The Politics of Food Pricing in Pakistan: Is there a hope for urban poor, landless and underprivileged*
Dr. Shakil Ghori†
*The piece is based on a research carried out for the Society for Conservation and Protection of Environment (SCOPE) / Alliance against Hunger and Malnutrition (AAHM) is an international network of civil society, intergovernmental organisations and international NGOs and Oxfam’s Grow Campaign.
†The author has a Masters degree from London School of Economics (LSE) and a PhD from Oxford Brookes University and worked extensively in Pakistani education sector. He is currently working as an External Consultant for the Oxford Centre for Staff and Learning Development.
(There are many reasons for food price inflation and volatility in Pakistan. Successive studies have highlighted some fundamental issues. For example law and order security, land tenure security, environmental factors, lowproductivity, rural road / transportinfrastructure, insufficient storage facilities, lack of market knowledge, influence of middlemen/ commission agents, unfair fees/charges at mundis, unfair weight and measures. – Author. In this article the author analysis the reasons behind food price inflation in Pakistan and offers his recommendations to counter this menace. – Editor)
The recent wave of hike in food prices due to inflationary pressures, weak rupee and accepting IMF’s system of conditionality leave very limited space for the government to maneuver vis-à-vis its Naya Pakistan’s welfare reform agenda. The right to food, one of the fundamental human rights, appears to be a low priority issue on the developmental agenda of Mr. Khan’s administration. The right to food entails that everyone should have both economic and physical access to enough food that is both safe and nutritious.
According to the UNDP, it is estimated that globally, half of the deaths can be linked to hunger and undernourishment. Global recessions and economic crisis since 2008 have had a negative impact on the world poor suffering from hunger. In 2014, UNDP estimated that there are 842 million poor suffering from hunger around the world.
Despite a record increase in global per capita food production, about one sixth of the world population is still undernourished 1; turning curable childhood illnesses into killer diseases. The issue arguably highlighted by Randolph & Hertel 2 in their global overview on the right to food concludes that there is enough food on the planet to adequately feed everyone alive today. However, the rules governing national agricultural policy and international trade, along with the economic incentives in the global food production system, do not currently result in fulfillment of access to adequate food for all.
The right to food is a legal obligation of country states under international law. It was initially codified. The international community has demonstrated strong commitment to formulate international law and commitments have been made in countless international conferences, however, translating these international law and commitments into actions and national policies is yet to be realized.
The constitution of Pakistan stipulates that the state is responsible for promoting the social and economic well-being of people including the provision of basic necessities such as food [Article 38 (d)]. It states that the state shall “provide basic necessities of life, such as food, clothing, housing, education and medical relief, for all such citizens, irrespective of sex, caste, creed or race, as are permanently or temporarily unable to earn their livelihood on account of infirmity, sickness or unemployment”.
Pakistan is a highly food insecure country suffering from a serious crisis of malnutrition. Over half of the households in the country are food insecure with no serious change affecting this trend. Young children and pregnant women that are malnourished have to face a whole range of medical issues such as infant mortality, stunted development and are more prone to catch and die from diseases such as diarrhea and measles. Pakistan is also faced with a wide range of social, environmental and economic issues affecting general development. Ethnic separatism and terrorism creates political instability. Inflation, poor governance and corruption create economic instability. Climate change and natural disasters create environmental instability. Urbanization and population growth creates social instability. All of these issues compound food insecurity.
After the global food crisis in 2008, the upward trend continued for some time. For example, in February 2010, Pakistan saw an unprecedented rise in price of wheat and rice. The price went up 30 to 50 percent higher than what these prices were before the global food crisis in 2008. The cost of sugar and cooking oils also rose. In 2010, Pakistan’s food inflation was at 15 percent. In 2013, this figure stood at 8 percent. Higher inflation was seen in manufactured food items 3. Though this figure has declined, it is still very alarming. There is also an inflationary inertia in the market. Firms look backward when setting prices. Wage rises, however, do not match inflation. Food inflation and expectation of inflation affects all other inflation given the weight of food in poor countries.
One of the reasons for an increase in international food prices is increased demand for food from China and India due to a rise in standards of living. Food crops are also higher in demand as they are being used for bio-fuels and animal feeds. Inputs in food production such as oil and fertilizers have become more expensive. Most unpredictably, climate change may result in varying drought conditions in grain producing countries resulting in world shortages 5.
Food prices have been an important player in Pakistan and Pakistani politics ever since the rise in sugar prices led to increased strength in the anti-Ayub Khan movement. In the years after independence, food was not seen as an issue integral to the country. Food prices were generally low in the early 1960’s due to huge investments in irrigation. In 1965, the war led to a shortage of food and food security became an issue. The 1970’s saw a nationalization phase in the food industry, as in other industries in Pakistan, during Zulfiqar Ali Bhutto’s government. The Zia-ul-Haq administration reversed these interventions, reducing subsidies and bringing prices on par with the world 4.
The poor in Pakistan have limited choices of food and rely on very specific food items. An intake of high calories may not be nutritious. Consumption of meat and fruit is very low. Furthermore, even if food is accessible it may not be absorbed. Food absorption is dependent upon clean drinking water, sanitation and immunization of children. Nutrients are consistently lost due to illnesses that result from lack of sanitation and improper health care. Malnutrition results in challenges such as stunted growth and wasting 5. Policy intervention can stabilise price to ensure that consumers are able to purchase food at low prices.
An analysis of Pakistan’s agricultural output shows that Pakistan produces enough food to provide the required average caloric intake for its entire population 5. The focus of government policy on food security has mainly been on agricultural production. Issues with food distribution – including transportation, handling, storage, etc. – are not considered as equally significant.
Though the agricultural sector still experiences growth, the agricultural market faces numerous challenges that prevent an increase in output and yield. Lack of inputs for food production is probably one of the first that agricultural producers will think of and one that the government has spent the most resources trying to address through subsidies. These included reducing the cost of fuel, fertilizer and seeds and providing access to farm machinery and technology. This is countered through traditional subsidies on fertilizer products such as urea. The recent withdrawal of subsidies on pesticides and electricity as a condition of the IMF shows that the general trend of agricultural subsidies is probably on the decline 5.
Why Food Price Inflation?
There are many reasons for food price inflation and volatility in Pakistan. Successive studies have highlighted some fundamental issues.
For example law and order security, land tenure security, environmental factors, low productivity, rural road / transport infrastructure, insufficient storage facilities, lack of market knowledge, influence of middlemen/ commission agents, unfair fees/charges at mundis, unfair weight and measures.
Pakistan’s poor law and order situation has had a negative impact on food security. General insecurity entails that people are worse off, food availability is lower and food insecurity is higher. Furthermore, inability to impose the law results in loss of food to neighbouring countries. Food is smuggled outside of Pakistan into Afghanistan and Iran through lawless areas in FATA, KPK and Balochistan. About 5 percent of wheat, 10 percent of rice and 11 percent of refined sugar is smuggled out of Pakistan every year. Items that are smuggled in are mainly non-food items 5.
Land tenure security in Pakistan is poor with land distribution skewed towards large landowners. The redistribution of land and land reforms are on-going issues in Pakistan which several governments tried to implement. The Shari’ah courts decided against this and since then it is a matter that has died. However, the government has attempted to irrigate and distribute land among landless peasants (haris). This policy has much potential. There is approximately four million acres in riverine areas that can be prepared for cultivation.
Out of the total surface water in Pakistan, only 42 percent reaches the farmers with much of it lost due to water losses at various levels and mismanagement. Farmers near the ends of irrigation canals have to supplement their water supply with ground water. This has made the situation worse due to energy crisis as farmers cannot operate electric tube wells 5.
Efficient and equitable water use is necessary. Large landholders and corporations make use of existing water resources leaving smaller farmers at a disadvantage. If water losses can be reduced and irrigated areas can be expanded then Pakistan will have more agricultural surface for production. Flood irrigation still prevails as the normal method for irrigation but leads to large quantities of water wastage. Drip irrigation and other efficient water use methods are not usually applied.
The impact of soil erosion, water salinity and water logging have not been dealt with comprehensive policy and action. Better quality farming inputs, such as seeds and fertilizers, as well as improvement in farming techniques produce better results. Similarly, improvement in agriculture livestock increases the potential of the dairy sector. Improving fodder conservation techniques, introducing agro-industrial and non-conventional feeds and breeding techniques are useful.
Genetically modified seeds and the pesticides used in their harvesting have enormous consequences on the environment and future of food security in Pakistan. Modern innovations are not fully incorporated. New breeding techniques may create animals that give more milk but may be more prone to disease and less adaptable to the weather. New type of seeds and different farming techniques may do more harm than good. The Aga Khan Rural Support Program ‘successfully’ tested a new high-yielding variety of wheat and intended it to be mono-cropped in Gilgit-Baltistan. Farmers in GB have traditionally been involved in harvesting a mix of different crops, a technique better suited to their climate conditions. Furthermore, farmers in GB determined the new wheat seed would not survive in the winds and frost of the area and that it did not even taste good 6.
Wheat productivity in Pakistan is low compared to other countries and the yield can be expanded. Rice yield can also be increased through better management of existing cultivated areas but rice cultivation should not be expanded because of the stress it places on water use. The yield of maize and other oil products can be expanded as well.
The Special Program for Food Security (SPFS) facilitated by the Food and Agricultural Organization (FAO) is intended to improve agricultural productivity through sustainable methods. The project was implemented through the Crop Maximization Program (CMP) in a 1000 villages in food insecure districts. It involved working with national and regional rural support programs to help small farmers increase their production capacity through tested methods and technological aid.
The lack of a proper road and transportation system entails that food producers find it difficult to bring their merchandise to a market. In Balochistan, FATA and GB the road transportation system is very limited. The challenge of transporting produce to the markets is difficult due to natural topography in the region. Balochistan and KPK produce surplus of fruits but the transportation system bars producers from reaching the market. This leads to food wastage. In Balochistan, farmers can end up feeding valuable fruit to their livestock. This opens the door for wastage and loss of agricultural produce as well as exploitative middlemen who can buy produce at very low prices from farmers who have no choice 5.
In regions where the transportation infrastructure is better and markets are regulated, middlemen still have a disproportionate control over the system. Market committee offices are tasked with monitoring price, quality and measurement but they are mostly ineffective. Farmers may also end up pledging their harvest to the middleman in return for credit, which they are unable to procure otherwise from formal credit institution in the public and private sector.
The livestock market faces similar issues. Milk producers are entirely dependent on local village collectors who can set the terms of exchange. Although private collectors, like Nestle, do collect from villages, however their reach is very limited. For livestock selling, middlemen, known as beopari, also control the meat market (bakkar mandi) and make a greater profit than those who rear the animals 5. The actors involved in a typical supply chain for Pakistani food products include: Growers/producers, contractors/ beopari/commission agents, wholesalers, retailers and consumers.
The storage capacity in Pakistan is very limited. Procurement and storage systems also suffer from losses and need to be updated. Without increased storage space, increasing productivity may not be worthwhile. Most storage spaces belong to Pakistan Agriculture Storage and Services Corporation Limited (PASSCO). The private sector has a small role in the existing storage network. In 2010-11, floods destroyed large quantities of grains causing a huge loss due to improper storage facilities.
Small farmers, in particular, lack market knowledge about the timing, location and process of selling their produce. One of the core reasons is lack of education and functional literacy. As a result, farmers are open to exploitation and hardly ever get a fair return for their produce.
There are multiple layers of commission agents and middlemen at each of the marketing channels that farmers use to bring their produce to the markets. This affects the price of produce as at each step a commission is paid with compound effects on the overall prices of the commodities. The middlemen sometimes intervene unnecessarily and hence reduce farmers’ income by charging a fee and commission at every step.
It is widely reported that farmers have to pay a number of unjustified charges in the markets. This hurts small farmers. Charges like commissions, payment to collie, masjid fund, flood fund, etc. are an extra burden to farmers/growers, particularly small farmers (Khan, 2013). In addition, farmers have to pay extra charges, duties, taxes while transporting goods to the market.
The prices of food commodities are negatively affected by unfair practices of weights and measures in the markets. Growers, particularly small farmers, are deprived of fair prices for their produce. Produce in the market is purchased by the middlemen and commission agents on a standardized unit of 40 kg. Farmers are paid for 1 mund, which is equal to 37.32 kg, thus losing 2.68 kg for every 40 kg.
What do Sector Actors say about it?
The sector actors are a knowledgeable group of individuals working in related areas that influence food prices in Pakistan. They have an insight and understand the inner working of the markets and could help in understanding the fundamental issues that are responsible for food price inflation in Pakistan.
Food prices generally fluctuate due to market mechanisms. However, since 2008, price hikes are a phenomenon attributed to the global price rise. It is reported that Pakistan experienced upward trends between 2008 and 2012, although food prices slowed down in other countries between 2009 -2012. Government policies are one of the reasons for this continued price rise. For example, government wheat support price mechanism helps farmers to produce more by incentivising wheat production but it is not effective for small and subsistence level farmers who are already food deficient. It can even be considered detrimental as small and subsistence level farmers suffer more due to increases in price.
There are better ways for governments to influence food prices in favour of farmers and consumers. Reducing input prices (i.e. costs of fertilisers, seeds) as well as provision of electricity for tube-wells, thereby, limiting the use of diesel generators, can create a competitive environment for farmers to increase production.
According to sector actors, prices are also influenced and manipulated by large producers and manufacturers forging cartels and creating monopoly situations in the market. The Competition Commission of Pakistan is responsible for dealing with such situations; however, it does not have the will or enforcement mechanism to act effectively.
Farmers usually invest in agricultural produce and often do so through credit. They take their produce to the market at their own cost i.e. transportation (which can be significant). The middleman buys this produce and then sells it at a higher price with a large margin. Sometimes, middlemen store the produce so that they can sell it later when the price is even higher. Thus, they are involved in unfair practices such as hoarding and price manipulation.
Sector actors indicated that food prices also fluctuated due to several other reasons, i.e. social, political, seasonal, environmental reasons as well as quality and natural disasters. These assertions, which are also substantiated by the secondary sources, are briefly outlined below:
Sector actors identified seasonal price volatility as one of the several factors for food price rises. Food prices are susceptible to religious events such as Ramadan when food prices always follow an upward trend and the government is keen to control the prices to avoid political backlash and criticism. In Moharram, however, some market insiders said that food prices are either saturated or slightly dropped due to slow market activity. Similarly, during Eid-ul-Azha, consumption of vegetables is down, therefore, forcing prices to go down as well, whereas, during wedding season prices go up again. There are several underlying causes for this seasonal price volatility, ranging from supply/demand to hoarding to consumption patterns to an anticipation of profit maximisation. However, sector actors also reported that the seasonal price volatility does not usually benefit the producers and farmers. Middlemen, traders, suppliers and other market actors tend to benefit more. They manipulate the market through controlling supply by stocking produce to maximise profits. Sector actors also reported significant seasonal volatility in fruits, vegetable, poultry and livestock products, however grains, particularly prices of wheat remain stable right after the harvest but fluctuate after a few months. They, however, generally remain stable due to the support price mechanisms in place.
Political and security conditions can also create an uncertain environment in the market and severely affect food prices in the country – both regionally and nationally. For example, market closure due to political uncertainty encourages speculators and stockers/hoarders to take advantage of the situation and manipulate food prices.
In times when significant political events take place, markets are usually closed for days, thereby, causing severe food shortages due to non-supply. This also disrupts distribution networks due to road closers and non-availability of transport. Thus, political unrest, strike calls and the law and order situation are detrimental to stabilising food prices. The law and order situation in bigger cities, such as Karachi, impacts prices both ways. On the one hand, prices fall due to perishability of fruits and vegetable and as a consequence producers and farmers are forced to sell their produce at lower prices. On the other hand, other market actors such as traders and middlemen with the ability to stock the commodities with storage facilities tend to benefit from supplying produce at higher prices. Even when storage facilities are available, the cost of storage as an extra expenditure minimise the profitability for both producers and retailers. In addition, conflicts in other parts of the country also hamper food prices usually forcing the prices to go up in affected areas.
One of the most important factors impacting food prices is the supply/demand factor. As discussed earlier, political, law and order situations and conflicts all severely impede food supply systems which ultimately link to food price inflation. It is indicated by sector actors that there is a direct link between food prices and food demand. However, interestingly, when demand increase the prices increase but when demand decreases there is no change in price. This suggests that demand driven price increase does not translate into a price reduction even when demand declines. The perishable nature of commodities such as fruits and vegetable also play a role in supply/demand. Due to climatic conditions, food stocks can be destroyed on the way to markets, thus, severely reducing stocks and hampering supplies. In such situations a timely increase in supply could provide relief to the market and ultimately to the consumers while keeping prices stable.
Pakistan is prone to disaster and floods are quite frequent. Wide- spread, severe flooding can affect crops leading to lower production and diminished stocks, hence pushing prices up. During peak floods, the transportation infrastructure is also damaged, thereby, restricting the movement of food commodities in the affected markets.
Changing environmental and climatic patterns impact yields and cause deterioration in soil productivity. Large swathes of areas have been cleared in recent times without any serious efforts towards afforestation. Consequently, the impacts of climate change are quite visible in terms of change in weather pattern, soil productivity, temperature and rain.
Another factor that affects food prices identified by the sector actors is the quality of food items. The lack of an effective mechanism for grading food items and not paying attention or recognising the importance of using quality and certified inputs make it difficult for producers to get a fair price. Sometimes consumers have to pay relatively higher prices for lower quality items due to the absence of an established mechanism to ascertain the quality of food items and inability of markets to properly regulate well defined quality attributes. Quality appears to be an arbitrary trait with different meanings for different actors with multiple quality standards. The markets are inherently weak in assessing quality of food items and applying standards. In markets, buyers (i.e. middlemen, traders) evaluate quality and use it as a negotiating tactic for pushing prices down, thus, controlling and manipulating market prices and preventing producers, particularly smaller producers, to get a fair price.
The prices of utilities affect all stages of food production, processing and packaging. The prices of electricity mostly have a negative impact on food prices. One sector actor from the grain sector points out that although flour mills do not pay GST on flour, however, they have to pay GST on their electricity bills which ultimately has to be passed on to the consumers. The situation is not different for other food items. At the producers’ level, higher costs of electricity also affect cost of production, which sometimes is difficult to bear, particularly for small farmers, due to the dominant position of other market actors such as traders and middlemen.
The cost of transporting produce to the markets plays a vital role in food prices. Discussions with sector actors highlight two aspects related to transportation costs. First, the higher costs of transporting produce to markets were due to higher costs of fuel – petrol and diesel. Second, higher costs were due to lack of investment in transport infrastructure – particularly farm to market roads.
The higher input costs are also damaging. In case of fruits, vegetables and grains higher cost of certified seeds, fertilizers and pesticides increase the cost of production, which ultimately affects the cost that the consumer has to pay. In case of food items, price increases in fodder, milk and meat have to be borne by the consumers. Small farmers and producers are disadvantaged due to their inability to buy inputs on cash. Small farmers buy input items on credit and usually pay higher prices, as well as interest. Farmers are sometimes bound to sell their produce at a lower price to input suppliers.
Food Price Monitoring System in Pakistan
Sector actors provided an in-depth understanding on how food price monitoring is implemented. For example, lack of knowledge among small farmers of market functioning is a major barrier in interacting and negotiation with the markets. Most small farmers lack functional literacy and mostly rely on commission agents, middlemen and arthis for selling their produce. The most suitable option for them is to sell their produce at their farm gate without getting involved in market functioning. This puts small farmers in a disadvantageous position with limited or no negotiation powers. Middlemen and arthis take advantage of this position and buy produce at the farm at lower prices and consolidate their position to dictate and manipulate market prices. There is no system of damage control insurance in case small farmers suffer loss. Thus, small farmers usually take a great risk and have nothing to hedge against their loss.
Government Price Control and Monitoring Mechanisms
The agriculture department is mainly responsible for determining and monitoring food prices in the markets. The department has a large infrastructure of provincial and district offices. The department operates in close collaboration with the local administration and is also responsible for monitoring and reporting food shortages at a local level. However, the performance of the agriculture department in this regard is less than satisfactory. The department is said to have many regulations and bureaucratic procedures but very poor implementation and is generally considered as quite inefficient.
Sources from the government agriculture department and district administrations described government price control and monitoring system as an impartial way of determining, controlling and monitoring food prices – particularly the 25 essential items.
The government officials from provincial and district administrations supposedly invite stakeholders largely at local level and develop a consensus among all stakeholders after deliberations. Once consensus on prices is reached – after taking into account costs of production, transportation, commissions, local taxes and prices in the nearby markets – district officials issue a list of selling prices of essential commodities. It is important to note that local officials do not issue a buying price for commission agents and middlemen but control the buying prices by setting the selling prices. This practice gives complete discretion to market actors, e. agents and middlemen, to control the buying price. Although, theoretically buying prices are determined in open auction but, in practice, buying prices must be lower than government issued selling prices. Thus, producers and farmers, particularly small farmers, have no control over market prices and do not get fair prices for their produce.
In practice, according to the sector actors, the government comes up with some arbitrary price figures for most of the 25 essential items – particularly fruits, vegetables and pulses. The purpose is to keep the prices low for urban dwellers that are relatively organised and The ultimate aim is to make political gains and maintain popularity among voters. Provincial and district functionaries as well as office bearers of market committees are influenced while fixing prices. This practice adversely affects small farmers due to the price setting behaviour by the markets through middlemen and traders. This and similar practices are very common in rural areas and smaller markets. It allows key players to manipulate the market and rule out a fair return on agriculture produce, particularly to small farmers.
It is also highlighted that price setting behaviour is widespread in fruits, vegetables, poultry and dairy commodities, while the prices of wheat and sugar are determined by the government based on rationalisation, market data and taking into account input and output costs. There are cases where farmers brought their produce and due to low prices could not cover the cost of transportation. In a few cases, as shared by the sector actors, farmers left their produce loaded on the trucks and ran away to avoid covering transportation costs from their own pockets.
On paper it appears that market committees operate as autonomous bodies. In practice, however, market committees function under the influence of their respective provincial and district agriculture departments and district administrations. The government is well aware of all the shortcomings and issues of market operations and sometimes come up with practical and appropriate solutions. Implementing these solutions, however, has always been a major issue. There are issues pertaining to market integration. It is reported that markets in large cities such as Karachi, Lahore, and Peshawar are well integrated. However, markets in remote areas, smaller towns and even in Quetta require more integration.
Food price monitoring is largely carried out by relevant government departments. The government has the largest infrastructure as well as human and financial resources. The Pakistan Bureau of Statistics (PBS) collects market price data from 76 markets in 40 cities and has several units and large teams dedicated for collection, collation, compilation and analysing price indices. However, questions were raised by the key informants on the effective use of data and how to make it more valuable for stakeholders. Therefore, there is a need to think about ways to utilise massive datasets for the benefit of stakeholders as well as to inform the food price debate.
International organisations such as WFP and FAO, as well as national organisations involved in monitoring food prices rely on PBS data, particularly CPI, for further analysis and reporting. Some of these actors are extensively involved in planning for, preparing for and forecasting situations like food shortages and providing food to the poorest of the poor in food deficient districts.
The enforcement of food price is also very difficult to implement. An example was quoted by one of the key informants from a small market, where the market committee appointed agents to monitor price and quality of fruit, vegetable and grains. The agents, despite being given authority to carry out monitoring raids are not able to enforce agreed prices due to no support from other influential market actors such as large landowners who happen to be local MNAs/MPAs and are interested in price manipulation in their favour. These actors control the entire market system through agents and middlemen as well as local officials.
The most powerful actors, according to the sector actors, appear to be commission agents/Arthis/middlemen. These actors also act as financiers, creditors and local banks, particularly for small producers/ farmers. They also share risk with small farmers, however, they charge a colossal amount of interest against the services that they offer. The key to success for them is to provide customised, need based and timely services against personal guarantee. They provide inputs – such as seeds, pesticides and fertiliser – on credit. However, sometimes, they also run these businesses and act as agents for pesticides and fertiliser companies.
Small farmers are not able to access financial services offered by public and private banks and other financial institutions due to not having assets to use as guarantees against loans and thus do not qualify to apply for any financial products. In addition, documentation, procedures and regulation as well as a lack of help, guidance and services puts them off from public and private institutions. The success of agents and middlemen is based on the premise of “services at farmers doorstep” based on long term relationships, sometimes generations, however, at very high costs.
Impact of Food Price Inflation in Pakistan
Inflation in food prices translates to limited accessibility to food on the ground. Key informants highlight some underlying issues. Purchasing power diminishes due to high prices of food items. As a consequence, people have to make choices and often go for cheaper options with low nutritional value. The poor are left with limited choices and lower consumption of meat and fruits. Lack of access to a balanced diet results in malnutrition, poor health and illnesses. The most affected and vulnerable group are children with high rates of deaths due to acute and chronic malnutrition – particularly among children under five.
The dismal nutrition situation has some other associated issues identified by key informants such as safe drinking water, WASH, sanitation facilities and low female education and literacy rate. It is emphasized that if females in a household are educated, it is more likely that children and women will be properly fed. The increase in production of commodities alone may not solve the problem; what is required is equitable distribution as well as access. It is of immense importance to look into policies such as placing an effective market mechanism to ensure well-integrated and better functioning markets that impact the whole country.
The consumption of food commodities is increasing with a rising population. However, production yield in Pakistan is still lower than other countries. This could put pressure on prices and could severely hamper the ability of a large segment of population to access food items with appropriate nutritional value.
Food prices also have an impact on local farmers. Importing food commodities is gaining ground due to higher costs of local production, free trade policies, lower foreign prices. As a result, local farmers suffer as decisions of growing certain crops have to be taken based on ongoing prices without prior knowledge of future prices. After harvest, if there is a shortage of a certain commodity, decisions to import that particular commodity may be disastrous for local farmers as their cost of production may be higher than the foreign import price.
The Way forward
In spite of being self-sufficient in terms of food production, the average food consumption in Pakistan is far lower than the required standard due to an inefficient food distribution and procurement system, illegal movement of food commodities, poor monitoring of the marketing system, lower purchasing power and natural disasters. The substantial growth in agriculture production during the 1990s was not translated into a reduction in rural poverty, particularly among small farmers, landless agricultural labourers and the rural non-farm poor.
The discussion above provided an understanding on the food price inflation in Pakistan. Based on the discussion above, we can conclude that;
- Food price inflation is a global phenomenon – The recent food price hikes Pakistan experienced, particularly since 2008 are attributed to the rise in global food prices. There is ample evidence to substantiate this assertion through available literature and discussion with key informants.
- The rising food prices affects the poor the most – There is an agreement in academic literature as well as among practitioners that higher food prices affect the poor more than the rich as the poor spend a greater proportion of their income, about 70 percent or more, on food. The poor can be urban poor, landless rural labourers, small and subsistence farmers. The discussions with key informants supported this nation.
- Poor border controls and smuggling bring high prices – It is estimated that considerable amount of wheat, rice, refined sugar, livestock and other food items are smuggled out of the country due to poor border The most likely destinations for smuggled items are Afghanistan and Iran. Food commodity smuggling puts more pressure on local markets and causes shortages and price hikes making the situation worse in food deficient border districts in Pakistan.
- Ineffective market regulations translate into dysfunctional markets – The markets in Pakistan are regulated under the legal framework formulated back in Laws are updated through amendments however; the overall framework is still based on the Agricultural Produce Markets Act 1939 that is not up to the task for regulating and running well-functioning, well integrated and modern competitive markets with active involvement from stakeholders. In this market environment unfair market practices allow large manufactures and producers to come together in cartels and create a monopoly situation in the markets. This encourages anti-competitive business practices such as price fixing, price manipulation, artificial shortages and hoarding.
- Higher cost of agriculture input and flow of credit add up to the costs of food items – It is an established fact, evident from literature as well as discussions with key informants, that both higher input costs and lack of availability of credit from formal sources act as inflationary forces and hinder a fair market mechanism. The higher input costs directly increase the cost of production and hence food prices for consumers. On the other hand, lack of formal credit opportunity due to various reasons forces producers to opt for informal credit with colossal interest rates. In addition, informal lenders, mostly middlemen or commission agents in some cases, act as input agents as well as negotiate buying rights of the produce upon harvesting. As input agents, they run agencies where they buy input products on lower rates and charge additional commission from producers. This puts small farmers into a difficult position with little or no negotiating power.
- Higher electricity cost, transportation cost and poor road infrastructure boost costs – The lack of transport infrastructure affects costs of transportation to In addition, higher fuel prices add to the costs of food items. More recently, the price of fuel came down by 60 percent in the international market; however, this did not translate into lower transportation costs in the same proportion. The higher price of electricity means that producers as well as food processers have to pay higher electricity bills and pass it on to the consumers.
- Improper storage facilities cause loses – Generally, there is a lack of proper storage facilities for grains and cold storage facilities for perishable items i.e. fruits and vegetables. In 2010- 11, floods destroyed 3 million tons of grains causing a loss of US$3.27 billion due to lack of proper storage facilities. In terms of fruits and vegetables, the prices are low during harvest seasons and large quantities of rotten produce have to be thrown away due to the weather and no proper Consequently, prices go up that would have otherwise kept stable if produce was properly stored and supplied to the markets.
Below are some recommendations that could help address the issues identified in the discussion;
- It is imperative that the government’s price control and monitoring system should be There is a need to introduce effective legislations in line with a fair and equitable marketing system in Pakistan. What is needed is a fairer system that takes into account the cost of production from the producers and a fair margin for other market actors so that consumers could get value for money.
- The Competition Commission of Pakistan (CCP) should be re- constituted and given power of enforcement
- Relevant and appropriate consumer protection laws should be introduced and a mechanism should be devised for its effective implementation.
- The role of middlemen/ commission agent /arthis should be regulated based on rationalisation of return on service that these actors offer.
- There should be an emphasis on price rationalisation based on food Thus, introduction of food quality grading and standards is necessary to ensure fair price for producers as well as consumers.
- The government is in the best position to put in place effective policies. Once the policies are in place and implemented other stakeholders, including producers and farmers, will be able to play a constructive role.
- There is a need to raise awareness about issues around environmental and climate change, its impact on cropping pattern and ways to deal with these issues.
- There is a need to educate the general public about using substitutes for commodities with higher nutritional value and lower prices. For example, tomatoes can be used in frozen or puree form if people are prepared to change their cooking behavior.
- Both public and private sectors should extend credit to farmers customized around their needs, requirements and timing. One size fits all strategy will deter small farmers in particular to engage and force them to go towards informal credit. The system of accessing credit should be made easier to understand and less bureaucratic.
- Producers and farmers, particularly small farmers, should be given direct access to the markets to get fair prices for their produce and to increase profit.
- The Government should provide relief to small farmers, as well as help them in making efficient use of farmland with the help of civil society organizations (CSOs).
- There is a need for the government to check and regulate prices of agriculture inputs such as seeds, pesticides and fertilizers to prevent the charging of excessive and unfair prices.
- All stakeholder from governments, private sector and civil society need to work in tandem to provide immediate solutions to what is an emergency situation in terms of food prices.
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