Ghulam Idris Khan
There is a huge public outcry due to the mismanagement and non serious attitude of the incumbent government in solving people’s problem, and still, as from the beginning of this government, they have involved the public in the political issues.
The government of Pakistan this year had fixed a target of 8.25 million tons of wheat procurement from the current harvest of wheat crop as the estimated production of 27 Million tons is expected which is more than domestic consumption .with rapid increase in population and urbanization the domestic requirement also increased with the same ratio.
Pakistan covers an area of 8.8 million Hectares which produces about 26 to 27 million tons of wheat. Pakistan is among the top ten wheat producing countries in the world, but lies at the bottom in terms of per unit production. In Pakistan there are about 1400 flour mills operating among which 950 are registered with the Association of flour mills. Small and big grinding machines (CHAKKEE) grinds wheat at village level. These flour mills grinds only 30 percent of the total wheat produce and serve the public of big cities and urban population.
The procurement of wheat is done by the public sector mainly by the government of Punjab, Sindh and Pakistan Agriculture Storage and services corporation (PASSCO). The other two provinces are deficit in wheat production and is getting their share of wheat and flour from Punjab. Although there is no such restriction on private sector for making procurement for their mills directly from the farmer but none has shown any interest in doing so.
The government has announced PKR 34,125 for one ton of wheat as a support price to pick the farmer produce by public sector such as Food Department government of Punjab and Sindh and PASSCO. The government will procure about 8.25 million tons of wheat from the upcoming crops which is in hand right now.
To cater for this quantity, about 380.5 Billion Pak Rupees will be consumed by government entities, which will be available to them as loan in the shape of cash credit limit sanctioned by State Bank Of Pakistan (SBP) through different commercial banks on commercial interest rate for this operation. The same will be paid back to banks in a specific time period. 66 percent of this operation has to be carried out in Punjab as it is hub of wheat production. The per ton price of wheat as mentioned above includes the incidental charges like gunny bags, grain storage, handling, transportation charges which amounts to about PKR 12,000 per ton as per the maths done by the Punjab government but it has never passed onto mill owners. It is subside provided to millers to supply ATTA to public at the same rate, while added their operational cost.
Although last year, government of Punjab and Sindh has paid PKR 50 billion, this year its volume will be double due to increase in quantity and rate of per tons, even the Sindh government did not make any procurement last year and announced that sindh government will start its operation in end March or early April. The harvest is early in sindh and the government have planned to procure 1.4 Million tons this year, the rest 6.8 to 7.0 Million ton will be procured by Punjab Food Department and PASSCO.
Punjab has born subside of Rs 42.0 billion annually This is another kind of debt adding to the already sky rocketing DEBT STOCK of about PKR 775 billion.Due to the recent wheat crisis government has decided to procure more wheat, which will enhance the debt further. We all are aware of energy sector’s infamous circular debt as it has been in news for quite a while but now there is a new sheriff in town in the form of “wheat circular debt “.
This cash starved government either in federal or provincial are accumulating debt to national economy, just to achieve two major goals that is to pick farmer produce and secondly subsidizing retail flour price mainly for urban consumers because the population living in rural areas have no problem regarding wheat owing to the fact that the 70 percent populace of rural areas have access to wheat from their own lands who after selling the specific quantity, use the remaining for their personal use throughout the year. But for the urban population which rely mainly on government had to face severe issues regarding the soaring price of wheat due to which people took to the streets to protest against the government of the day.
Now how to come out from this debt and also provide wheat flour to the common man at reasonable price is Million Dollar question, which needs to be get answered. As public sector is the principal buyer of wheat produce in the country, which move the private sector out of the game. The present system of wheat procurement is defective and faulty. About more than 1000 mills operating all over the country are making quick and big money at government of Pakistan expense. All mill owners just wait and look up to government to release wheat quota to them and as soon as they get the green signal, they start grinding it. Different studies on the current system of wheat procurement have found that this system is financially expensive and inefficient owning to massive cost borne by the government.
Now it is up to the government of Pakistan to reshape the policy of wheat procurement .The Ministry of National Food security and Research (NFS&R) should be given the task to sit with all stakeholders particularly private sector mill owners to formulate a pragmatic policy to replace present one
First, the organized flour mills should be given with the task of demarking their zones in their respective area of operation such that Mill “A” B” or “C” should only procure from their designated zones. Secondly the mill owners under obligation from government should hire Agriculture graduates for awareness of farmers to increase per unit yield, as presently Pakistan falls short of the world’s average production of per unit yield, so this gap of cost of production can be bridged. Also, the mill owners should be provided loans through State Bank of Pakistan from banks on soft terms for the procurement of farmers produce. If there are any duties or taxes on this operation, that should be waived off and a specific tax free period say 5 years should be implemented. Usually un-skilled workers work in these mills, governments either provincial or federal should train their manpower on its own expense so that grinding operation can run efficiently. Last but not the least the government should announce a reasonable price for flour to be provided to the market working its way around the operational cost and profit.
For coordinating all these activities a wheat advisory Board should be established in the Ministry of National Food Security and Research, which should have representatives from every stakeholder be it private sector or government functionary like Agriculture, Food and Finance departments, State bank of Pakistan and Farmers. If this strategy is adopted the per unit wheat production will increase, procurement will be smooth and effective and government debt should be reduced gradually.
The author is an Agriculture expert and served as Managing Director Pakistan Oil Seed Board in the Ministry of Food and Agriculture Government of Pakistan.
