Wheat support price: Centre rejects Punjab government's request

The federal government has reportedly turned down Punjab government's proposal to freeze wheat support price at Rs 1300 / 40 kg as the raise in price would create unrest in the province, sources close to Minister for National Food Security and Research told Business Recorder.

Giving the background, the sources said, that Federal Government each year, in order to safeguard the interest of growers and to ensure food security for the masses, reviews the minimum support of price of wheat crop. The ECC fixes the Minimum Support Price (MSP) of wheat each year. Last year, the price was fixed by the ECC in its meeting held on November 07, 2018 @ Ra 1300/ per 40 kg.

Keeping in view the world market of wheat and fluctuating prices of major farm inputs, the MSP @ 1300/ per 40 kg has been maintained for the last five years. According to the International Grains Council, London , the world wheat production would slightly increase to 762 million tons in 2019-20 as compared to 733 million tons estimated in 2018-19. The world wheat trade and consumption would remain with a slight change at the level of 173 and 756 million tons respectively.

Agriculture Policy Institute has worked out the cost of production of wheat crop 2019-20. In order to determine an appropriate support price for the next crop, major determinants like world wheat situation, cost of production, export/ import parity prices and domestic producer prices are taken into consideration. The estimation of cost of production of wheat crop 2019-20 for Punjab at Rs 1349.57/ 40 kg, whereas for Sindh it is at Rs 1315.72/ per 40 kg.

The matter of support prices was discussed in the meeting of wheat review committee on October 17, 2019 in the Ministry of National Food Security and Research. The working of API was shared with the provincial governments who were requested to provide their input on the MSP of wheat for the crop year 2019-20.

In this regard, Government of Punjab proposed to maintain the support price at the level of Rs 1300/ 40 kg. In their view, any increase in support price will make a call of increase in flour(Atta) price in the market resulting in unrest at the end of consumers, as flour price is closely associated with the support price of wheat. The other provinces did not communicate their viewpoint at that time.

Ministry of National Food Security and Research argued that as the sowing of wheat crop has started in southern parts of the country, it is prudent to announce the minimum support price for wheat crop 2019-20.

In view of this scenario, Ministry submitted following proposals for consideration and approval of the ECC with the request to approve one of the proposals: (i) support price of wheat crop 2019-20 may be maintained at the level of Rs 1325/40 kg and not to burden the consumers;(ii) support price of wheat crop 2019-20 may be fixed in wake of the cost of production of wheat worked out by the API at the level of Rs 1350/40 kg and ;(iii) support price of wheat crop 2019-20 may be approved in line with the release prices of Food Departments of Punjab and Sindh a the level of Rs 1375/ 40 kg.

During ensuing discussion, Secretary Cabinet Division observed that the purpose of the minimum support price is an incentive to wheat growers and is also a step to stabilize the price of the commodity.

Finance Division observed that Government of Sindh did not procure wheat in time. Now wheat is being provided to Sindh from PASSCO and substantial subsidy is being provided on account of incidental charges by the Federal Government, which is a burden on the public exchequer. It was suggested that all the provincial governments may be directed to ensure timely procurement of wheat according to their requirement.

In case of failure, no subsidy be given to the provincial governments in connection with procurement of wheat for their provinces from PASSCO. The ECC agreed to the proposal. The ECC also observed that since minimum support price of wheat has been maintained for the last five years and cost of production has now been increased therefore, Rs 1350/ 40 kg would be a reasonable minimum support price for wheat crop 2019-20.

On November 13, 2019, after detailed discussion, the ECC approved minimum support price of wheat at Rs 1350/ per 40 kg. The committee also directed Ministry of National Food Security and Research to inform all provincial governments to ensure timely procurement of wheat according to their requirements.

In future the respective provincial governments will bear full cost of incidental charges from their own resources on account of procurement of wheat from PASSCO. The ECC directed Finance Division to make a detailed presentation to the ECC in its next meeting on accumulating circular debt on commodity operations.

On November 28, 2019, Finance Division informed the ECC that the government commodity operations over the years resulted in Rs 757 billion as total debt and liabilities and recommendations for reducing the debt.

The sources said, the ECC decision about fixation of wheat support prices at Rs 1350 / per 40 kg was not supported by some of the influential parliamentarians who raised this issue with the Speaker National Assembly, Asad Qaiser who convened a meeting a few days ago which was also attended by the newly appointed Minister for National Food Security and Research, Khusro Bakhtiar, who wanted the MSP to be fixed at Rs 1400/ 40 kg. However, his proposal was opposed and it was recommended that wheat price should be fixed at Rs 1365/ 40 kg. Later on the ECC approved minimum support price of wheat at Rs 1365/ 40 kg.