Zulfikar Ali Bhutto’s address to the nation on take-over of Large Flour Mill, Rice Husking & Cotton Ginning factories on July 17, 1976

My dear Countrymen:

I have to communicate to you tonight a most important decision taken by your Government. The decision is meant to transform the hub of our national economy. It flows from that commitment which is supreme and everlasting in my heart and mind. This is the welfare, the happiness and the progress of the people of Pakistan. I believe that no object can be dearer than to reduce, and eventually to eliminate, the operation of all those forces which stunt our society’s growth, cripple its energies and condemn the vast majority of our population to utter helplessness. I consider no fulfillment more gratifying than to pave the way for an upstanding, productive, vibrant future generation. I have said repeatedly that Pakistan’s strength lies in the strength of its people. If the people, the farmer bent with his toil and the nameless man in the street, are not strong, if they are caught in the vice tightened around them by the hoarder and the speculator, the racketeer and the smuggler, then the country’s strength can only be fragile, its morale low and its spirit enfeebled.

Our national economy, as you know, is primarily agrarian. One of the first campaigns which your Government therefore, launched was that of land reforms. This was an assault on feudal power. We limited the size of land holdings and redistributed the land in excess of that size to its tenants. In an area like Baluchistan, we first ended the pernicious practice of shishak and then we went ahead and liquidated the Sardari system with all its tentacles and attendant evils which had been entrenched for centuries. We exempted small landowners from the payment of land revenue. We assured the farmer of minimum support prices for wheat. We established corporations for the export of rice and cotton in an endeavor to secure remunerative prices for these commodities in a volatile international economy. We initiated schemes for fighting the menace of water logging and salinity. We devoted a substantial portion of our resources to subsidizing the inputs of agriculture. We arranged the supply of tractors. We reduced the price of fertilizer. We provided subsidies for the sinking of tube-wells. We are doing our utmost to improve the quality of seed and to extend the coverage of plant protection measures. All this effort is aimed at enhancing the productivity of our agriculture and rationalizing our rural economy.

INSIDIOUS ROLE OF THE MIDDLEMAN

But, after all this sweat and expense, after all the multiplicity of arrangements that had to be made in pursuance of these plans, we found that the end product of agriculture was still beyond social control. Why? What is the element that has so far eluded your Government’s grasp and blocked the percolation of these benefits to the small agriculturist? Who defrauds both the farmer, on the one side, and the consumer of agricultural products, on the other? Who manipulates the agricultural market? Who steals from the urban consumer the advantages of substantial Government subsidies for the provisioning of wheat? What is the barrier in the way of managing our agriculture as it should be managed in this day and age?

This element, this insidious all-pervasive force, is that of the middle-man, be he a cotton ginner or a paddy husker. For generations, the middleman in agriculture has sucked the farmer’s blood and kept the consumer whether an individual or an industry, at his mercy. He has artificially reduced the price of commodities like seed cotton and paddy, which the farmer delivers to him, and raised the price of lint, cotton seed and rice, which he supplies to the consumer. He has evaded or obstructed all our measures to secure fair rewards for the farmer’s labor. He has done so by the variety of means which are at the disposal of those who have not a trace of social conscience. He exploits the farmer’s economic weakness and he takes advantage of the glut in the market at the time of the harvest to deny him a fair price. He hoards stocks in anticipation of higher prices and an undeserved profit. He under-weighs the commodity delivered to him, mixes one variety with another, forms a league with the smuggler and establishes a black market.

My fellow citizens: I would urge you to construct in your minds the picture of the situation resulting from this economic arrangement. The poor peasant who with his family has labored over his land for months and reaped his slender harvest goes to the cotton ginner or the paddy husker to deliver his produce. He is faced with pretexts; he encounters subterfuges — all meant to deny him a fair reward. What could more demoralize the peasant and destroy his will to produce more for our agricultural economy? The prime contributor to our national economy is being strangulated by the middleman. He has no recourse; the middleman has a virtual monopoly. The grower either is underpaid or does not receive his payment in time. The ginner sifts the cotton from seed, which the grower cannot; he hoards both and eventually charges the consumer twice the price he paid the grower. This is how the middleman operates at the human level.

LESSONS FROM LAST YEAR

At the national level, the stranglehold that he maintains is no less deadly. I shall give you an example. In 1975-76 we had an exceptionally poor cotton crop. The farmer received far less than the price which this shortage would dictate. It is the middleman and, with him, the speculator who grabbed huge profits from the high prices of lint cotton. The hoarders cornered the stocks and many textile mills were denied this vital raw material for their operation. This caused unemployment and loss of production. If the middle link — that is, ginning — had been under social control, the farmer would have received a reasonable return for his investment and labor and the edible oil and textile industries would have been assured their raw materials at a stable price. Curtailment of industrial production, increase in unemployment, reduction of exports and hardship to the domestic consumer could, in large measure, have been avoided.

The picture of another of our major crops is no less disquieting. We fixed floor or support prices for the different varieties of rice. We also organized the export of rice in an endeavor to cushion our production against the shock of international price fluctuations. We had a right to expect that the benefits of these important measures would reach the paddy grower. But they did not. What happened was that the farmer was underpaid for his paddy and watched helplessly while the rice trader, who often was also the owner of a paddy-husking plant, speculated and made windfall profits.

How does this exploitation differ from what was done in early British colonial days by the textile barons of Lancashire and Manchester? The colonial power inhibited the formation of textile industry in the subcontinent. The successors, in Pakistan, of those colonial exploiters are those middlemen whose stock and trade is an equally devastating market manipulation. Unobtrusively with stealth and graft, they have successfully managed to convert a service, ginning or husking, into a potent instrument of economic hegemony. In the production cycle of our economy the mere intermediary has become the monopolistic owner and exploiter.

The case of wheat is somewhat different because wheat is procured domestically or imported by the Government and then it is milled on government account and flour is distributed through the provisioning system. The cost of the procurement and import far exceeds what the consumer pays. The difference is paid for by the Federal and the Provincial Governments. The outlay for this subsidy by the Federal Government alone amounts to about 118 crores of rupees. Why do we spend this vast sum? It is not only to assure a price for the consumer within his means but also to provide him wholesome, whole-meal wheat atta which is his staple food. However, there are leakages in the mills; maida is extracted and foreign matter is mixed with the rest. The low quality of atta which thus reaches the consumer may cause a revulsion but it can hardly occasion a surprise.

THE CURSE OF ADULTERATION

Adulteration of food is a curse which has to be wiped out from our land. I cannot contemplate with equanimity the spectacle of our men and women falling prey to undernourishment and disease because of flour milling being outside our control. I cannot tolerate this hazard to the health of our people. No progressive society will allow a public disgrace merely because it is privately owned.

For all these reasons, for eliminating the hoarding and black-marketing and the price manipulation of seed cotton, for ensuring a fair price for paddy, for eradicating the evil of the adulteration of atta, for eliminating the middleman from our rural economy, we have decided that the Government itself undertake cotton-ginning and paddy-husking operations and those flour-milling operations which relate to wheat that is meant for distribution through the provisioning system, and, to this end, assume forthwith the ownership, control and management of all units engaged in these operations. Specifically, this means that from today no cotton-ginning unit, no paddy-husking unit (except chakkis) and no roller flour mill in Baluchistan and no such mill with six or more rollers in the rest of the country will be privately owned, managed or operated.

My compatriots: The necessary laws have already been promulgated today and all administrative measures required for the acquisition of these units have been completed throughout the country. This has been done with the concurrence and support of all the four Provincial Governments. It was not a minor undertaking. You can judge its size from the fact that the number of units was more than two thousand dispersed all over the country. It should be our prayer that Allah’s blessings make this venture successful in the interest of our country, in the interest of its poor, in the interest of all those millions who look to their Government for a brighter future.

The relevant laws — namely, Flour Milling Control and Development Ordinance, Rice Milling Control and Development Ordinance and Cotton Ginning Control and Development Ordinance — are published today. You will notice that the aim is not only control but also development. This needs to be spelt out in some detail in respect of each of our three major crops.

BENEFITS OF TAKE-OVER

The nationalization of flour milling will stop the malpractices and adulteration in the production of atta which is our main food. Henceforth, at each mill, there will be drawing of samples and monitoring of the quality of atta by independent officials. Deficiencies will be heavily penalized. Further, the ratio of production of atta against the quantity of wheat provided will be worked out and anyone responsible for the shortfall will be punished. Milling charges will also be reviewed and fixed on a reasonable basis. The nationalization of rice husking will yield several advantages. First, it will guarantee a remunerative price for paddy and thus fulfill an age-old demand of the paddy grower. Second, it will enable the government fully to control the utilization of rice, rationalize its internal distribution, maintain stable prices and eliminate profiteering. Third, it will improve by modern and scientific means the quality of milling both for export and domestic consumption. The percentage of broken rice will be brought down and its qualities and grades will be standardized. The nationalization of cotton ginning is likewise aimed at bringing a number of benefits. First, as in the case of paddy, it will guarantee a remunerative price for seed cotton. Second, it will control the internal price and utilization of lint cotton and totally eliminate hoarding, speculation and profiteering. Third, by preventing admixture of different varieties, it will improve the quality of lint cotton and salvage its international reputation. Fourth, it will facilitate an effective selection of quality cotton seed for sowing. Fifth, it will enable us to use the remaining cotton seed for scientific oil extraction after removal of cotton linters. Sixth, we will have total control on the price of cotton seed and cotton oil and use the latter for the edible oil industry. By extracting cotton ginning from the clutches of the rapacious middleman, we hope to make room for technological improvements in cotton processing. The middleman’s concern is for windfall profits; ours will be for quality, efficiency and sound commercial policy. We shall not evade the social responsibility of government in advancing our economic cause. Moreover, lint cotton will now be made available at predetermined prices and the present element of uncertainty will be banished. As for cotton there will be an assured price both for the grower and the textile mill, so there will be a fixed price for the edible oil industry.

FAIR COMPENSATION WITHIN SIX MONTHS

Compensation will be paid to the owners of flour mills, rice-husking and cotton-ginning units which are now managed by the Government. Let me emphasize that, despite the manifold evils which have been perpetrated by them, despite the grievous exploitation to which both the farmer and the consumer have fallen prey at their hands, we are not expropriating them. We are taking over their assets and liabilities and will give them compensation in accordance with our established and announced policy. This compensation will he in cash for the smaller undertakings and in bonds for the rest. It is the Government’s intention that the compensation be paid as soon as possible, preferably within six months from today. In abolishing the malpractices, the hoarding, the speculation and the satta, the State of Pakistan is not acquiring any legitimate private interest. By the same token, we are solemnly committed to exempt foreign investment from compulsory state acquisition. Units which are under foreign ownership and are more scientifically managed will continue to remain in the private sector.

Two other clarifications are necessary here. First, the labour that was employed in the units which we have taken over will not be dislocated or displaced. They will have their rights duly protected. Second, the Government is aware that some of the owners of these units advanced loans and credits to the peasant, of course, usually on extortionate terms. Let me make it clear that, under the new arrangement, these credit facilities, in accordance with custom and usage will not only remain intact but be made fairer for the peasant and advanced without discrimination.

LARGEST SECTOR TAKEN OVER SO FAR

My countrymen: The decision that I have announced today involves an operation far larger than that of the nationalization of certain undertakings in the industrial sector in 1972. It is an imposing task to manage a turnover of nearly 1,400 crores of rupees. But the Government which you have elected to office is not daunted by challenges. It does not shirk innovation. It is poised to answer the call of revolutionary measures. Organizations are now being constituted to manage this vital sector of our economy. The ownership and management of ginning units will he transferred to the Cotton Trading Corporation which will make arrangements for operating these units in time for the cotton season. For rice, a Rice Milling Corporation has been constituted under the Federal Government for owning and operating all shellers, hullers and automatic plants except chakkis. It will thus process almost the entire paddy yield of the country both for internal consumption and for export. There will be no control over the movement of rice from one district to another. After retaining the quantity of rice reserved for export, the Corporation will sell rice to private trade at fixed prices relating to different varieties and specifications. In wheat, the milling capacity which we have acquired will be more than adequate for meeting the needs of the provisioning system. This will be under the ownership and management of Provincial Wheat Flour Milling Corporations in Punjab, Sindh, NWFP and of the Baluchistan Development Authority in Baluchistan. To control and coordinate these vast operations, it is necessary to set up a separate Ministry in the Federal Government. This Ministry named the Ministry of Agrarian Management is being established from today.

My fellow citizens: Let no one try to misinterpret this decision as the nationalization of an industry. I am saying this not because we fear that there is anything unethical about the nationalization of industries per se. After all, there is no morality superior to that of ensuring the people’s welfare. I am saying it only because we promised that we would not nationalize any more industries during our present term of office. Nations have blazed new trails by denouncing treaties and calling them scraps of paper. Governments discard assurances given today by devoting themselves to what they consider a worthier objective tomorrow. Aggrandizement may be evil but aggrandizement by the poor, the underprivileged and the disadvantaged is pure justice, in accordance with God’s decree and the lofty ideals of man. However, an adherence to pledges and fidelity to our assurances are woven into our creed. The decision taken today breaks no promise. The units which have come today under the State control do not belong to the industrial sector. On the contrary, they are an integral part of our agricultural economy which so far has been neither under the farmer’s control nor under the Government’s. There are a large number of processing agencies which intervene between the primary producer and the end-user and, as I said, exploit them both. In bringing these agencies under social control, we are taking a further step, a giant leap, towards the rational integration of our rural economy.

FULL PROTECTION FOR PRIVATE INDUSTRY

Since the end-user in the case of cotton is also the textile industry, which is in the private sector, today’s decision will go a long way in ensuring its better economy and sounder health. With regulated conditions, this industry will be cured of the malaise caused by the middleman’s operations. Had I any intention to nationalize any industries at the present time, what more suitable occasion could offer itself than the crisis which overtook the textile industry last year? Since, however, even before the People’s Party assumed office, we had promised that we would not nationalize this industry and a Chief Minister repeated the assurance on my behalf, we decided on a series of measures to extricate it from its difficulties. We reduced the excise duty on yarn and abolished the export duty on cloth and yarn. Could there be a better earnest of our intention to protect the industries that are privately owned?

This should leave no room for the insecurity of those with timid hearts and sagging souls who have capital to invest in Pakistan but are plagued by the morbid fear that they might be expropriated. I ask them: which is a better haven for your capital than your own country? Where do you wish to invest? Is it expedient for you to take your wealth to a country where you will be stabbed for the pigmentation of your skin? Do you consider it wise to go to countries where insurgency is rampant and civil or racial strife is smoldering and may erupt like a volcano? Is it in your interest to stake your chances in affluent societies where you will be treated as mendicants and may one day be regarded as vermin? I urge them to take stock of the whole economic environment. I wish them to exorcise ghosts which have been haunting them all these years. There are vast opportunities open to them. Let then realize that there is no safer sanctuary for their capital than Pakistan.

My brothers and sisters: As I speak to you tonight, I bow my head in gratitude to Allah for taking us out of the dark tunnel through which we passed and giving us the clear vision and the confidence to march towards fresher goals of collective action. Nothing but His guidance and blessing, the forward-looking attitude and diligence and devotion of your Government and the courage and resilience of the people of Pakistan could have furnished us the strength to hold our head high in the world. It is not fortuitous that a broken country is now considered a citadel of stability. It is not an accident that a tattered economy is being transformed into a solid fabric — despite calamities like floods and drought and the worldwide economic recession and inflation. Strengthened as Pakistan is, we are now devoting our attention and energy to remove whatever obstacles to our progress there still remain. The decision I have announced tonight goes beyond what we visualized in the manifesto of the Pakistan People’s Party. Were I swayed by electoral considerations, I would have reserved the appeal of this decision for the Party’s manifesto for the next elections. But that is not the way I operate. Whenever a shortcoming is to be overcome, an irrationality to be ended, an evil to be eradicated in order to modernize our society and reinforce our economy, we in your Government do not prevaricate. We do not temporize. We do not fear an addition to our burden. We do not shelve decisions after a proposal has been examined and found feasible. This is our orientation and this is our record. I let the people judge. In their judgment, I feel completely secure. They will understand that this is a step taken to fulfill in part my solemn pledge to the people of our country, that we will concentrate on food, shelter and clothing and that the economy of Pakistan will be set on this course, thus enabling, if not you, but Insha’allah definitely your children, to hear the ring of truth in the pledge of Roti, Kapra and Makan. They say Rome was not built in a day. A broken Pakistan cannot be built in one small term of a Government in a matter of four years. But we have the resolve to proceed ahead to fulfill our objectives according to the highest aspirations of the people of Pakistan.

Pakistan Zindabad.