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Punjab Govt to Cut Wheat Price, Spurring Fears of Smuggling

The Punjab government is set to announce the Wheat Release Policy 2023-24 for flour mills and set the price around Rs. 4,200 per maund.

Punjab Food Department has reportedly sent the proposal to the Provincial Finance Ministry on which the Caretaker Cabinet will make a final decision in the coming days. The proposal outlines multiple options for prices up to Rs. 5,000 per maund but the price is expected to be around Rs. 4,200.

It should be remembered that the government procured Wheat at Rs. 3,900 per maund in 2022-23, nearly Rs.1,700 higher than the previous season. The Punjab Government has nearly 4 million tons of Wheat in stock and has also requested for additional 0.5 million tons from the federal government.

But the problem is that the proposed price is significantly lower than the current market price of Wheat and some millers fear that it is a subsidy that will end up in the pockets of trading/inoperative flour mills and will lead to market distortion or worse, smuggling of the essential commodity to other provinces..

A letter written by Progressive Flour Millers Group Chairman Khaleeq Arshad and Majid Abdullah to interim Punjab Chief Minister Mohsin Naqvi cautions that the proposed release price may favor flour mills involved in illegal grain trading, a practice that has been largely curbed in recent years. There are concerns that such a decision could revive the misappropriation of wheat held by the provincial government.

Pakistan is facing a wheat production deficit of approximately 2.5 to 3.0 million tons this year. Contracts for about one million tons have already been made, and a significant quantity has been imported, helping to stabilize domestic grain prices. Moreover, ECC has also approved the importing of a million tons more on government to government basis this week.

However, setting the wheat issue price at Rs. 4,200 per 40 kilograms, against the local rate of Rs. 4,500 to Rs. 4,600 per 40 kilograms, could render wheat imports economically unviable at prevailing international rates, necessitating a substantial subsidy.

Punjab Wheat prices have experienced a significant shuffle in the past week or so. After a rumor that the Punjab Government was to release Wheat from October 15th, prices have declined by up to Rs. 200 per maund in some grain markets but further distortion is expected with the Wheat Release Policy announcement.

The leaders of Progressive Flour Mills highlighted that issuing wheat below the current market rate would require a significant subsidy, and the cost of storage and incidentals for the wheat held by the provincial Food Department exceeds Rs. 4,600 per 40 kilograms.

The millers argue that such subsidies intended for providing cheap wheat to the poor may end up benefiting inefficient millers and lower-level food department officials. They oppose what they term a poor policy decision, advocating for a market-matched issue price and liberal release of stocks, especially when government, private, and imported wheat stocks are abundant.

With the Khyber Pakhtunkhwa (KP) government already issuing wheat to its flour mills at Rs. 4,600 per 40 kilograms, there are fears that a lower issue rate in Punjab could lead to grain diversion to KP, given the lucrative price difference. Flour millers have urged the Punjab Chief Minister to prioritize this issue, emphasizing the need for targeted subsidies to the poor through specific programs and the elimination of inefficient across-the-board subsidies.

Source: Pro Pakistani

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