The Economic Coordination Committee (ECC) which is scheduled to meet on Monday with Finance Minister Ishaq Dar in the chair, will approve the Minimum Support Price of wheat within the range of Rs3,000-3,200/40 kg for 2022-23.
Wheat is the staple and a strategic crop of the country. To ensure maximum cultivation and to achieve self-sufficiency, the government fixes its Minimum Support Price (MSP) to assure fair returns to the farming community. MSP for the current year was fixed at Rs2200/40 kg.
The cost of production of wheat crop Rabi 2022-23, worked out by the Agriculture Policy Institute (API) is estimated at Rs2,495/40 kg for the average farmer and Rs2,427/40 kg for the progressive grower. The issue of MSP was highlighted in the first meeting of the Wheat Board held on June 30, 2022.
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The National Assembly Standing Committee on NFS&R in its meeting on July 15, 2022, recommended the provinces should finalise the support price of wheat for the next year.
Later on, NA Standing Committee on Commerce in the meeting on September 02, 2022, recommended that the federal government may announce the MSP of wheat not less than Rs3,000/40 kg. The estimated costs were shared with the provincial governments in a meeting chaired by the Minister for NFS&R on August 26, 2022. Their proposals range between Rs2,600/40 kg to Rs3,000/40 kg.
The provincial cabinets of Punjab and Khyber Pakhtunkhwa have endorsed the support price of wheat at Rs3,000/40 kg, while the government of Balochistan has not announced it to date. The provincial cabinet of Sindh has announced the support price of wheat at Rs4,000/40 kg.
The sources said a cabinet committee met with CM Sindh with a request to review the MSP. However, no feedback has been received.
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This recommendation of the Sindh government is expected to have multi-dimensional effects and is likely to increase food inflation. Moreover, PASSCO may not be able to procure wheat from Sindh, while other provinces may impose a ban on the movement of wheat across borders.
Growers and middleman will use the price disparity amongst provinces to distort the market and hoarding and smuggling is likely to occur. Keeping an abnormally high MSP would also hurt the finances and subsidies of federal and provincial governments. Hence, a reasonably high-profit margin, keeping in view the flood situation would be the most prudent course of action to incentivize the next wheat crop.
Pakistan Bureau of Statistics (PBS) in its reports for the period April 2022 to September 2022 has reported the average local wheat price at Rs2,776.66/40 kg. Inflation for August was 26.23% with the support price of wheat at Rs. 2200/40 kg.
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Ministry of National Food Security and Research is of the view that in case of an increase of every Rs100/40 kg in the MSP, the estimated rate of increase of inflation would be 0.16% (other things remaining the same). Therefore, in the case of the proposed MSP of Rs3,000, Rs3,200 and Rs4,000/40 kg, the estimated increase in CPI would, tentatively, be 1.27, 1.60 and 2.86%, respectively.
After explaining the scenario, the Ministry of National Food Security and Research has proposed the following proposals: (a) Minimum Support Price (MSP)/Procurement price of wheat crop 2022-23 may be fixed at Rs3,000/40 kg. This would provide a profit margin of 20% or Rs3,200/40 kg to growers. This would provide a profit margin of 28% to growers.
The Ministry has also recommended that provincial governments be directed to implement the Anti-Hoarding and Anti- Profiteering Act, 1977 in letter and spirit to keep a check on inflation.
The MSP of wheat for 2022-23 will be approved by the ECC on Monday before the Finance Minister's departure for Washington to attend IMF/ World Bank annual meetings.
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