Wheat prices to become new government’s Achilles’ heel

The tough task of setting a wheat price that will suit flour mill owners and consumers alike awaits the new Prime Minister (PM) and Punjab’s new Chief Minister (CM); favoring the consumer results in wobbly supply and smuggling whereas favoring the mill owners results in a hit to their vote bank come election day.

According to the details available with The Express Tribune, the food department of the country’s most populous province has successfully completed the procurement target of 3.5 million tons of wheat set by the former provincial cabinet - which is now being termed as fastest food procurement drive by the food department in two decades.

However, sources privy to the matter say that the procurement might not be over yet as the federal government has increased the target for districts of South Punjab to 4 million tons which is to be completed after Eid.

These ambitions have rung alarm bells for flour mill owners who have warned that if Pakistan Agricultural Storage & Services Corporation (PASSCO) and Punjab Food Department continues their wheat procurement campaign, the quantity of saleable wheat for flour mills in the open market will decrease.

Resultantly, the government will then have to release government wheat for flour mills ahead of schedule.

On the other hand, if the government departments were to stop their procurement, the government would have to import at least a small quantity of wheat at exorbitant prices.

Experts have termed the situation as a “double-edged sword for the new government.”

Read PM directs Punjab govt to provide 0.2m MT wheat to K-P

Another potential problem awaits the new government if they decide to give a subsidy for political gain.

The ousted Pakistan Tehreek-e-Insaf (PTI) government had fixed the price of 20 kg flour at Rs 1,100 by providing wheat to flour mills at Rs 1,950 which was purchased at Rs 1,800.

Now the price of wheat has gone up to Rs 2,200 and according to the same ratio, the price of 20 kg flour in the next release season becomes Rs 1,300.

Flour mill owners have all eyes on PM Shahbaz Sharif and CM Hamza Shahbaz as reports suggest that the father-son duo are in favor of reduced prices.

However, setting a low price will mean that wheat flour theft will increase and give rise to a flour availability crisis similar to the one witnessed last year under the PTI government.

Wheat production has already dropped by more than 15% this year, as per sources privy to the matter and with the change in government the uncertainty and ambiguity for the flour milling sector has only grown.

While the sector scratches their head in confusion over the anticipated price, the new government will also have to deal with reports of wheat being smuggled to Afghanistan, where it fetches higher prices as the neighboring country has an apparent wheat shortage due to the conflict between Ukraine and Russia.