Wheat import may worsen Punjab’s debt

Bringing in 700,000 tonnes from abroad could push province’s food sector debt beyond Rs500 billion

LAHORE:

Between a severe financial crunch and a persistent food crisis, Punjab is not having the best year. The province’s circular debt in the food sector alone has surged to a staggering Rs420 billion. And yet, it appears the situation will get much worse before it starts to get any better.

Speaking to The Express Tribune, sources privy to developments said there is high risk of another major flour crisis in the months of February and March next year. To stave off a potential food security crisis, the Punjab cabinet has approved the emergency import of another 700,000 tonnes of wheat.

The move, however, comes with a catch. Already, financial experts say the province’s food sector debt has exceeded its annual development programme. The emergency import, however, could add between Rs50 billion to Rs70 billion to this debt and push it beyond the Rs500 billion mark.

The Punjab government has so far provided 1.2 million tonnes of wheat from its own silos to flourmills in the province. To maintain flour prices, the government applied a subsidy of Rs15 billion while making this supply available. That is not all, however – while procuring the wheat for its silos, the government applied another subsidy that amounted to as much as Rs60 billion, sources said.

The Punjab government will also apply a subsidy of Rs20 billion on the import of 700,000 tonnes of wheat. That figure may also double if the government ends up increasing the import to 1.4 million tonnes.

Making matters worse for the province, sources said the centre is unwilling to share some of the burden from the import of wheat with the Punjab government. They said this is despite the fact that Punjab subsidised the supply of wheat for Islamabad by Rs1 billion this year and by Rs19 billion over the past decade. The federal government, on the other hand, has spent as much Rs66 billion on subsidising flour in Khyber-Pakthunkhwa over the last 10 years, the sources added.

Concerns over the supply of wheat and flour to both the centre and K-P were raised in the special meeting of the Punjab Cabinet that took place recently, sources said. It was pointed out that K-P missed its 400,000-tonne wheat procurement target by a huge margin, managing to procure just 37,000 tonnes. The cabinet members agreed to take the issue up with the prime minister.

Proposals to increase the official rate of wheat from Rs1,600 per quintal to Rs1,700 were also discussed in the meeting, sources said. However, the government is undecided on this as of yet and a c ommittee of ministers was tasked with studying the move, they added. If the move goes ahead, the price of a 20-kilogramme bag of flour could rise from Rs920 to Rs970.

According to sources, chief minister’s adviser Faisal Jabwana was in favour to raising the official wheat rate and proposed a more steep hike to Rs1,800 per quintal. Agriculture Minister Hussain Gardezi, however, argued for fixing the price at Rs1,700 to stimulate wheat production while keeping it affordable for farmers.

In the meeting, Housing Minister Mehmoodur Rasheed also criticised the agriculture department for less wheat production per hectare than Indian Punjab.

Published in The Express Tribune, October 15^th, 2020.