru announced the launch of an online app for wheat procurement aimed at facilitating farmers and suppliers, adding that transparency and merit would be upheld throughout the wheat procurement process.

Additionally, on May 14, Yasin, the Punjab minister, said that the government cannot procure wheat from farmers under the prevailing circumstances, as the funds to be spent on the wheat purchase would go into the pockets of the middlemen who have already bought most of the grain, curbing hopes of increasing the target — when the government initially hinted that it would raise the wheat purchase target.

In all, the Punjab government continued to play down the protests, with its spokesperson Azma Bukhari claiming that the police had not taken any protest leader into custody from anywhere despite more than 250 farmers’ arrests reported in Lahore alone.

Key actions

The “wheat import scandal” has led to calls for an investigation into the 3.2m tonnes of wheat imported during the tenure of the caretaker ministry, which was led by the then prime minister Anwaarul Haq Kakar.

After an initial delay, incumbent Prime Minister Shehbaz Sharif ordered a committee to be formed to investigate the matter.

The probe should have focused on who benefitted from the $1.1bn import of wheat the entire year and why the government felt the need to import when wheat is expected to be a bumper crop in the country this year. However, it appears that the committee’s mandate is limited only to investigating imports during March, with a recent Dawn editorial questioning why the prime minister does not want to probe the role of caretakers in creating a crisis that impacts his own political party.

The only other party that stands to lose more are the farmers. The carryover inventory and the delay in procurement by the Punjab government mean that the farmers’ produce is being sold at a much lower price than anticipated. Understandably, thousands of wheat farmers have joined the protest against the government.

Dawn.com spoke to an agriculturist in Sindh who said that poor farmers were the most vulnerable party to this. Despite having produced a good quality crop this season, they would suffer due to the excess supply as the Punjab government has stopped procurement because of carryover inventory — something he said the middlemen can take advantage of.

The committee set up by the prime minister was reportedly also mandated to investigate why the interim government — tasked with everyday tasks until the elections — decided to import around 3m tonnes of wheat.

It was initially reported that Kakar, ex-finance minister Shamshad Akhtar and then-Punjab chief minister Mohsin Naqvi (now the federal interior minister) were summoned by the committee. However, Information Minister Attaullah Tarar denied any such reports, saying: “No person was called or interviewed, as is being reported in the media.”

What are the former caretakers saying?

Kakar, the former interim PM under whose government the aforementioned wheat was reportedly imported, defended the decision and claimed that it was “for the good of the consumers”.

Now a senator, Kakar told Dawn that he was aware of the wheat import issue based on Food Security Ministry projections, adding that his government valued private sector wheat imports, as he denied allegations of corruption.

Meanwhile, Naqvi said the investigation will exonerate the caretaker Punjab government.

“The Punjab government was and is not concerned with wheat import. The province procures grain from the local farmers and not from abroad. The import decisions are taken by the federal authorities,” he told a press conference on May 6.

Naqvi said that in his personal opinion, the caretaker government did not act in bad faith on the import decision.

He claimed that “some people” might be desirous of instituting an inquiry against him, adding that nothing should be expected from such a probe.

Policy failure?

Adil Mansoor, an agriculture researcher in Karachi, told Dawn.com that the wheat crisis was the result of numerous policies’ failure, calling it a “multipronged problem” which needed to be tackled with an all-hands-on-deck approach.

He highlighted the initial delay in procurement by the Punjab government, who had led the farmers to believe they would procure their produce at the standard price. However, the provincial government “failed to keep their end of the bargain” due to ballooning debt servicing and carryover inventory.

“Over the past few years, the government’s procurement system has been inefficient,” he added.

“Farmers sow wheat in October, and when they sow wheat they need clarity in what profitability is going to look like,” he said, elaborating that the government led the farmers to believe that it would be business as usual, however, the delay and freezing of procurement prices post-election led to farmers incurring losses.

“This is a betrayal of confidence in my opinion,” Mansoor said, adding that while a commitment may have not been legally binding, it did blindside the farmers.

However, he said it would be wrong to put the entire blame on the import of wheat, adding that the imports are not a significant chunk of the wheat basket.

“The government set a production target of 32.12m tonnes,” he recalled. “Pakistan’s production has come at 29.5m tonnes, which means — inclusive of the imports that have come in — it is not enough to cause a collapse in the market prices the way they have.”

He agreed that a small group did make a profit, but added that “had the government been more forthcoming with the farmers and played the role of a stabiliser for market prices, this crisis would not have reached the point it has.”

So how does the government procure wheat?

The government’s procurement is said to be set up to help smallholders from being exploited. That is to say, the government sets a minimum support price for a product.

The reason for the procurement — often relying on unsustainable commercial borrowing from banks at high interest — is usually justified in the name of national food security, especially when the announced wheat support price exceeds the international price, as was the case in 2024.

This is where the problem comes in.

Khalid Saeed Wattoo, a farmer and development professional, said that the system is set up in such a way that the government and farmers are often at odds with one another.

Moreover, the government’s “inability to set a sustainable wheat support price policy due to the cumbersome and corrupt procurement system harms farmers’ profits and national agricultural productivity”.

Mansoor explained to Dawn.com that several inefficient policies by the government tend to create issues from time to time. This time around, the wheat crisis was created as the government essentially made the local produce uncompetitive in front of the international prices.

Impact on farmers

According to Khalid Saeed Wattoo, the impact of the crisis on the agricultural front may see the cultivation area for wheat decrease and the area for alternatives increase.

“Overall, the farmers’ income will decrease because other alternatives are not as lucrative as wheat,” he said.

“And when profitability goes down for the farmers, they will have less input for the next harvest,” Wattoo said, adding that the agricultural sector was inextricably linked to poverty alleviation.

“It should be emphasised that more than 60pc of the country’s population is still based in rural areas and heavily dependent on agriculture,” he added.

Wattoo said that the farmers always compared their options at the start and took into account the cost structure, aiming for lucrative options, adding that the low market prices would result in farmers switching crops for the next years.

Instead of the knock-down rates, he said, the farmers were expecting more this year because the cost of inputs such as diesel and pesticides has risen. “They were expecting that the rates will go up.”

He added that even the farmers who usually did not grow wheat did so this season. That, and favourable weather conditions, resulted in an increase in output by 15 to 20pc from the previous year.

Impact on consumers

Wheat consumers fall into two categories: rural and urban consumers, and drawing a difference, according to Wattoo, is necessary as many people assume all rural folks are farmers.

The landless and poorer segment of the rural community would want wheat to remain cheap. However, a trend in rural Punjab, he noted, was that they participate as labourers during harvest season and opt for part of the crop as payment instead of wages.

“However, when they have to pay for the wheat [themselves], they would want it to be cheap,” he said.

Wattoo said that urban consumers would also want wheat to remain cheap, adding that its consumption among South Asian nations such as India and Pakistan has risen.

This was backed by the findings of a report titled “Global trends in wheat production”, which states that wheat consumption is more pronounced in countries such as India, China and Pakistan.

Apart from the rising consumption, there are several other reasons for food inflation, including global factors such as Covid-19 and Russia’s invasion of Ukraine, which caused global supply chain bottlenecks, according to the Food and Agriculture Organisation (FAO).

“One thing that remains to be seen is whether consumers will be able to benefit from the cheap rates all year long or only until flour millers and middlemen get their hands on the produce and “artificially hike up” prices by controlling the supply,” Wattoo added.

Middlemen and private sector dynamics

Mansoor said that abnormal profits were made by the private sector between September and March, when wheat was imported around Rs3,200 to Rs3,425 per 40kg while the wholesale price in local market was Rs4,500 as late as April.

Wattoo noted that middlemen may be the ultimate winners in the equation as they are in charge of rerouting the produce for the farmers and getting hefty commissions.

This is so because, in Pakistan, farmers do not sell their produce directly in the open market. The middlemen purchase their produce by paying a little higher price than the prevailing price — although in books alone.

Middlemen continue to act as the custodian of the produce and as a result, all procurement happens through them, while the payment from procurement agencies also reaches the farmer through them. This indirect system of payment puts the cash firmly in the hands of the middlemen, which they leverage to exploit the farmers.

Impact on the economy and market

Wattoo said that if middlemen and flour millers choose to disrupt market prices, the government does not have sufficient stock to play the role of a stabiliser.

“The government used to have a sufficient stock in place which it used to play the role of a price stabiliser,” he recalled. “When prices used to increase, the government would release their stock in the market to counter it.”

However, he added, the current stock with the government may be enough for strategic reserve, but it is not enough to play the role of a price stabiliser.

Wattoo said the Punjab government’s decision to stop procurement citing carryover inventory was a “lame excuse”, adding that the $1.1bn spent on wheat import from countries such as Ukraine could have helped local farmers far more in countering the economic impact.

While much of the damage is already done, the government, ahead of a new round of impending protests, needs to establish itself as a credible stabiliser of the market and an ally of the vulnerable smallholders instead of being stuck in the blame game mindset.