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June 22, 2019

Regulatory lacunas let the wheat price test new highs in Punjab

Business

June 22, 2019

LAHORE: A steep rise in wheat and its flour prices is brewing a perfect storm in the commodity market mainly due to weak monitoring and regulatory mechanism, low crop size, and robust exports through formal and informal channels, The News learnt on Friday.

The price of wheat is going up by leaps and bounds but concerned officials are simply acting as silent spectators. The price of wheat flour, which stood at Rs745 to Rs765 per 20kg bag at the start of April 2019, has now gone through the roof to over Rs800 to Rs815 per bag in Punjab. Such an ascent in the price of wheat has never been witnessed in the history, especially during wheat procurement season when the market is brimming with grains.

Following conclusion of official wheat procurement campaign, there has been a jump of at least Rs50 in the rate of 20kg wheat flour bag during the last couple of weeks. The barrier of Rs800 per 20kg bag mark has broken for the first time and it is feared that Rs850 mark is not far.

Many insiders are worried that if left unchecked, the wheat flour price would swell to over Rs900 per bag in the next three to four months. They also hinted that Pakistan might be left with no option but to import grain for making up for the shortage.

The commodity market took a worst turn when Pakistan Tehreek-e-Insaf governments in center and Punjab failed to act for controlling grain prices. Especially, federal government is criminally indecisive over restricting export or tightening the screws on the regulatory mechanism as the last meeting of Economic Coordination Committee referred the matter to a committee in an apparently dilly-dallying tactic under the influence of powerful traders’ lobby.

Punjab government, the biggest player and trend-setter of grain market is in deep slumber and seems to have no objection to movement of wheat out of the province, that too in bulk. According to an official estimate, daily, 150 to 200 truckloads of wheat from Punjab are going to other provinces. As many as 4,500 tons of wheat is being sent daily to Afghanistan and beyond alone via two checkpoints set up at border districts of Punjab. It looks like the provincial government is losing its grip and the situation is slipping out of its hands.

Punjab unwisely feels that its responsibility about wheat trade regulation is just to alert the federal government for restricting wheat export via formal and informal means. There is no regulation of wheat that is in possession of the private buyers in the province.

According to an official estimate, 2 million tons of wheat is available with private buyers including flourmill owners from fresh crop bought under food grain license. There’s evidence that influential wheat buyers have this huge quantity in their stores, although they only admit purchasing 1.3 million tons of wheat.

This wheat and the one available with other buyers should be guided towards open market instead of allowing it to end up in black market or other provinces or Afghanistan.

Punjab officially has no version over the skyrocketing wheat and flour prices. Provincial minister for food security and other government officials are least bothered to take steps for supervising the stocks available in the market. It seems they don’t want to use leverage available with the provincial food department.

There is also a dire need to curb or at least strictly regulate wheat exports by federal government in a bid to stabilise supplies into grain market. Unfortunately, there’s a lack of wise approach to deal with rapidly changing wheat market. Time is running out as this crisis may snowball into an out-of-control catastrophe, leaving administratively weak government in even deeper trouble.

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