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