Govt urged to announce private wheat policy

LAHORE : The current grain sector situation calls for a comprehensive private wheat and flour milling policy.

The upcoming month of November is critical as farmers will be making decisions regarding wheat sowing and crop selection for investment. This year has been challenging for wheat farmers, particularly since the Punjab government opted not to purchase wheat from growers, despite the federal government setting a minimum support price of Rs3,900 per 40kg. This decision has forced farmers to reconsider which crops to plant for better returns, said Progressive Flour Millers Group here Saturday.

The government's unexpected stance has severely impacted farmers, leading to a drastic decline in wheat prices from Rs4,000 to Rs2,500 per 40kg. Flour millers, stockists, and middlemen have also suffered, as they were compelled to buy stocks at elevated prices and later average their costs.

In this backdrop, should farmers choose to reduce their wheat sowing this year, we may face a diminished crop yield, necessitating imports and diverting our valuable foreign reserves to foreign farmers instead of those in Punjab, warned Majid Abdullah, president of the group.

While the drop in wheat prices has benefited urban consumers, with atta prices falling by approximately 50%, the Punjab government's decision to eliminate the wheat subsidy and withdraw from wheat trading is a positive step. However, it requires refinement through the prompt establishment of a comprehensive private wheat policy for flour millers, who will assume the responsibilities previously managed by the Punjab Food Department. This half-hearted approach will not enhance the reputation of the outgoing food department, which has attempted to manipulate the free market through administrative measures, such as setting wheat prices at Rs3,000 and atta prices at Rs1,730 per thella, contradicting the minimum support price notification of Rs3,900 per 40kg, he observed.

He was of the view that the free market, driven by the principles of supply and demand, is likely to yield optimal outcomes for farmers, millers, and consumers alike. Given that wheat is a fundamental food source, it is essential to safeguard farmers to motivate them to increase production for urban areas, thereby restoring their confidence. Farmers must be assured that millers will purchase their wheat, ensuring they are not left without buyers.

The Minimum Support Price (MSP), Abdullah said, typically set by the federal government, is intended to guarantee a baseline purchasing price for wheat for provincial governments involved in procurement. If procurement ceases, the MSP should also be eliminated. The pricing of wheat at harvest time should be dictated by market dynamics, including demand, supply, and crop yield, similar to other crops like corn, rice, and sugarcane. The federal government should ensure that all provinces adhere to this approach to prevent regional discord, particularly when some provinces continue procurement while Punjab does not.

The establishment of the Punjab Price Control and Commodities Management Department has replaced the Food Department, consolidating various relevant agencies under a single entity. The flour milling sector must be prepared to fulfill its responsibilities. Flour mills should be incentivized to enhance their wheat storage capabilities by investing in silos, with no import duties on these structures. The milling industry is well-positioned to take on this challenge and can effectively replace the outdated government-controlled wheat trading system, he added.

Millers require government assistance to develop the necessary infrastructure and legislative framework to support a policy of non-procurement and privatization. This approach will help prevent future issues with unscrupulous millers and corrupt lower-level officials from the food department, which could lead to a significant erosion of trust and infrastructure.

Efficient flour mills have the potential to assume the responsibilities of the food department, provided they receive timely support. It is crucial to focus on enhancing the private sector's capacity for storage and financing, especially since the exit of major public sector players has created a gap, leading to a decline in wheat prices. Banks should assist flour millers in adapting to their new storage responsibilities, which are necessary to compensate for the food department's storage capabilities. The State Bank should implement a comprehensive wheat stocking banking policy that includes offering subsidised lines of credit to the private sector for purchasing wheat from farmers during the harvest season, Abdullah stressed.

Additionally, the export of wheat and wheat products should be permitted year-round, allowing the flour milling industry to access international markets and alleviate current inventory challenges.