Economic Welfare Analysis of State Interventions in the Sugarcane Economy of Pakistan

Abstract

The instant study of Pakistan’s Sugarcane economy identified state policy
interventions and estimated welfare effects associated with state interventions
prevailed during the study period. The study points out that Sugarcane crop had
been subjected to ‘price support-cum-import tax’ regime during both study sub
periods i.e. during 1985-1995 and 1995-2005. These interventions were found
associated with welfare effects – higher losses to consumers, Rs.142842.28
million than gains to producers Rs.134671.18 million during pre-WTO period.
Similar trend continued during post-WTO period where consumers suffered
higher, Rs.208424.66 million per year than benefit received by the producer,
Rs.199521.21 million per year. Based on the analysis, the study presents the
following recommendations. First, government interventions should be
minimized and gap between domestic and international prices should be
narrowed down till the two prices arrive at the same level. Second, trade
liberalization process should be stepped up, and more specifically, world prices
should be allowed to prevail in domestic Sugar market. Third, Government of
Pakistan should gradually reduce its role in trading through State Trading
Enterprises (STEs) and act as facilitator of trade as per WTO agreements. More
investment should be made in research and development, out-reach activities
and quality aspects of sugarcane crop.