Pakistan's wheat policy has once again become a test of the government's ability to reconcile economic reform with agricultural livelihoods and food security.
The announcement of an indicative price of Rs4,500 per 40 kilograms for the 2027 crop, alongside plans to maintain strategic reserves of up to six million tonnes, signals an attempt to restore stability to a market unsettled by successive policy changes. Yet the more important question is whether the new policy can address the structural weaknesses that have repeatedly undermined farmers' incomes, distorted market incentives and exposed consumers to price uncertainty.
For decades, Pakistan's wheat economy has wavered between extensive government intervention and market-based price determination. Neither approach has delivered lasting stability. Public procurement provided farmers with some price certainty but imposed substantial fiscal costs, encouraged inefficient stock management and created opportunities for discretionary intervention. Conversely, withdrawing routine procurement exposed growers to market conditions in which storage, financing, and competitive trading arrangements remained underdeveloped.
Recent years offer important lessons. According to the State Bank of Pakistan, wheat production declined from 31.4 million tonnes in 2023–24 to 28.9 million tonnes in 2024–25. The withdrawal of the minimum support price and routine government procurement contributed to weaker farm-gate prices and greater uncertainty among growers. Although weather, irrigation, input costs and other factors influence agricultural production, price uncertainty can significantly affect cultivation decisions and investment in subsequent crops.
The underlying problem was not necessarily the decision to reduce government intervention. Rather, it was the expectation that private markets would assume functions previously performed by the state without adequate institutional preparation. Competitive agricultural markets require reliable price information, accessible storage, affordable financing, transparent trading arrangements and effective regulatory oversight. Without these conditions, deregulation can transfer risks from public institutions to farmers without delivering the anticipated efficiency gains.
Small farmers are particularly vulnerable to such transitions. Unlike larger producers, many lack the financial capacity to retain their harvest until market conditions improve. Outstanding input payments, immediate household requirements and limited access to formal credit frequently compel them to sell wheat during peak harvesting periods, when prices are often under pressure. Larger traders and financially stronger market participants are better positioned to purchase, store and release stocks when prices become favourable.
This imbalance raises a fundamental political economy question: who benefits from agricultural market reforms, and who ultimately bears their adjustment costs?
The newly announced indicative price of Rs4,500 per 40 kilograms must be examined against this background. The increase from the previous benchmark of Rs3,500 may help restore growers' confidence ahead of the sowing season. However, the effectiveness of the announcement will depend on whether farmers can realise the stated price in actual market transactions.
An indicative benchmark is not necessarily equivalent to an enforceable minimum price or an unconditional government commitment to purchase the entire marketable surplus. The State Bank's assessment of the earlier wheat policy explicitly distinguished the indicative benchmark from a legal price floor. Whether the revised arrangements provide stronger protection to growers will depend on the detailed procurement rules and their implementation.
Pakistan is not beginning this transition without an institutional framework. The Interim National Wheat Policy 2025–26 introduced a model for engaging licensed private companies in the procurement, storage and management of strategic wheat stocks. The framework envisaged competitive selection, defined storage requirements and government oversight, with the objective of reducing the fiscal burden associated with conventional public procurement.
The new policy should therefore be assessed by how effectively it builds upon these arrangements. Key questions include the obligations of private procurement companies, the treatment of smaller growers, transparency in purchasing transactions and the mechanisms available to address non-compliance. Unless these issues are resolved, an announced price may offer limited protection to farmers with weak bargaining power.
The proposed strategic reserves represent another important policy instrument. Maintaining adequate stocks can protect the country against supply disruptions, unexpected production shortfalls and excessive price volatility. However, the announced target of up to six million tonnes must be distinguished from the volume of fresh wheat that the government or its contracted operators will need to procure. Existing stocks, expected production, provincial requirements and stock rotation arrangements all matter in determining actual procurement needs.
Pakistan cannot afford to alternate indefinitely between financially burdensome public procurement and market liberalisation without the institutions needed to support it
The fiscal implications are equally important. Even where private companies undertake procurement and storage, the allocation of financing costs, commercial risks, storage losses and government liabilities must be clearly established. Otherwise, a model intended to reduce public expenditure could create new contingent liabilities or reproduce the inefficiencies of the previous system.
Federal-provincial coordination presents a further challenge. Agriculture is primarily a provincial responsibility, while national food security, international trade and macroeconomic stability require federal coordination. Although the announced price followed consultations with provincial governments, differences in agricultural support programmes, procurement capacities and storage arrangements could still produce uneven outcomes.
The National Assembly's Standing Committee on National Food Security and Research had earlier recommended a minimum support price of Rs5,000 per 40 kilograms, alongside a more uniform approach to farmer assistance. The difference between this recommendation and the announced price reflects competing pressures around production costs, fiscal sustainability and consumer affordability.
A national framework must therefore extend beyond agreement on a price. It requires common standards for stock reporting, procurement transparency, market monitoring and coordination between federal and provincial authorities.
Private sector participation also deserves closer scrutiny. Its success should not be measured simply by the extent of government withdrawal, but by improvements in competition, investment and market access across the agricultural value chain. A market dominated by a limited number of financially powerful intermediaries may reproduce existing inefficiencies under a different institutional arrangement.
Greater investment in modern warehousing, logistics, grain quality assessment and structured commodity markets could help address these weaknesses. Warehouse receipt financing, supported by credible certification and appropriate financial safeguards, could enable farmers to obtain liquidity without immediately selling their produce. Farmer organisations and cooperatives could strengthen collective bargaining and improve market access.
However, private investment requires regulatory certainty, enforceable contracts, fair competition and predictable government intervention. These conditions are particularly important in agricultural markets, where decisions concerning imports, procurement and stock releases can significantly influence domestic prices.
The wheat debate must also move beyond pricing to the persistent challenge of agricultural productivity. Rising fertiliser and energy costs, water constraints, inadequate mechanisation and limited access to quality seeds continue to affect farm profitability. Periodic increases in indicative prices cannot substitute for sustained investment in agricultural research, irrigation efficiency, improved seed varieties and extension services.
Higher productivity offers a more durable means of improving farm incomes while containing food costs. Public expenditure should increasingly support these investments rather than repeatedly absorb the financial consequences of inefficient commodity management.
Consumer welfare deserves equal consideration. Wheat is not merely an agricultural commodity; it is central to household food security. Higher producer prices may improve returns for surplus-producing farmers but can also place additional pressure on consumers, particularly low-income households. The consequences also differ among rural households, since many smallholders and landless agricultural workers are net purchasers of food.
A credible policy must therefore distinguish between producer support and consumer protection. Targeted assistance to vulnerable households, alongside measures that improve agricultural productivity and market competition, offers a more equitable approach than broad interventions whose benefits are often unevenly distributed.
The government should also strengthen the availability of timely market information. Regular publication of production estimates, verified stock positions, procurement volumes and regional price trends would reduce uncertainty and support better decisions by farmers, traders, flour millers and policymakers. Transparency is essential to strengthen market confidence and limit opportunities for manipulation.
Ultimately, Pakistan cannot afford to alternate indefinitely between financially burdensome public procurement and market liberalisation without the institutions needed to support it. The state has an important role in maintaining strategic reserves, enforcing competition, supporting productivity and protecting vulnerable consumers. The private sector, in turn, must operate within a transparent framework that encourages investment without allowing market power to become concentrated among a few participants.
The success of wheat reform should not be judged by how far the state withdraws from the market, nor by the price announced before each sowing season. It should be measured by whether farmers receive fair returns, consumers can afford an essential food commodity and the market becomes more competitive, efficient and resilient.
Without these outcomes, Pakistan risks replacing the fiscal burden of an inefficient procurement system with the economic and social costs of an incomplete reform.
The writer is a policy researcher and heads the Centre for Private Sector Engagement (CPSE) at the Sustainable Development Policy Institute (SDPI), Islamabad.
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