The government would do itself a favour by explaining to the people that food commodity prices are driven by international prices. They’ve moved up by as much 25-50% for the different food commodities in the last few months.
Today international wheat price is ranges between rs2100-2300 per maund whereas the support price paid to local wheat prices is 1350 per maund. Why should local farmers sell at 20-30% lower prices than what he can get by selling across the border in Afghanistan.
Even if he does so, the middle man will buy up the stock and smuggle it across. There’s no point moralising about farmers receiving subsidies and that they should sell at a lower rate than what they get elsewhere. Even if they comply other intermediaries won’t.
That’s the unfortunate reality of how market forces work. The best the government can do is provide targeted subsidies to the poorest section of society whenever there’s such a dramatic adverse move in prices.
Also it might be worth asking why should the rural farmers sell at lower than international prices in order to subsidise the appetites of generally richer city dwellers. The common man is not only the middle classes in urban areas.
It might be worth noting that higher wheat prices if delivered to farmers means that their purchasing power increases. Not only can they buy other manufactured stuff, possibly from cities, but also increase their inputs for wheat production and thereby enhance yields/productivity
Finally the government needs to move away a labyrinth of distorting intervention such as fertilizer subsidies, support prices, import restrictions and price controls. Trying to fight market forces not only harm consumers from getting products at the best prices,
but also discourages competition and productivity improvement. If we want a competitive and growing Pakistan, the government has to educate the people that there are no free lunches. We cannot immunise ourselves from international market forces.
The more we try do so the more we will create inefficiencies in the system. The state can do the greatest good for the most by integrating with the rest of the world as best as we can and ensuring all markets in the country work efficiently
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