AGRICULTURAL PRICE POLICY IN PAKISTANs

Definition
The government of a country can play an effective role in deterring as to what agricultural goods
are to be produced, how much to be produced. The government can also regulate the prices of
agricultural goods keeping in view the interests of the consumers as well as of the producers.
Agricultural price policy up to mid 1960's Pakistan.
Negative Pricing Policies.
, the government's agricultural price policy was to provide cheap food to urban consumers and
industrial workers, cheap raw materials to agro-based industries and to transfer resources from
agriculture to the urban sector for investment. In the light of these objectives, the main pricing
and trade policies followed up to mid- 1960s were as under:
Monopoly procuring of wheat and rice at deliberately fixed low price.
Heavy export duty on cotton which kept low prices for the farmers but benefited the local
industry.
Restrictions on inter-provincial and inter - district movement which depressed seed prices in
surplus producing areas.
Prices of vegetable ghee controlled at low level depressing prices of cotton seed and oilseeds.
Agricultural imports at confessionals prices depressing local prices.
Overvalued exchange rates which depressed prices of agricultural exports
Underlying assumptions falsified:
The above policies were based on the following assumptions:
Those farmers would not react to low price by reducing their production and would continue to
produce to their capacity.
The country could be developed industrially without first developing the agriculture sector. The
above assumptions provide to be wrong resulting in shortage of food and other products and
balance of payment problems. It was recognized that agriculture had to be developed to sustain
industrial development.
This led to policies in favour of agriculture.
Positive pricing policies from 1972
The shift from negative to positive pricing policies has been gradual. The first major correction
in the overvalued exchange rate was made in early 1972 when the rupee to dollar exchange rate
was decreased from Rs. 4.76 to Rs. 11 per dollar. Thereafter, rupee exchange rate was adjusted
to bring it closer to the market rate. Monopoly procurement was changed into voluntary
procurement in 1960s in case of wheat and much later in case of rice. Export duty was first
abolished in case of rice and in the recent past in case of cotton. Agricultural imports at
confessional prices have also been reduced and phased out steps