ISLAMABAD: Though the government has increased wheat support price by Rs50 per 40 kg after a hiatus of five years, the farmers of Punjab may not get any incentive because of higher cost of production and government’s efforts to avoid further rise in flour prices which can spark protests.
Wheat is a major food crop and its adequate production ensures food security in the country. The Economic Coordination Committee (ECC) of the cabinet sets the minimum support price for wheat every year.
Last year, the price was kept unchanged at Rs1,300 per 40 kg in an ECC meeting held on July 11, 2018. This year, the government has set the price at Rs1,350, but the cost of production in Punjab has been worked out at Rs1,349.57 per 40 kg, which is equal to the support price.
Govt to provide Rs16b subsidy on wheat cultivation
However, Sindh farmers will get some relief as the Agriculture Policy Institute (API) has calculated the production cost in the province at Rs1,315.72 per 40 kg.
A senior official of the food security ministry told The Express Tribune that the API had worked out the cost of production of the 2019-20 wheat crop in a bid to determine an appropriate support price for the next crop. For the purpose, major factors like world wheat supply situation, cost of production, export and import parity prices and domestic producer prices are taken into consideration.
Southern Punjab is a big producer of wheat crop and chief minister of the province also belongs to that region. However, Punjab had opposed any increase in the support price and called for keeping the price static at Rs1,300 per 40 kg, which was even less than the cost of production in the province.
Farmers had been bearing the cost of gas infrastructure development cess (GIDC) since long, but the current Pakistan Tehreek-e-Insaf (PTI) government waived cess worth billions of rupees, which was due to be paid by fertiliser producers. However, criticism from the people forced the government to take back its decision.
The Ministry of National Food Security and Research told the ECC in a recent meeting that the support price had been discussed by the wheat review committee when it met on October 17, 2019 at the ministry. In the huddle, API’s calculations were shared with provincial governments and they were requested to provide their input on the wheat support price for crop year 2019-20.
The Punjab government called for keeping the support price at the previous level of Rs1,300 and argued that any price hike would spark calls for increase in flour prices in the market. This could trigger unrest in the country as flour prices were closely linked with the wheat support price, it said.
The other three provinces, however, did not share their views on the support price.
Earlier, keeping in view the world market situation and fluctuating cost of major farm inputs, the minimum support price had been left unchanged at Rs1,300 for the past five years.
According to the International Grains Council, London, the world wheat production would slightly go up to 762 million tons in 2019-20 as compared to 733 million tonnes in 2018-19. The global wheat trade and consumption would, with a slight change, stay at 173 and 756 million tonnes respectively, it said.
After five years: ECC increases wheat support price
The food security ministry suggested in the ECC meeting that as wheat sowing had commenced in southern parts of the country, it would be prudent to announce the minimum support price for the 2019-20 crop.
The Cabinet Division secretary noted that the support price provided an incentive for the wheat growers and also ensured price stability in the market.
The Finance Division pointed out in the meeting that the Sindh government had not procured wheat in time. Now, wheat was being provided to the province from stocks of the Pakistan Agriculture Storage and Services Corporation (Passco), it said.
Apart from that, a substantial subsidy was being given to the province on account of incidental charges by the federal government, which put burden on the public exchequer.
It was suggested that all the provincial governments may be directed to make timely procurement of wheat according to their requirements. In case of failure, no subsidy would be given to the provincial governments on purchase from Passco stocks.
The ECC endorsed the proposal and said since the minimum support price had been maintained for the past five years and the production cost had gone up, Rs1,350 per 40 kg would be a reasonable support price for the wheat crop.
The ECC also directed the food security ministry to convey to the provinces to timely procure wheat and the federal government would not offer any subsidy on incidental charges while procuring the commodity from Passco.
Published in The Express Tribune, November 27th, 2019.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.