Distortions in Prices of Food Grains in Pakistan: 1996 to 2006

The paper has examined and analyzed the domestic producer and international prices of wheat, basmati and IRRI paddy during 1996-06. The analysis has suggested deterioration in the purchasing power of these foodgrains as their annual increases fell short of the general price increase in the economy. The analyses of domestic and international prices during the study period suggest negative protection to domestic production of wheat averaging between 30-34 per cent per year, of basmati paddy varying from 12 to 20 per cent and huge transfer of resource from the producers of these crops. The comparison of domestic prices of IRRI paddy with the export parity prices, estimated at the official exchange rate, generally suggests positive protection to its domestic production averaging at 6 per cent per year. However, when export parity prices are estimated at the equilibrium exchange rate the overall picture changes to one of negative protection or implicit taxation averaging at 4 per cent per year.