Farmers demand action as costs soar, profits plummet

The Central Chairman of the Kissan Ittehad threatened to launch a march on Islamabad if the demands of farmers were not met. Farmer demands include increasing the wheat support price in addition to subsidizing input costs as they have risen recently.

The demands are not entirely baseless, as rising electricity costs have hampered the ability of farmers to cost-effectively operate tube wells for irrigation. Farmers who have access to a flowing source of water are not faring much better either, as the rate of irrigation water has increased, making it tougher for farmers to afford to irrigate their fields.

More concerningly, the prices of urea fertilizer, which is a major input in crop cultivation, have risen too. However, Islamabad’s hands are effectively tied due to the conditions imposed on the federal government by the International Monetary Fund (IMF).

Under IMF conditions, Islamabad is unable to extend subsidies to these farmers to assist them when they need them. According to the chairman of Kissan Ittehad, this could leave them open to exploitation by flour mills that can purchase wheat at below-market prices.

The implications for businesses operating in the agricultural sector will be serious if they are unable to secure governmental support in the form of minimum support prices or subsidies.

This is because rising input costs will translate directly into a fall in the profit margins of farmers. This could result in a fall in the supply of crops such as wheat and sugarcane. While the damage ends here for farm owners and the 36.43 percent of Pakistanis who call the agricultural sector their source of income, the same cannot be said for others.

It is to be noted that wheat, sugar, and other agricultural sector outputs are essential for businesses further along the supply chain. A lower supply means the prices for these inputs will rise, causing businesses that use wheat or sugar to lose profits. This spells bad news for businesses such as bakeries and confectionary manufacturers.

Islamabad is expected to feel the impact of not providing subsidies as well. Experts predict that a reduction in wheat and sugarcane yields is likely to worsen the trade deficit for Pakistan as wheat imports surged to one billion dollars in FY 2023-24.

Sugar exports brought in $330 million in 2023, and a fall in production might negatively impact export figures. The resulting widening of the trade deficit will strain the already meagre $16.62 billion in foreign reserves that the State Bank of Pakistan (SBP) possesses.

If the farmers decide that Islamabad has left them to fend for themselves, the Kissan Ittehad might deliver on its promise to ‘initiate a sit-in in the capital’. The protests will negatively impact Pakistan’s attractiveness as a stable destination for both foreign and local investment funds.