CCP seeks changes in wheat policy

Asks govt to address distortion that is leading to commodity shortage

Our Correspondent August 27, 2020


Pakistan can overcome 1.5 million tons of wheat shortage without importing it with just one stroke of a pen that will also help improve the quality of substandard wheat flour, said Competition Commission of Pakistan (CCP) on Wednesday.

Wheat flour mills are allowed to extract 35% bran and other products from wheat and if this permission is withdrawn, there will be immediate availability of 1.5 million tons of wheat flour, said the CCP.

The anti-trust watchdog has issued a policy note, asking the government to address the issue of distortion in the wheat sector that is leading to shortage of the commodity and provision of substandard wheat flour to the consumers.

After first exporting 5.5 million tons of wheat, including 1.8 million tons of its products, the Pakistan Tehreek-e-Insaf (PTI) government is now in the process of importing 1.5 million tons of wheat. However, so far, the grain could not be imported due to a lack of clarity over funding and subsidies.

There is a need to enhance supply of wheat flour through production of whole wheat flour against the quota issued at subsidised rates by the government, the CCP recommended to the government.

As per wheat release policy of the government of Punjab, the mills are allowed to extract 65% wheat flour and 35% other products. However, in temptation for higher profits, the mills even exceed the limit and add moisture to wheat flour to enhance the weight.

“The regulatory monitoring is not much effective and mills take advantage of it,” according to the CCP.

According to market sources, the flour mills at large intend to increase the moisture levels of wheat flour, therefore, compromising its quality, it added. “This is done to make unfair profits as increasing moisture content adds to the weight of wheat flour.”

“The larger roller flour mills prefer to focus on producing more maida and fine flour, given their higher market value and consumption in more refined products,” said the CCP.

The CCP stressed that provincial governments should enforce labelling requirements stringently to prevent consumers from being misled - improve quality and protect consumers. It must carry details like moisture (if added or not) and extraction (if done or not).

The implication of this behaviour is not only for the price and quality of wheat sold to end-consumers, but it also reduces the shelf life of such flour as wheat flour with moisture content above a certain level becomes a breeding ground for fungus and decay, underlined the anti-trust watchdog.

It said there is a need for adequate labelling of wheat flour bags in terms of nutrients and moisture level, which is missing whether it is supplied by the flour mills or grinding mills (Chakkis).

Prices of wheat grain and flour, the country’s main staples, increased sharply between November 2019 and January 2020 to near record highs in most markets, according to the CCP.

However, the CCP did not dig deeper into root causes of the crisis and restricted its work to November 2019 onwards.

The CCP also highlighted the highhandedness of the Punjab government in its policy note. The Punjab government started releasing wheat quota in July this year, which was earlier than the schedule, which is October of each year.

An analysis of the last 10 years shows that the government is procuring on an average 35% of market surplus, ranging from 25% in 2018-19 to 43% in 2009-10. Government procurement in 2019-20 jumped to 39% of market surplus as compared to 25% in 2018-19, according to the CCP.

“This sharp increase in procurement in 2019-20 at support price is likely to have crowded out the private sector and created unrest among them,” noted the CCP.

It also asked the government to provide a fair share of quotas to the small grinding mills, known as Chakkis.

The contribution of roller flour mills declined significantly in flour supply to consumers and Chakkis’ share increased to roughly two-thirds of supply. However, more than 95% of the government wheat quota at subsidised rate is issued to the roller wheat mills that supply only one-third of the consumption.

The small wheat grinding mills are getting only 5% of the subsidised wheat quota from the government but are meeting two-thirds of wheat flour needs, according to the CCP.

The flour mills are receiving wheat from the government at Rs1,475 per 40 kg and selling it in the market at Rs2,400 instead of grinding to make flour, according to the CCP.

The CCP recommended gradual withdrawal of the government from the minimum support price fixing regime and said the governments’ role may essentially be reduced to ensuring food security, maintaining fair and transparent competition, helping to increase agriculture productivity through research and development.

Published in The Express Tribune, August 27th, 2020.

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