Supporting farmers: Wheat support price increased by 8.4%
Dar repeats tradition of taking decisions as ECC chief without involvement of body
ISLAMABAD:
Amid transparency concerns, the federal government on Saturday announced an 8.4% increase in wheat support price and fixed it at Rs1,300 per 40 kilograms (kg) for next crop, a move aimed at providing relief to the farmers but raising apprehensions about inflationary pressures.
The government made the decision public at a time when the influential sugar industry also wants at least a 20% increase in ex-factory sugar price on the argument that the industry is no more financially viable after the increase in sugarcane support price. The government fixed the sugarcane price at Rs180 per 40 kg, which was Rs170, for the upcoming crushing season.
The decision to increase the wheat support price by Rs100 – from Rs1,200 to Rs1,300 – was taken by Finance Minister Ishaq Dar in his capacity as chairman of the Economic Coordination Committee (ECC) of the Cabinet without calling its meeting. The decision of fixing the wheat support price used to be taken at the forum of the ECC in consultation with provinces – as after the 18th Amendment in the constitution, agriculture policymaking is in provincial domain.
“Finance Minister Ishaq Dar, in his capacity as ECC chairman, has approved the support price of wheat at Rs1,300 per 40 kg for the 2014-15 crop,” according to a statement issued by the Ministry of Finance. The decision was taken to facilitate the farmers’, it added. The decision came just days after the government imposed 20% regulatory duties on import of wheat. According to economists, both actions will push the wheat flour prices up in the domestic market.
It is not the first time Dar took a decision outside the ECC forum. Earlier, he sanctioned millions of rupees in budget honorariums to his ministry’s top officials without seeking approval of the ECC.
In 1996, the ECC had accepted a summary to give budget honorarium up to grade-20 officials. However, Dar, in his capacity as the body’s chairman, sanctioned honorariums to grade 21 and 22 and his advisor, who is in ‘Management pay scale-I’ – not entitled to any additional monetary benefits.
It is the first increase that the PML-N government has given to the growers after leaving prices unchanged at Rs1,200 per 40 kg in March this year for the outgoing wheat season.
The increase is below expectations of the farmer community, who demanded fixing the price at Rs1,500 per kg.
According to independent economists and various studies, a 10% increase in wheat support price causes a 3% increase in overall inflation due to a snowball effect. After the increase, the prices of wheat flour are also expected to go up – which are currently at Rs50 per kg.
Sugar price increase
Representatives of the Pakistan Sugar Mills Association (PSMA) also met with Dar on Saturday. They demanded the government to impose duties on sugar imports, allow export of 1.5 million tons of the commodity and increase the ex-factory sugar prices.
“After increase in the sugarcane support price to Rs180 per 40 kg for the new crushing season, it was no more viable to sell the sugar at Rs50 per kg at the factory gate,” said PSMA Chairman Iskander Khan. He said at the new rates, the sugar production price comes to around Rs51 per kg, hence the ex-factory price should be Rs61 per kg.
He also demanded that the government should impose a minimum 25% custom duty on imported sugar aimed at keeping the local industry viable. The industry has asked that it should be immediately allowed to export 500,000 tons of sugar out of the 1.5 million tons. Even after 1.5 million tons of exports, the country will still have 1 million tons of surplus sugar stocks, claimed Khan. He said the projected sugar production for the new crushing season is 5.7 million tons, while the country already has stock of one million tons left from the last crushing season.
“If the demands are not met, the industry will not be able to start the crushing season on time”, said Khan. He said Dar assured the PSMA that the industry’s demands will be tabled in the next ECC meeting.
Published in The Express Tribune, November 2nd, 2014.
Amid transparency concerns, the federal government on Saturday announced an 8.4% increase in wheat support price and fixed it at Rs1,300 per 40 kilograms (kg) for next crop, a move aimed at providing relief to the farmers but raising apprehensions about inflationary pressures.
The government made the decision public at a time when the influential sugar industry also wants at least a 20% increase in ex-factory sugar price on the argument that the industry is no more financially viable after the increase in sugarcane support price. The government fixed the sugarcane price at Rs180 per 40 kg, which was Rs170, for the upcoming crushing season.
The decision to increase the wheat support price by Rs100 – from Rs1,200 to Rs1,300 – was taken by Finance Minister Ishaq Dar in his capacity as chairman of the Economic Coordination Committee (ECC) of the Cabinet without calling its meeting. The decision of fixing the wheat support price used to be taken at the forum of the ECC in consultation with provinces – as after the 18th Amendment in the constitution, agriculture policymaking is in provincial domain.
“Finance Minister Ishaq Dar, in his capacity as ECC chairman, has approved the support price of wheat at Rs1,300 per 40 kg for the 2014-15 crop,” according to a statement issued by the Ministry of Finance. The decision was taken to facilitate the farmers’, it added. The decision came just days after the government imposed 20% regulatory duties on import of wheat. According to economists, both actions will push the wheat flour prices up in the domestic market.
It is not the first time Dar took a decision outside the ECC forum. Earlier, he sanctioned millions of rupees in budget honorariums to his ministry’s top officials without seeking approval of the ECC.
In 1996, the ECC had accepted a summary to give budget honorarium up to grade-20 officials. However, Dar, in his capacity as the body’s chairman, sanctioned honorariums to grade 21 and 22 and his advisor, who is in ‘Management pay scale-I’ – not entitled to any additional monetary benefits.
It is the first increase that the PML-N government has given to the growers after leaving prices unchanged at Rs1,200 per 40 kg in March this year for the outgoing wheat season.
The increase is below expectations of the farmer community, who demanded fixing the price at Rs1,500 per kg.
According to independent economists and various studies, a 10% increase in wheat support price causes a 3% increase in overall inflation due to a snowball effect. After the increase, the prices of wheat flour are also expected to go up – which are currently at Rs50 per kg.
Sugar price increase
Representatives of the Pakistan Sugar Mills Association (PSMA) also met with Dar on Saturday. They demanded the government to impose duties on sugar imports, allow export of 1.5 million tons of the commodity and increase the ex-factory sugar prices.
“After increase in the sugarcane support price to Rs180 per 40 kg for the new crushing season, it was no more viable to sell the sugar at Rs50 per kg at the factory gate,” said PSMA Chairman Iskander Khan. He said at the new rates, the sugar production price comes to around Rs51 per kg, hence the ex-factory price should be Rs61 per kg.
He also demanded that the government should impose a minimum 25% custom duty on imported sugar aimed at keeping the local industry viable. The industry has asked that it should be immediately allowed to export 500,000 tons of sugar out of the 1.5 million tons. Even after 1.5 million tons of exports, the country will still have 1 million tons of surplus sugar stocks, claimed Khan. He said the projected sugar production for the new crushing season is 5.7 million tons, while the country already has stock of one million tons left from the last crushing season.
“If the demands are not met, the industry will not be able to start the crushing season on time”, said Khan. He said Dar assured the PSMA that the industry’s demands will be tabled in the next ECC meeting.
Published in The Express Tribune, November 2nd, 2014.