PAKISTAN REVIVES THE RATION CARD

UNCLAS ISLAMABAD 000669

SIPDIS

SENSITIVE

SIPDIS

USDA FOR FAS/OCRA/RADLER/HIGGISTON/MEARDHRY, OCBD/FREITAS AND
OFSO/DEVER

E.O. 12958: N/A
TAGS: EAGR ECON ETRD PK
SUBJECT: PAKISTAN REVIVES THE RATION CARD


1. (SBU) Summary: On February 8, 2008, the Government of Pakistan
(GOP) launched the Bachat Card, a food rationing program which
allows low-income Pakistanis to purchase five staple food products
at subsidized prices through the government-owned Utility Stores
Corporation. Flour, ghee and cooking oil, sugar, rice and pulses
will be available to the eligible poor at below-market rates.
Nearly 20 years ago, Pakistan abandoned an earlier ration card
program due to corruption. End Summary.

2. (SBU) On February 8, 2008, President Pervez Musharraf launched
the Utility Store Bachat (Savings) Card scheme, aimed at providing
essential food items at reduced rates to 6.8 million poor
households. The decision to initiate a food security support system
was in reaction to high food inflation that has gripped Pakistan
since early 2006. In December 2007, food inflation reached as high
as 12.2 percent. The President and caretaker Prime Minister
distributed the ration cards to a target group at the launching
ceremony in Islamabad. The Bachat Card program plans to provide a
subsidy of Rs. 36 billion (USD 6 million) annually. Five staple
food products - wheat flour, ghee and vegetable oil, sugar, rice and
pulses - will be made available at 42 per cent less than the
prevailing market rates and 25 per cent less than the prevailing
Utility Store prices.

3. (SBU) This program allows eligible cardholders to purchase flour
at Rs. 9 per kg (USD 0.15) and sugar at Rs. 15 per kg (USD 0.25).
The GOP-supported market price for wheat flour is Rs. 14 per kg (USD
0.23) and Rs. 25 per kg (USD 0.42) for sugar. There are also plans
for a joint venture between the Utility Stores Corporation and a
private firm to supply clean drinking water at Rs. 3 per liter (USD
0.05) compared to the market rate of Rs. 22 per liter (USD 0.37).
Bachat Card holders will get five liters of water free of cost with
their purchased items. The ration card can be used only through
Utility Stores, which are administered by the Ministry of Industries
and Production. At present, there is a network of 4,500 Utility
Stores throughout Pakistan. The GOP intends to increase the number
to 6,000 by the end of March 2008.

4. (SBU) While the program has been initially launched in Islamabad,
plans are to expand it to other regions of the country to reach the
2 million poor families registered with the Bait-ul-Mal (House of
Treasure -- the social security network),followed by 2.4 million
households registered with the Directorate of Zakat and Usher (the
mandatory annual Muslim tithing payment to the poor) under the
Ministry of Religious Affairs. In addition, another 1.8 million
poor families would be covered in the third phase of the scheme. In
total, 38 million Pakistanis are the target beneficiaries - nearly
one quarter of the population.

5. (SBU) Comment: A similar ration card system was abandoned about
20 years ago after charges of mass corruption. A 1986-87 study of
the ration shops indicated that 80 per cent of the total subsidy
available was pocketed by Food Department officials, while only 20
per cent of the subsidy reached the target population. Critics
argue that the new Bachat Card program could open the floodgates of
corruption once again. At present, the 37 million Pakistanis who
fall below the poverty line live primarily in rural areas; however,
the majority of Utility Stores are located in urban areas.

6. (SBU) Comment continued: About half of Pakistan's population is
considered poor and vulnerable. Critics argue that the new system
is an acknowledgement that recent programs to help the neediest have
failed to make a difference. The success of the new Bachat Card
will depend on the ability of the GOP to reach the poorest of the
poor while controlling the corruption that engulfed similar projects
in the past. End Comment.

PATTERSON