Wheat release price increased massively

Finance Minis­ter Shaukat Tarin disclosed more than 32 per cent increase in the issue price of wheat. This is from Rs1, 475 to Rs1, 950 per 40kg for release to mills. The government would provide direct cash subsidy to the affected population on four necessary commodities like wheat, sugar, ghee and pulses. The government would also launch this year cut down Kamyab Pakistan Programme to support 6 million households. The trade deficit, had increased and could put pressure on balance of payment, but there was nothing to worry about because it was manageable. Higher trade deficit was $400 million worth of vaccine imports, which had been financed by the Asian Development Bank and World Bank, had net zero impact on trade. Imports by the automobile sector also put weight on balance of payment. But this was however was able to be managed. Finance minister stated that government would provide direct cash subsidy on wheat flour, sugar, pulses and ghee. The finance minister comforted the public that wheat flour prices would drop over the next few days. Rs1,950 per 40kg release price did not satisfy the government which was still providing about Rs100 subsidy on it as the actual cost worked out to Rs2,040 per 40kg.
The government would introduce this month a targeted subsidy plan to provide direct cash subsidy on wheat flour, sugar, pulses and ghee. This would meet the needs of about population in the lower section of the population. The government did not have that sort of targeted subsidy before. The subsidies have so far been limited to electricity and gas. The direct cash insertion would be made through Ehsaas data which was not available so early. The government had stopped the issue price for wheat in May this year because of arrival of fresh harvest but was being resumed now. The targeted cash subsidy was a short-term measure to protect exposed people and would be followed by medium- to long-term measures like construction of commodity warehousing, cold storages and agricultural malls to form a direct link between farmers and customers by removing the role of middlemen. The world commodity prices had increased much higher than in Pakistan and food inflation had dropped by 5percent and 8percent for urban and rural consumers from 15 percent and 18 percent to 10 percent and 9 percent, respectively, since July last year.
Besides the influence of universe commodity prices, a huge devaluation of the rupee from Rs104 to about Rs167 against the dollar and height of 13.25 percent discount rate under the IMF programme led to restricted economic activity. This showed in lower income levels and hence the impact of inflation in Pakistan was felt more than other parts of the world. Public debt levels increased by Rs1.5 trillion to Rs2.9trilllion and in three years from Rs25.7trillion in 2018 to Rs39.9trillion in fiscal year 2021 that is Rs7.7trillion in first year of the present government, Rs3.7trillion in second year and Rs3.5trillion in third year. State Bank’s reserves have increased from $10billion to $20billion. This also included $7billion from the IMF and $4-5billion of Eurobond.
The policymakers had always been talking about guarantee international commodity prices for Pakistani farmers to increase production and income levels, but this time Pakistan had to import sugar, ghee, pulses and wheat and Pakistan became a net food importer.
There were certain food crops like onions, potatoes and tomatoes in which Pakistan was suitable in its position as it also exported these besides local consumption, but were influenced by global prices and more importantly due to 400 percent profit margins by the middlemen. The government was also doing some process re-engineering based on of scientific studies to control middlemen’s interest. The past government took no interest in agriculture sector for about twenty years that destroyed the farmers and Pakistan became a food importer. The increase in income levels would have nice effect while the government introduced Kamyab Pakistan Programme within this year to support four to six million households.The average wheat flour price has shot up by 20percent in the last one year in spite of government subsidy. Further the prices of other kitchen essentials consumed by low-income families have risen by above 13percent in one year. Under the Ehsaas programme is commendable but it offers only a temporary ease. It needs to be followed up by relevant steps to remove poverty and encourage incomes through restructuring of the economy and job creation.
Sindh has so far procured around 750,000 tonnes against its target of 1.4m tonnes. The experts believe Sindh, which drew political support of offering higher price of Rs2, 000 per maund against Rs1, and 800 by Punjab, might not be interested in going beyond the figure of 750,000 tonnes due to price factor. Sindh would be happy to save as much money as it can by keeping its procurement as low as possible, knowing well that it could later get cheaper wheat from Punjab.
Sindh’s procurement, price difference may put pressure on Punjab.
This is in spite of the fact Pakistan is hoping for more than 27million tonnes, and Punjab is claiming to top 21.70million tonnes against 19.40million tonnes last year. Pakistan produced 24.94million tonnes of wheat last year, but ended up importing 3.61million tonnes at a cost of $983 million to keep the supplies intact. As this season is concerned, the experts from Punjab think Sindh may throw the spanner in the procurement and supply chain efforts. Despite having a target of less than half of the Punjab’s procurement goal, Sindh authorities have not been able to achieve more than 53.57pc of its 1.4m tonnes target. Interestingly, Sindh had started procurement a month ahead of Punjab and was offering a rate of Rs2,000 against Rs1,800 per maund in the Punjab.
As mills in Sindh would naturally need this 750,000 tonnes of wheat and probably be fed from South Punjab, the private supplies may dry quickly. Since the province has procured wheat at a higher price, it would also be releasing it at a higher rate, close to Rs2,100 per maund, offering better prospects to traders in the south. All this would generate pressure on the Punjab and may rig its calculations, warns a miller from Lahore. The Punjab would do better to purchase more, beyond its current target, or else it may find itself in an uncertain and challenging situation later this year, he warns.
Second layer might be added by the over-optimistic calculations about the crop size, claims Majid Abdullah, another miller from the city. “Yes, crop size looks better if overall situation is any measure of it. The food department achieved its target easily, without any hassle. The millers got supplies for daily grinding smoothly and also made extra purchases of 750,000 tonnes. But one should not forget that rate of wheat did go up during the procurement month by Rs100 per maund from Rs1,800 to Rs1,900, which points out that picture was not as rosy as the official departments insisted. The millers would also be purchasing another 750,000 tonnes to complete their 1.5 million tonnes need for the season. How market would behave after Eid when the millers make purchases will complete the story of actual crop size,” he says.
The Punjab crop reporting service is yet to offer any credible explanation of its claim of additional two million tonnes of wheat in the province, a trader from Lahore, Mohammad Ramzan says, adding that the only scientific reason it has given is that wheat area increased by 3.25 per cent this year. But he warns it is still to come up with per acre yield figures, which can explain this over two million tonnes addition as until those figures are measured, firmed up and shared, uncertainty would continue hovering over wheat market at least on 21.70m tonnes production figures.