New wheat support price to add Rs3b to farmers’ kitty

It will also put additional financial burden of Rs18.25b on consumers

LAHORE: The farmers in Punjab will get an additional profit of Rs3 billion on wheat sale after the federal government decided to increase the support price of wheat from Rs1,300 to Rs1,365 per 40 kilogrammes.

However, the current price of 20 kilogrammes of flour will be increased by at least Rs35 to Rs40 in April next year and the consumers will have to bear an additional financial burden of Rs50 million per day ie Rs18.25 billion annually.

Moreover, the Punjab government will have a limited carry forward stock of wheat; unlike the past, because of that, the government will have to take the exemption from the conditions of Smart Programme of World Bank (WB) once again for setting the purchase target of at least four million tonnes of wheat.

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In a recent meeting chaired by Prime Minister Imran Khan, the purchase price of wheat support price across the country was increased from Rs1,300 to Rs1,365 per 40kg, while sugarcane support price in Punjab was increased to Rs190 from Rs180 to per 40kg.

The support price of wheat has been increased after five years and the support price of sugarcane after four years.

In 2014-15, the government raised the support price of wheat from Rs1,250 per 40kg to Rs 1,300, which has not been increased since then.

Prior to this in 2012-13, the Pakistan Peoples Party (PPP) government had increased the support price from Rs1,050 to Rs1,150 while from 2008-09 the PPP government had increased the purchase of wheat by Rs100.

Similarly, the support buying of wheat in Punjab by the Pakistan Muslim League-Nawaz (PML-N) government had increased from Ra150 to Rs160 in 2013-14 and this was increased next year to Rs170 and then to Rs180 in 2015.

The annual production of wheat in Punjab is more than 18 million tonnes and by increasing the price per tonne by Rs65, the farmers will get an additional Rs3 billion. However, it will increase the financial burden on consumers.

Approximately, 1.3 million bags of flour are sold in Punjab daily. At this time, the department of food is selling wheat purchased at Rs1,300 to flour mills at a price of Rs1,375 per tonne and the government has fixed a rate of Rs808 per 20kg bag of flour.

If the current formula is also applied in the next year as well, the price of a 20kg bag is expected to increase by Rs35 to Rs40. However, it remains unclear if the government will increase the subsidy to reduce the prices further or tries to find another way to tackle the situation.

The Punjab food department will have less carry forward stock, which will require the authorities to buy at least 35 to 40 million tonnes of wheat. In this situation, the Punjab government will have to take exemption from the World Bank's Smart Programme.

Under the agreement with the World Bank, the food department of Punjab is to reduce its wheat procurement to two million tonnes in three years.

The wheat procurement is planned to be reduced to 20 million tonnes in 2020 but the PTI government, after taking exemption from the World Bank has purchased 3.3 million tonnes of wheat this year and now in 2020 it will be difficult for the government to implement the Smart Programme and will have to take another exemption from the WB.

If the official wheat procurement for the last five years is to be examined, then in 2015-16, the food department of Punjab procured 3.23 million tonnes of new wheat while it had carried forward stock of 2.6 million tonnes of wheat. In 2016-17, 3.99 million tonnes of new wheat was procured along with 2.6 million tonnes of carry-forward stock.

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In 2017-18, with a carry-forward stock of 3.6 million tonnes, 3.9 million tonnes of wheat was procured. In 2018-19, 3.63 million tonnes of new wheat was procured along with 4.6 million tonnes of carry-forward stocks.

While in the current year, the wheat procurement department of Punjab has procured 3.35 million tonnes of new wheat while it has a carry forward stock of 1.56 million tonnes of wheat.

So far this year, the food department has sold 1.5 million tonnes of wheat and has 3.3 million tonnes of more wheat. The current daily sales are more than 21,000 tonnes and the department has to deliver the wheat till April 30.

Published in The Express Tribune, December 6^th, 2019.