Prime Minister Imran Khan has expressed grave concern over the continuous and fast rising trend in prices of basic food commodities and has directed his economic team to initiate measures for bringing down their prices. He has also directed government agencies to conduct deep and thorough probe to find out causes of recent high price spiral. The issue has been commented in these columns a number of times by referring to the factors responsible for the unprecedented galloping price level and cited measures how unelected governments in the past succeeded in bringing it down and kept it stable for the welfare of low and middle income group people. The recent report released by Pakistan Bureau of Statistics shows 2 percent rise in inflation rate from 12.6 percent to 14.6 percent. A wide range of food commodities including wheat flour, rice, pulses, meat, dry skimmed milk, poultry and vegetables have registered price increase from 50 percent to 100 percent, making the life of people miserable. If government had taken strong action against the elements responsible for increasing the prices of medicines then cartels of food commodities would have refrained from applying monopoly practices of restricting supplies to market to push up prices.
The prices of essential food commodities started rising when the so called economy stabalisation reforms were rushed in one go under the conditions agreed with the International Monetary Fund (IMF) by an unelected advisor instead of an elected member of the federal cabinet. Before opting for the frontloaded IMF loans programme, former advisor in the finance ministry Dr.Asfaq Hassan Khan had advised the PTI government to stop imports of six luxury items instead of entering into loan programme that will de-accelerate the wheel of the economy. His sane advice was not taken worth consideration and he has to quit the Economic Advisory Council of the Prime Minister. He was followed by Dr. Shakib Sherani who was also not in favour of availing such a bail out of IFM which slams the door on growth of the economy.
Shrinking economy and its cartelization by political and business elite are the major factors that whipped high price spiral. The economy is still agrarian as agriculture sector contributes lion share of 20 percent to gross domestic product. It provides 60 percent plus direct and indirect employment to the working force. Successive elected governments implemented skewed economic policies which pushed it into perpetual crisis. Construction of big and small dams ‘storages was abandoned forever which created water shortages. Revenues generated from domestic sources and foreign loans were spent on unproductive grandiose projects such as Motorways and Orange Train, creating debt trap. The shady electricity purchase agreements and legislation of Gas Infrastructure Development Cess abnormally pushed up the price of fertilizers beyond the purchase capacity of small farmers. Raw material industry for manufacturing insecticides and pesticides was not established. Agriculture Research Centers established for evolving better quality of seeds of cereal and cash crops were made redundant. All these deliberate and skewed priorities of elected government that remained in power since 1972 have destroyed agriculture and agro-based industries in the country.
It was expected that PTI government’s team of economists and elected leaders with rich background of economy will at least give priority to incentives loaded long term agriculture policy. But lopsided policies of previous governments of two other mainstream political parties continued with more severity. The three year agriculture emergency programme of Rs. 309 billion does not include any incentive for small farmers to increase yield of crops including wheat, rice, pulses and vegetables. The growth of agriculture sector which is stagnant at 0.84 percent will not go up to the desired level of over 6 percent if the net return ratio between investment and profit of farmers remain low at the existing rate of less than 1 percent and it is not increased to 3 percent. This can be achieved by overcoming water shortages, substantially lowering the prices of high yield seeds, fertilizers, insecticides, pesticides, crops insurance and attractive minimum support price for wheat, rice and gram. It remains to be seen how Prime Minister’s directives are translated into concrete actions to take on the politically influential cartel owners. The fact remains that strategy of administrative price control does not work unless buttressed by supply augmenting measures with immediate import of food items in the short run and boosting domestic production in the long run. Will the incumbent government look at past precedents of achieving price level stability?