Dilemma over wheat price

As the annual wheat harvest draws near the government wrangles with setting a procurement price for the grain which aims to balance the cost of inputs with the final price of flour in the market to keep it affordable for the vast segments of the population. Like every year, the government is mulling its options on providing subsidy to keep the prices of wheat – the basic ingredient for bread – low or to pass on the increased cost to the public. The Punjab Food Authority has suggested keeping price locked at Rs1,300 per maund (40 kilogrammes) at the bare minimum after its earlier suggestions to raise it to Rs1,350 were rejected by the government. Only a few months ago, the government had decided to maintain for a fifth-consecutive year the wheat support price at Rs1,300 per kg where the government had conceded that farmers were earning a meagre 2% as profit.

But now, the government has locked horns with the PFA to further lower this rate. The PFA, though, is refusing to budge. The main reason for this is that there are some voices in the federal cabinet who are afraid of provoking another backlash from the public after it has raised fuel prices, power rates and allowed the exchange rate to slip to the highest it has ever been. To make matters worse, there is pressure on the government – which just saw its finance czar walk out – to decide this price quickly so that flour mills can start their procurement. The government must now decide, and quickly, whether it wants to set a lower wheat procurement price or whether it is ready for another round of expensive subsidies to keep the masses undisturbed. Or is it strong enough to embrace the backlash of hikes in wheat prices.