The economics of wheat subsidy in Gilgit-Baltistan
By Ashab Baig
We humans domesticated cereal crops, particularly the wheat, nearly fifteen thousand years ago. It is no exaggeration to say that the foundation of human civilization is laid on grains of wheat. It is the most delicious, nutritious and popular of all food stuff found across the world. Wheat has been the major food staple of people living in the Indus Basin. In Pakistan for example, consumption of wheat is 125Kg per capita that fulfills nearly 70% of daily caloric intake. Particularly, in Upper Indus Basin and Gilgit-Baltistan, wheat is hailed as the most essential ingredient of every traditional dish and local cuisine.
But this penchant for taste gets distasteful when we look into the ongoing social, political and economic dynamics around wheat in GB. It was during the early 1970s when a new constitution was being promulgated in Pakistan, and people of GB were eyeing for a formal integration under the new constitution. But to the dismay of GB people, instead of constitutional rights, they were offered a very affordable subsidy on wheat, at one-fourth of the market price. Nearly five decades on, this subsidized wheat on one hand, arguably has catered to the needs of food security in GB, but on the other, it has gravely morphed the subsistent and self-sufficient local farming systems. It has disincentivized the local production of cereal crops as subsidized wheat is cheaper to buy than grow in GB.
A look at a few key statistics would be helpful in knowing the context of ongoing debate on wheat subsidy. The total annual wheat consumption demand is nearly 180,000 tons in GB. Approximately, 30,000 tons of this demand is met from local produce. Thus, GB is deficient by 150,000 tons of cereals annually. This outstanding demand is mostly met through the imported subsidized wheat from down country.
Until the past few years, the price of wheat flour was roughly stable at PKR. 50 per kg and it would need approximately PKR 7.5 billion to purchase and supply 150,000 tons of wheat in GB. This corresponds with annual budget allocations of GB government for subsidized wheat (PKR 7 to 8 billion) in recent years. However, the prices of wheat related commodities in domestic and global markets have soared tremendously to PKR 150 per kg. It is thus no longer possible to purchase and supply the same demanded quantity of subsidized wheat within the same budget and price, as well as due to the possible loopholes or leakages along the supply chain.
Under the current situation, two scenarios develop before us. Firstly, in order to continue subsidizing the wheat at the same rate, the GB government would have to have an annual budget of at least PKR. 24 billion to purchase and supply subsidized wheat henceforth. However, this is very unlikely to happen, given the fiscal constraints being faced by the GB and federal governments.
Alternatively, if the government is unable to increase the budget provisions for wheat subsidy and it remains the same, then only one-third or 50,000 ton of wheat will be available annually in supply chain for subsidized distribution in the region. This is sufficient only to cater the food security needs of the neediest in GB. The recent wheat price set at PKR 52 per kg by GB government is justified on these grounds, which is still much lower than the current wheat flour market price of PKR.160 per kg in major cities of Pakistan.
The impact of subsidized wheat on GB’s economy, its agriculture systems and food security needs to be viewed in a broader manner. However, given the circumstances, the targeted subsidy approach is the way to go and let go of the current blanket subsidy approach. If we roughly divide the population of GB into three socio-economic strata of high, mid and low; then it is the one-third at the bottom that deserves the subsidy. Qualifications can be made about those in the middle, but the top one-third should be excluded from subsidy, due also to the fact that government is the biggest employer in GB which employs at least one person in every third household in the region.
One of the ills of subsidized wheat is that it has caused to stifle innovation and growth in agriculture and cropping systems of the region. With only 2% of total land mass, the cultivable land is scarce in GB. It is therefore all important to make the most efficient use of the available productive land. Though mass cultivation of cereal crops is not feasible in GB due to various ecological factors, then there is option to opt for high value horticulture and agroforestry. For example, there is tremendous scope to apply innovative ways to turn the barren lands of GB into productive green biomass systems. The food security is primarily a matter of income security that comes with diversification of local economy. All the policies geared towards increasing the size of the economic pie should therefore be on the priority list of all stakeholders, alongside the efforts for greater political and constitutional justice for people of GB.
The writer is an Economic consultant based in Islamabad. He can be reached at asahab.baig@gmail.com.
