ISLAMABAD, Aug 25: In a major policy shift, the government has decided to link the support price of two major crops — wheat and sugarcane — to sliding production cost and increasing yield per acre as incentive. This will do away with the existing policy of ‘sustaining poor farmers at subsistence level’.

This has been approved by Prime Minister Shaukat Aziz on the recommendations of a high-level committee on core inflation led by Industries and Production Minister Jahangir Khan Tareen.

It comprised ministers for food and commerce, the State Bank governor, the Planning Commission deputy chairman and a representative of the finance ministry.

In the short-term, the government has decided that the prime minister will ask the four chief ministers to release wheat to only the functional flour mills at Rs470 per 40 kg ahead of Ramazan in liberal quantities, otherwise another increase of Rs0.50-1 per kg will take place before the holy month.

Currently, about 4.7 million tons of wheat stocks are available with the government, much lower than the last year’s 6.5 million tons.

The government has also decided to increase the wheat price on a bi-monthly basis from November onwards, according to official documents available with Dawn.

The committee, which mainly focused on four major items having greater impact on food prices — wheat, sugar, livestock and pulses — has reached the conclusion with consensus that imperfect markets, speculation and hoarding, lack of information of farmers and lack of focus by the government (provincial and federal) were major causes of inflation.

Officials told Dawn that a long-term policy had been approved by the prime minister and would be announced soon after a formal approval by the Economic Coordination Committee (ECC) of the cabinet.

The committee believes that the provision of support price for wheat has a direct bearing on food inflation and planting levels of other crops.

Hence, it should be clearly defined what objectives the support price achieved at the time of each revision and how it cost other crops to create a balance and make farmers internationally competitive.

The committee stipulates that main policy objective henceforth will be to ensure farmers profitability so that the country remains self-sufficient and competitive in the international market. To achieve this objective, the support price will be provided for productivity enhancement or higher yield per acre and reduction through efficient farming practices.

The ministry of food and agriculture will formulate productivity and cost reduction plans in collaboration with the provinces and monitor its implementation, which will include lesser ploughing and sowing costs and lower water requirement techniques.

In addition to setting volume targets, the Federal Committee on Agriculture (FCA) will also set yield and cost targets. The committee deplored that yield per acre had increased from 1,080 kg in 2001 to 1,108 kg in 2007 as their cost at the farm level increased from Rs246 per 40 kg to Rs444.

Likewise, marketing expenses increased from Rs10 to Rs16 per 40 kg in six years and cost at the mandi stage surged from Rs256 per 40 kg to Rs460. This could not be allowed to continue and hence the average yields should be substantially increased, the committee said.

It added that the farmers’ profitability balance should be created with other crops so as not to create shortages in production of other crops.

It has been decided that wheat would be considered as a benchmark for other food items, by procuring the available marketable surplus at a support price. Likewise, the issue price of wheat by Punjab and Sindh will be determined in the overall framework of food inflation.

SUGARCANE: The committee has concluded that sugar mills should start crushing on October 15 in Sindh and November 1 in Punjab and the NWFP, but provincial governments should remain flexible in start of crushing in case of later maturity due to weather.

The federal and provincial governments will formulate sugarcane/sugar policy in consultation with stakeholders by September 15 every year. The policy envisaged that sugar should not be imported until the size of sugar season is determined by the end of March, except in case of very abnormally high sugar prices.

The government will build up a buffer stock of 400,000 tons for price intervention through imports or local purchases in staggered intervals during December to April. The Trading Corporation of Pakistan should buy sugar through open tenders.

In has been decided that millers will pay the cost of storage and replace it with new stocks every year in case buffer stock remains unsold and is purchased from them. The committee suggested that sugarcane support prices should not be raised from existing levels in 2007-08.

LIVESTOCK: The government has acknowledged that Pakistan has fallen far behind the rest of the world in livestock research and application and as a result, fodder production has become expensive and breeding farms less productive.

To achieve breakthrough, the government has decided to introduce a separate policy for attracting expatriates to bridge yawning knowledge gap by making sure for each expert to train 10 locals per year in an organised manner.

PULSES: It has been decided that prices of pulses on long-term basis will be reduced by procuring surplus at the market price and release it on regular intervals for elbowing out speculators. This would be started with moong pulse this year because 50,000 tons of surplus crop is expected. The same policy will be introduced for gram, besides increasing area and productivity of mash and masoor crops.