Pakistan: the wheat crisis – issues and solutions

Shahid Kardar, the former Finance Minister of the Punjab Province, has written a two part series on the current wheat/atta crisis in Pakistan. He makes some startling comparisons:

While the Pakistani farmer was being paid less than half of what the government has been willing to pay to the Australian and American farmer for the wheat imported from them, and with price of flour significantly higher beyond our borders, the government continued to provide cheaper wheat to the flour mills, over a million tons of which, as mentioned above, was smuggled out.

He is clear on who the real beneficiaries of this crisis are:

The beneficiaries of this bizarre wheat policy have been middlemen (Arthis), officials of the Food Department, the flourmills, traders, and personnel of border security forces, all of who connived in this smuggling racket. As a result, the Pakistani consumer ended up paying close to the international prices for wheat while the Pakistani farmer failed to get a remunerative price for his product.

The beneficiaries of the lower price of wheat supplied from government stores to the flour mills were not those intended, the domestic urban consumers, but this motley crowd, which makes one question the efficiency of the nature of the wheat subsidy as it stands today. Read more here

On potential solutions, Kardar has to say the following:

Instead of distorting prices, employing two possible strategies could ensure better targeting of the subsidy: cash transfers and mobile distribution units, to those most in need.

Direct cash transfers and grants, a form of social assistance, to target the poor and the vulnerable segments of the population — generally the disabled, elderly, female headed households, orphans, widows and unemployed and unskilled household heads with large families — would be the best way to help those most in need of food. For urban areas, a self-targeting mechanism can be employed whereby the katchi abadis or residential areas colonised by poorer households areas can be identified for the disbursement of such a cash grant — the needy and the vulnerable would be targeted by virtue of them inhabiting the poor locality.

Full text of this part here