Khalid Masood Khan
Punjab’s recent attempt to deregulate the wheat market was meant to signal bold reform and fiscal prudence. Instead, it has turned into a textbook example of what happens when governments abandon legacy systems without laying the groundwork for what comes next. Far from ushering in a new era of efficiency, the move has sparked confusion, financial loss, and growing distrust in the very idea of market-based reform.
At its core, the decision to step back from wheat procurement wasn’t flawed. For years, public procurement in Pakistan has been riddled with inefficiencies, political interference, debt burdens, and leakages. Reform was long overdue. But reform isn’t just about withdrawing the state—it’s about replacing outdated systems with functional, well-communicated alternatives. Punjab, unfortunately, did the former without doing the latter.
In its eagerness to impress development partners and reduce fiscal pressure, the government exited the market abruptly—without establishing a proper floor price mechanism, without creating support structures for farmers, and without providing clarity on how small and medium growers could navigate a deregulated environment. What resulted was not market liberalization but market breakdown.
The absence of a state-backed buyer at harvest time—historically the cornerstone of pricing expectations in rural economies—left farmers adrift. Even when procurement didn’t materialize in full, its mere announcement helped stabilize prices and guide decision-making for both growers and traders. Without that psychological and operational anchor, the wheat market fragmented, leading to sharp price drops and financial distress for producers already operating on thin margins.
Worse still, the timing of the reform was poorly chosen. Right before harvest, the government dumped public wheat stocks into a weak market, crushing prices further. Meanwhile, the Electronic Warehouse Receipt (EWR) system, touted as a modern solution, was introduced without practical support. For most farmers, especially smaller ones, EWR was less a financial tool and more a bureaucratic puzzle. They didn’t need paper-based instruments or commodity speculation—they needed liquidity and fair prices. Neither was delivered.
To make matters worse, this sweeping reform was launched with minimal consultation. Farmers, arthis (middlemen), traders, and even local bureaucracies were left in the dark. No one was told what to expect, how the system would work, or what role they were expected to play. There was no communication strategy, no political groundwork, and no transition plan.
There were obvious first steps that could have built confidence. Removing artificial price caps on flour and roti would have allowed for more honest grain pricing. Liberalizing trade—especially imports and exports—would have helped local markets find a stable price benchmark, anchored in international parity. This would have sent a strong signal to growers and traders alike, showing that pricing would now reflect real supply and demand dynamics, not political optics.
The EWR system could have been rolled out more intelligently. Instead of pushing it as a financial innovation, it should have been tested in small, controlled pilots—tied to input financing and harvest-based repayment cycles. This closed-loop model would have created self-sustaining capital flows and offered farmers a practical way to manage their financial needs without being overwhelmed by speculation or bureaucracy.
Support to aggregators—those who bulk-buy crops and move them through supply chains—could have been offered conditionally. Any subsidies for storage or markup support should have been tied to proof that they paid farmers above-market rates via traceable banking channels. This approach, already used in sugarcane payments through CPR-backed systems, wouldn’t require massive fiscal outlays and would ensure that support actually reached farmers.
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Of course, such changes would likely cause some short-term pain. Urban consumers might face higher flour prices. But rather than hiding from this trade-off, the government should explain it openly. Pakistan’s domestic wheat prices are currently at a four-year low—well below the cost of imports. Growers have suffered huge losses this season, and no subsidy can undo that damage. If we want food security, urban consumers must share in the burden, at least temporarily.
Perhaps the most critical point is that legacy systems exist for a reason. They may be inefficient, but they’ve endured because they serve certain core functions—often providing stability in fragile rural economies. Reforming or replacing them requires not just policy precision but political choreography. You can’t just yank out a system that touches millions of lives without a plan to earn their trust in what comes next.
When reforms are rolled out without proper sequencing, without communication, and without visible wins for stakeholders, they don’t just fail—they backfire. They don’t just hurt the politicians who launched them; they discredit the entire idea of reform. They feed public cynicism, give strength to vested interests, and allow those resisting change to say, “We told you so.”
Punjab’s wheat market reform didn’t fail because the vision was wrong—it failed because the government forgot to build the bridge from the old system to the new one. There was no ladder, no scaffolding, no guide rails. Just a leap into uncertainty.
For deregulation and market-based reform to succeed, benefits must be tangible, clear, and evenly distributed. Farmers need to see better prices. Arthis and aggregators need clarity and incentives. Consumers need transparency and explanations. Until everyone in the value chain sees why reform is better than the status quo, resistance will persist—and future reform efforts will struggle to gain credibility.
What Punjab needs now isn’t just a policy reset—it’s a political reengagement. One that treats stakeholders as partners, not afterthoughts. One that respects the complexity of agricultural markets and understands that timing, trust, and transparency are as critical as any fiscal goal or World Bank recommendation.
Until that happens, market reform will remain a broken promise—haunted by good intentions, undone by poor execution.
