Pakistan begins liberalising wheat market amid resistance

September 19, 2021

LAHORE: After policy go-ahead, Pakistan has started liberalising grain market with 'realistic' wheat release price, to the utter annoyance of a group of shady flour mills that has launched a...

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LAHORE: After policy go-ahead, Pakistan has started liberalising grain market with 'realistic' wheat release price, to the utter annoyance of a group of shady flour mills that has launched a campaign against the move.

Taking cue from the policy approved by the federal government last week, the Punjab government has set precedence for embracing liberalised wheat market after fixing realistic release price of Rs1,950/40 kg for the flourmills against the support price of Rs1,800/40kg.

According to an estimate, the average buying price of private wheat during harvesting season ending June 2021 has been less than Rs1,925 per 40kg and prevalent price in the open market ranges between Rs2,160-2,200/40 kg. So, there will be little charm for the flour mills to illegally trade officially released wheat in the open market.

And that was the reason a group of flour mills allegedly involved in misappropriating subsidised wheat was opposing grain issuance policy 2021-22 on one pretext or the other, said market insiders.

Punjab on Saturday asked flour mills to submit documents for launching wheat releases from Monday, (September 20, 2021). All flour mills have been asked to submit authority letter and vaccine certificate. As per latest wheat policy, there will be a quota of 40 sacks per flourmill body at the rate of Rs1,950/40 kg.

Moreover, the provincial food department has made it clear there would be no quota for the flour mills having arrears pending or challenged in the court. Similarly, there is no allocation for the non-functional mills. The rest of the mills will be issued an advance challan after completing documentation today (Sunday) in order to issue quotas to respective flour mills.

As issue price has been fixed well above the support price and relatively little difference left with prevailing grain prices in the private market, “we are heading towards a practical liberal wheat market”, said a market insider. “Yes, it seems to be true, while keeping in view emerging trends in wheat market.” “Liberal wheat market simply means it tends to function without any visible intervention and only market forces will determine demand and supply dynamics and price fluctuation independently,” he maintained.

A progressive group of flour mill owners have long been vying for introduction of liberal wheat releases to flour mills, which is one aspect of a truly liberal grain market.

Majid Abdullah, an owner of a leading flour brand said the government’s intervention in wheat market always led to distortion due to multiple reasons.

“Today, the provincial food department has over four million tons of wheat coupled with a stock of one million tons with the flour mills, which is ample for liberal releases throughout the season ending in April 2021.”

He said, however, certain mills, allegedly involved in illegally trading official wheat hand in glove with the department, were scaring the decision-makers to not go for liberal.

“If I get wheat as per my requirement from the food department, I would certainly not go for purchasing grains from non-functional mills.”

Hence, liberal releases would weed out the inefficient millers besides making their group a thing of past in addition to clipping wings of unruly officials involved in malpractice of systematic wheat pilferage, he said.

Majid was of the view that the government had rightfully allocated subsidised wheat separately for the downtrodden.

“Hence, the price of subsidised flour will be available at last year’s rate of Rs430/10 kg.

Khaliq Arshad, a veteran leader of progressive group of flour mills said there would be a win-win situation for producer, processor, and consumer if market was allowed to run freely. Arshad also favoured population-based wheat releases in districts saying this step would help avoid embezzlement of officially released grains.

However, he demanded that wheat grinding charges needed to be revised on account of increase in operation cost due to successive energy tariff revision, hike in labour cost and high tax rates. On the other hand, the ruling group of flour mills association has opposed wheat release policy on the basis of pollution of the respective districts. A leader of the association said flour mill owners would not lift the quota from Monday.

It may be noted that The News on September 10, 2021 broke a story about Wheat Release Policy 021-22 (https://www.thenews.com.pk/print/890251-rs100-drop-in-20kg-flour-price-expected-next-week). As a result of the new issuance policy, a decrease in flour price by about Rs100/20kg bag is expected.

At the same time, wheat quota for targeted subsidy is said to be enhanced substantially, offering flour to low-income groups at the last year's rate of Rs860/20kg. Hence, there will be two rates of flour in the province under the proposed wheat release policy of the provincial government. The low-income group can get flour at the last year's rate of Rs43/kg in specially designed 10kg bag at Rs430 while the rest of the population would buy flour at Rs55/kg or Rs1,100/20kg against the present rate of Rs65/kg or Rs1,230/20 kg. More, importantly, this step under the guidance of the federal government would help eliminate distortion from the market, making possible uniform flour rate in the whole country.



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