FeaturedNationalVOLUME 15 ISSUE # 24

Another wheat crisis in the offing?

In view of a recent wheat and flour crisis, the government is keeping a watch on the market to prevent the situation from getting out of control. Prime Minister Imran Khan has ordered the provision of wheat at affordable prices and its unhindered availability to the common people. He directed authorities concerned to ensure its obstacle-free inter-province movement. It is feared his steps may not be enough to ward off the crisis.

Prime Minister Imran Khan instructed all provincial chief secretaries under the chairmanship of Minister for National Food Security Syed Fakhar Imam to evolve a coordinated strategy to ensure sufficient stocks of wheat in every province as per its needs along with uniform prices of wheat and flour in the federating units. The prime minister directed that farmers and the common people should be the axis of the strategy, as those involved in profiteering and hoarding in the past had deprived the cultivators of their due profit, while the common man was compelled to buy flour at higher rates. He also ordered the authorities concerned to take effective action against hoarders of sugar in light of an investigation report.

The Punjab chief secretary informed the meeting that 716 tonnes of flour and 16,0008.5 tonnes of sugar worth over Rs1 billion had been seized from hoarders and dealers. The chief secretary told the participants that the Punjab government was going to release wheat worth Rs35 billion, which would help end flour shortages as well as reduce prices of wheat and flour in a gradual manner.

However, according to media reports, the overall wheat supply situation is far from stable. It is said that if the government does not move quickly to control the situation, the country may face another flour crisis. As we know, the previous flour crisis led to a surge in the price of the commodity resulting in shortages all across the country. Reportedly, the new crisis could arise following the early release of wheat stocks by the Punjab, lack of proper planning due to the unavailability of accurate production and consumption data and non-procurement of wheat by Khyber Pakhtunkhwa and Balochistan.

It may be recalled here that the PTI government, taking notice of the recent wheat and flour crisis, had held an inquiry into the market manipulation by flour mill owners involved in cartelisation that led to a jump in flour prices. In a bid to break up the cartel of millers and stabilise prices in the local market, the Punjab had released wheat stocks early in the market instead of the end of the year as it normally does.

In this connection, important questions have been raised by experts regarding the accuracy of production and consumption data. They have also expressed concerns that the early release of wheat stocks could further aggravate the situation. As things stand, despite the release of wheat stocks earlier than scheduled, the government has not succeeded in bringing down flour prices.

It is relevant to point out here that the Economic Coordination Committee (ECC) had taken some key decisions in consultation with the provinces to respond to the emerging situation and stabilise the market. To improve the supply situation, the Punjab was asked to release 900,000 metric tonnes of wheat. The private sector was also allowed to import wheat without placing any quantitative limits. At the same time, border authorities were instructed to enforce strict measures to curb the smuggling of wheat.

In addition, KP and the Balochistan governments were asked to work out an arrangement with the Pakistan Agricultural Storage and Services Corporation (PASSCO) and the Punjab to mitigate the situation, besides engaging directly with importers to meet their requirements. The Sindh government had also been asked to share its wheat release schedule to ensure predictability and stability in the market. The conversion rate of wheat to flour was enhanced to maximise the supply of the latter from the available stocks.

Two issues have now come to the fore. One is the early release of stocks and the other is the high release price of Rs1,550-1,575 per 40 kg fixed by the Punjab. It is despite the fact that wheat was purchased at Rs1,300 per 40 kg last year and Rs50 incidental charges were added to it. This year, the incidental cost has increased to Rs175. Needless to say, the high wheat price will eventually translate into higher flour prices unless the Punjab revises down the release price through some subsidy. A further complicating factor is the veracity of data of wheat consumption and production necessary for proper planning of the supply chain activities.

It is not yet too late to initiate steps to stabilise the wheat and flour supply and price situation. Last time, the country faced a shortfall of 1.5 to 2 million metric tonnes, coupled with aggressive procurement by the government for storage. It affected the availability of the produce in the domestic market. The higher international price of Rs1,700 per 40 kg against the local price of Rs1,550-1,557 per 40 kg had also made smuggling of wheat to Afghanistan lucrative. The situation worsened further due to the non-procurement of wheat by KP and Balochistan governments. To deal with the emerging situation, a high level inter-provincial committee should be set up to monitor the stocks, movement, supply and prices of wheat in the country. If needed, imports should be ordered in advance and all smuggling routes sealed to frustrate the game of hoarders and black marketers.