Govt seeks to fix food prices through ordinance

Draft of Pakistan Food Security Flow and Information Ordinance 2021 ready

ISLAMABAD:

Prime Minister Imran Khan has directed his team to fix the prices of essential items through an ordinance as the federal and provincial governments have failed to check inflation.

However, the move may backfire due to constitutional limits.

The government has prepared the draft of the Pakistan Food Security Flow and Information Ordinance 2021, according to sources in the PM’s Office.

The ordinance, if issued by President Arif Alvi, would empower the federal government to fix prices and seek information about the supply and demand of the commodities.

The move comes amid an anticipated wheat shortfall of up to two million metric tons this year and a race between the Sindh and Punjab governments to take lead in procuring maximum quantity of the commodity.

The sources said the ordinance would empower the federal government to determine the prices of the essential items, including wheat and sugar.

A management committee would be established under the chair of Prime Minister Imran Khan with provincial chief ministers as its members, according to the proposal.

The management committee shall meet at least twice a year to review and fix the prices of essential commodities, it added.

There shall be an executive committee, to be presided over by the federal secretary, national food security and research. The executive committee shall meet once in a month to ensure implementation of the decisions taken by the management committee, said the sources.

It has also been proposed that in case any federal or provincial department refuses to provide information, the person may face imprisonment for up to six months or proscribed fine.

The idea is that there should be an institutional mechanism that would monitor prices as well as to ensure centralised database of the essential commodities, according to an official of the ministry of national food security and research.

The sources said that the Ministry of Law and Justice had initially opposed the idea due to constitutional limits, as the subjects of agriculture and price control fall in the provincial domain. They said the law ministry only agreed to the proposal after it was pushed hard by the PM’s Office.

The draft of the ordinance suggested that Prime Minister Imran Khan wanted to address purely an administrative issue through legal means that may prove to be counterproductive in the absence of a constitutional cover, said the sources.

The wheat and sugar crises have been rooted in the PTI government’s decision to allow the export of both the commodities after coming into power.

For the current year, the government had set the wheat production target at 27 million metric tons. The sources said that the initial data suggested that actual production may be around 26.25 million metric tons, indicating a shortfall of 750,000 metric tons.

The federal food ministry has estimated the current wheat consumption, including seed requirement, at nearly 28 million tons.

A government official said that the country may again have to import 1.5 to 2 million metric tons of wheat this year. It will be the second consecutive year when the PTI government would import wheat. It allowed the import of around 2.5 million metric tons wheat last year.

The sources said that a significant quantity of the imported wheat was also smuggled to Afghanistan due mainly to weak border controls and the involvement of provincial food department officials to facilitate it.

The federal government also faces the problem of fixing a uniformed wheat price across the country which, the sources said, was also a reason behind the decision to promulgate the ordinance.

Last week, the Sindh government increased the minimum wheat procurement price to Rs2,000 per 40 kilogrammes – a raise of 43% or Rs600 over the last year’s price.

The Rs2,000 price was 21% or Rs350 per 40kg higher than the minimum support price approved by the Economic Coordination Committee of the cabinet.

The ECC has set the minimum wheat procurement price at Rs1,650 per 40 kg – an increase of Rs250 or 18%. The ECC has not yet approved the wheat release price to flour mills, which will entail huge subsidies.

The PPP wanted to give a better return to the farmers given its strong vote base in rural areas. On the other hand, the PTI wanted to strike a balance between the interests of farmers and consumers as it has a strong presence in cities.

The new wheat crop has started arriving in Sindh markets and its rate is over Rs2,100 per 40 kg.

Two different sets of prices can result in hoarding and smuggling from one province to another, making matters worse for the federal government.

Higher prices in Sindh will also make it difficult for the Punjab government to procure wheat at the minimum price without resorting to coercive measures.

Punjab wanted the price to be set at Rs1,800 per 40kg.

For the new crop, the food ministry has estimated the cost of production at Rs1,587 per 40kg, an increase of Rs237 or 17.5% over the last year’s crop.

The prices shot up after the PTI and PML-N governments exported 5.5 million metric tons of wheat during the past five years. Things have, however, aggravated due to mishandling of the wheat procurement by the PTI-led Punjab government. The Sindh government also did not procure wheat in the previous year, which further deepened the crisis.

The Pakistan Bureau of Statistics reported on Friday that the wheat flour prices increased by another 8.4% during the last week as compared to the same period of the previous year. The sugar prices went up by 23% and the maximum price has again surged to Rs110 per kg, according to the PBS.

Finance Minister Dr Abdul Hafeez Shaikh-led National Price Monitoring Committee has more become a debating club and a tool to showcase performance to the PM, as the body does not have any legal or administrative authority to check the prices.