Distortions in whole wheat sector: CCP recommends gradual withdrawal of govt from fixing wheat support price

ISLAMABAD: Highlighting distortions in whole wheat sector putting small farmers at disadvantaged position and resulting into monster of another circular debt, the Competition Commission of Pakistan (CCP) has strongly recommended gradual withdrawal of government from fixing minimum support price.

The CCP’s policy note issued to government on Wednesday asked the government to bring paradigm shift in wheat releases and for resolving the looming wheat/flour crisis on immediate basis, it asked for binding flour mills to produce 100 percent flour out of 65 percent released wheat and impose ban on all other products including maida, suji, choker etc.

In background discussion with select group of reporters, the CCP’s top officials were of the view that the flour mills were not producing flour out of 65 percent released wheat and there is no proper monitoring and reconciliation mechanism, aggravating the wheat/flour shortages in the country at the moment. It was findings of the CCP that branding and packaging through effective enforcement could resolve many problem of wheat sector. The CCP found that the government fixed the support price at Rs1400 per 40kg and they procured 6.5 million tons against fixed target of 8.5 million tons. However, the market price of quality wheat hovered around Rs2200 to Rs2400 per 40kg so the real benefit of increased wheat prices were not transferred to small farmers.

The policy note also found that Chakki catered about 2/3 or 75 percent market share but flour mills were getting released wheat procured by the public sector. The flour produced by the mills is bad in quality and not considered as good quality/eatable flour.

In its policy note, the CCP recommended gradual withdrawal of government intervention from minimum support price fixation regime, consistent wheat export policy, removal of overlapping of regulatory regime between provincial and federal legislations and a level playing field in the wheat sector.

The policy note recommended that the federal and provincial governments may only intervene by making judicious use of their strategic reserves, when there is dire shortage of wheat in the market due to abnormal market conditions. It may define and experiment with the idea of expanding the role of the private sector, millers, and stockists in the procurement, trade, and bulk storage of wheat.

The government’s role may henceforth be restricted to oversight in terms of standard/quality, fostering R&D initiatives to enhance domestic as well as international competitiveness.