Flour schemes raise circular debt

Clearance of dues by caretaker govt a Herculean task

LAHORE:

Subsidies on schemes like free and cheap flour and bread have left the Punjab Food Department reeling under circular dept of billions of rupees.

According to officials, the department owes more than Rs750 billion, while the caretaker provincial government has paid it Rs200 billion in subsidy during the current fiscal year.

The Punjab government has to pay more than Rs380 billion under the head of subsidy to the food department.

On the other hand, despite heavy subsidy in the past 15 years, the deserving people could not get the desired relief regarding flour. Even rich people used subsidised flour due to the system of general subsidy. According to economic experts, a claim of the caretaker government to repay the Rs600 billion loan of the food department in the next four months appears very difficult.

The department has to repay Rs750 billion loans received from banks, while Rs380 billion are to be received in flour subsidy from the government.

The food department at present has about four million tonnes of wheat worth around Rs400 billion.

The debt of the food department had increased during the previous 10-year rule in Punjab of Prime Minister Shehbaz Sharif from Rs52 billion to Rs428 billion. The amount included rebate of Rs36 billion given on wheat export. In 2001, the circular debt of the food department was Rs36.9 billion, which had increased to Rs52.4 billion by 2007. In 2008, the debt increased by Rs98 billion to Rs150 billion, which included a large subsidy on the Sasti Roti Scheme. In 2009, with an increase of Rs41 billion, the debt rose to Rs191. By 2013, the amount had reached Rs204.8 billion, which increased by Rs66 billion to Rs271 billion in 2014 and Rs324 billion in 2015.

The highest increase in debt of the food department was recorded in 2017, when it reached Rs447 billion after a hike within a year of Rs95 billion.

An official said the department was bearing expenses of around Rs700 per maund on the wheat purchased during the past year.

Speaking to The Express Tribune, former provincial financial adviser Salman Shah said the caretaker government had made a claim about clearing the circular debt of the department in four months.

However, it had not been shared how the claim would be implemented and the task would be difficult in the current economic situation. Subsidy on flour had been given for political interests, but the governments did not pay the food department adequately, due to which the amount of the debt has increased.

Pakistan Flour Mills Association chairman Asim Raza said the industry had always contended that the food department’s debt had pushed up the price of government wheat, which in turn has jacked up the price of flour. He welcomed the initiative of clearing the circular debt of the food department.

Commenting on the matter, a consumer, Nauman Khalid, said the government humiliated the people in the name of cheap flour, while the subsidy was manipulated by the mills, shopkeepers and officials.

If cash subsidy is given directly to the deserving people, the problems can be solved and corruption eradicated, he suggested.

Published in The Express Tribune, June 22^nd, 2023.