Spike in flour prices, wheat shortage on the heels of procurement staggering

Islamabad : The surge in the prices of wheat flour in Punjab and Khyber Pakhtunkhwa (KP) and shortage of grains in KP has turned out to be surprising as the annual procurement of the commodity has just concluded in the four provinces.

There are more than sufficient stocks of wheat available in government stores at the moment, providing no justification for increase in prices and wheat shortage for flour millers. However, in view of lesser yield this year for various reasons, such a situation may arise after a few months if wheat was not imported on time.

During a chat with The News, Federal Minister for National Food Security Syed Fakhar Imam suspected that some vested interest has created the prevailing state of affairs. He said wheat will have to be imported but preferred not to give any estimate. “The international wheat prices are more than those of Pakistan, which such elements want to exploit as there is attraction for them in the global market.”

In KP, he said, there has been some 40pc less production this year. He said overall there was less produce because of the climate change especially untimely rains in March and April and yellow rust attack. In Punjab, he said, the wheat procurement has been one of the highest compared to previous years. Sindh has also met the procurement target.

Punjab Food Minister Aleem Khan has admitted in two tweets increase in flour prices. “Farmer brothers have been paid full compensation for their hard work in the wheat procurement campaign and they fully benefited from it. Better price for wheat resulted in hike in flour prices for which the food department has devised its line of action. Recommendation has been sent to the government that the food department be allowed to import wheat so that the wheat requirements of KP and southern areas of Punjab be met. It has to be assured that the commodity is available in surplus in the province so that there is no shortage and the prices remain stable.”

An official said that price hike and wheat shortage immediately after the procurement ended is astonishing. Generally, no such things happen in the first few months of the procurement. It is stated that in KP a 20-kg bag of flour is being sold for Rs1,500 while it costs around Rs1,000 in Punjab. These rates are higher than the price fixed by the governments. The “nanbais” have also increased prices.

Sources said that over the past few weeks, the KP government has persistently urged the Punjab administration to lift ban on wheat movement to its province. The concerned KP officials are in constant touch with their counterparts in Punjab on this issue on emergency basis to avoid any unrest.

Officials explained that three factors were always important in the context of use of wheat produced every season: One is the procurement done by the federal and provincial governments to achieve their targets. Second is the domestic consumption - the farmers retain certain quantities for their own use, for seeds and for farm labour that is paid in kind instead of cash for the work it has done. Third is the “market surplus” – the commodity that the grain dealers, miller and “Chakki” owners purchase. If the government, to meet its procurement target, takes away the grains, falling in the last two categories, the shortage of wheat and price hike is bound to take place. This is what has happened now, the official said.

In Punjab, Aleem Khan has led an aggressive campaign to hit the target, and in several cases raids have been conducted by the district administrations to recover wheat stocked by different persons.

Normally, the official said, the government doesn’t release wheat from its strategic reserves before October. It had been done in the past that the Punjab had been allowing the KP and Balochistan to procure wheat for their use from its areas knowing that these two provinces are short of commodity. The KP is traditionally largely (more than 70pc) dependent on Punjab, he said.

One argument is that large quantity of wheat is smuggled to Afghanistan and Central Asian States out of KP. However, the KP’s stand is that it is the federal government’s responsibility to control and manage the borders to stop smuggling and the subject doesn’t fall in the province’s domain.

The official said that currently the “circular debt” of wheat is around Rs400 billion with its major share belonging to Punjab. When the food departments procure wheat every year, the State Bank of Pakistan (SBP) creates a consortium of banks for commodity finance. The farmers are paid by it while the federal and provincial governments get the wheat.

The government also spends considerable funds on storage and fumigation, and releases wheat to millers after October on subsidized rates. Thus, less than what the banks have paid is repaid to them. This results in circular debt. Every year, only Punjab allocated in its annual budget some Rs30 billion to pay interest on its part of this debt.

The Punjab Food Department has also stated that no ban has been clamped on transportation of wheat products to KP as flour is being dispatched by certain flour mills. Wheat movement can never be banned to any province as per the Constitution, it said, adding that keeping in view the KP’s demands, Punjab will arrange 0.5 million tons wheat for this province. The Punjab food department is facilitating flour supply to KP by issuing special permits.

But the KP flour millers have threatened to start a protest along with their workers if the ban on inter-provincial wheat supply was not lifted forthwith.