Support price of agriculture commodities are viable built-in stabilizers to induce farmers to boost productivity of this sector which enhance their income. But the incumbent federal government dominated by the mercantile class has decided to do away with the support price mechanism for sugar cane and introduce a new price mechanism that will be linked with the wholesale price of sugar. The decision was taken in a cabinet meeting, which is apparently aimed at appeasing the farmers who are being persistently exploited by the sugar barons.
It remains to be seen how far this political gimmick will benefit the farmers because the intended pricing formula will frequently undergo variations due to fluctuations in the wholesale price of sugar in the national and international markets. It also gives certain degree of leverage to sugar mill owners in the mode of payment to growers. According to the proposed pricing mechanism sugar mill owners will make 75 percent advance payment of sugarcane and will withhold the remaining 5 percent for almost one year keeping in view the average wholesale price of sugar in the market. This seems to be no incentive for the sugarcane grower as they will be still at the mercy of powerful sugar mafia for receiving full payment of their produce.
In the government of President Ayub Khan, the mill owners were legally bound to keep a revolving fund in the branches of National Bank of Pakistan located in the premises of sugar mills. Accounts branch of the mill issued payment invoices of sale proceeds of sugarcane for encashment from the relevant branch of National Bank within a couple of days. It was a fairly transparent system of payment according to support price of sugarcane. In 2012, the previous PPP government revived almost the same mechanism for sugarcane purchase. It introduced a cane purchase receipt, convertible into bank cheque, to save sugarcane growers from the exploitation of millers. However, the present PML-N government failed to implement it. Even the Ministry of industries and production sent a comprehensive summary in that regard to the cabinet but it was not approved. The cane purchase receipt, convertible into bank cheques, would have been a supported document of the agriculture sector and would have safeguarded the interest of growers.
Instead of approving the receipt mechanism, the mercantile class dominated PML-N government doled out billions of rupees in the form of export subsidy to sugar barons. Total hit to public exchequer, both federal and provincial, will be at least Rs. 20.4 billion. This is in addition to the benefit of Rs. 30 billion that the millers will get by claiming a subsidy of Rs. 20 per kilogram on export of 1.5 million tons. The millers are reportedly paying low price to farmers who are receiving Rs. 140 per 40 kg of sugarcane against the suppoprt price of Rs. 180. The farmers are also cheated in calculation of weight of sugar and deductions on account of binding materials. The farmers are hence doubly at loss.
Farmers get support price of the commodities they produce even in the developed countries where the share of agriculture gross domestic product is much less in the gross domestic product (GDP) as compared with manufacturing sector. In Pakistan, it is still the main stay of the economy with 20 percent direct contribution to the GDP. A prompt and transparent mechanism of support price must be implemented so that the area under cultivation of sugarcane may not shrink, which will result in the closure of a number of sugar mills in the provinces of Punjab and Sindh like the four sugar mills in Khyber Pukhtunkhwa.