Technical Note
SUPPORT PRICE MECHANISM IN PAKISTAN
INDUSTRY :-
AREA :MANAGERIAL ECONOMICS
ORGANIZATION :-
LENGTH :16
LUMS No :11-126-2015-2
PUBLICATION YEAR : 2015
ABSTRACT:
This note attempts to explore the concept of support price mechanism. Governments intervene through support price mechanisms in agrarian economies to create stability in the market. In Pakistan major crops such as wheat, rice and sugarcane contribute approximately 29% to the total value added of the agriculture sector and 6% of the total GDP. Therefore, the government of Pakistan intervenes through a procurement price policy to ensure the production of these important crops. The procurement of output prices of the major cash crops including wheat, sugarcane and rice are often fixed by the government. Other crops under the minimum support price program include cotton, pulses, oil seeds, potatoes, and onions. The Agriculture Policy Institute (API) is in charge of reviewing and suggesting the support price for the major crops. Wheat procurement price and quantity is decided by the Federal government after consultation with the provincial governments. The major implementation of this procurement policy is done by the provincial governments and PASSCO. On the other hand, the sugarcane price support system is controlled by the Pakistan Sugar Mills Association. The procurement process for cotton and rice are not as constant as that of wheat and sugarcane. The procurement prices of cotton are implemented through the Trading Corporation of Pakistan (TCP) and mostly the procurement prices of cottonseed are announced by the government. Similarly, the procurement policy with respect to rice has not been constant by the government. Support price programs, when carried out, are implemented through Pakistan Agricultural Storage and Supplies Corporation (PASSCO) and TCP. Overall, there is immense potential to price support programs in Pakistan if implemented properly and the maximum advantage is passed on to the small farmers.