THE Sindh cabinet’s decision on wheat procurement this year seems more to please public opinion. As in the past, the ground reality and market dynamics have been overlooked. Last year, the food department could not meet the procurement target. Against the target of 500,000 tons, it succeeded in purchasing only 180,000 tons. Under the new policy, 500,000 tons of wheat will be procured from growers while the traders or middlemen will be eliminated. The condition requiring growers to show Form-VII (ownership of the land) has been waived. There will be no ban on inter-district movement and if Punjab does not impose a ban on inter-provincial movement, Sindh will do the same. Delivery charges offered to growers to provide wheat to the department last year at Rs9 per bag has been withdrawn.
The general perception is that it will be nearly impossible for the food department officials to identify bonafide growers especially with the waiver of Form VII. Any trader can deliver wheat posing as a grower.
An important fact that has been overlooked is that small growers make forward sale of their wheat crop to traders taking loans for input. As the crop is ready for harvesting, trader comes and takes away his grains and pays the difference, if any. As such, only big growers will be able to sell their crop directly to the government.
Since there will be no ban on inter-district movement, traders will be able to purchase wheat from one district and send it to another for getting higher rates. Thus, traders will be able to collect more than the government. This is the dynamics of any free market economy.
Again, as far as linking of inter-provincial ban on wheat movement is concerned Sindh government has unreasonably linked it to Punjab’s policy. Sindh produces early crop starting from March while Punjab harvests a month later, in April. If Sindh remains under the impression that Punjab would not impose ban on inter-provincial movement of wheat, by that time, Sindh will have lost a month’s crop.
Sindh government intends to sign an agreement with the Punjab on reciprocal basis on ban on inter-provincial wheat movement. In that situation, indeed it will be different. Otherwise, Sindh will remain at the receiving end.
Last year, the provincial government offered Rs9 as delivery charges to growers which was an incentive for them to sell crop to the food department.
The cabinet, in a policy decision has also withdrawn this incentive because of the increase in the wheat prices. Now, wheat prices have been fixed at Rs1000 per 100 kg bag instead of Rs875. But, the cabinet forgot that as compared to the last crop, prices of petrol and lubrication (POL) have increased more than four times and input costs have also increased. Thus, the incentive of delivery charges was not a big deal, especially when the target is ambitious.
The government has also allowed Pasco to procure wheat from some districts with the condition that it would store the grain within Sindh so that in case of wheat shortage, the reserve stocks could be utilized. This is a better policy decision, if implemented.
Sindh food department has set up 276 centres to procure 500,000 tons of wheat, of them 60 in defunct Hyderabad division, 71 in Mirpurkhas, 102 in Sukkur and 43 Larkana. Procurement target for Hyderabad is 65,000 tons, Mirpurkhas 100,000 tons, Sukkur 300,000 tons and Larkana 35,000 tons. Thus, the procurement will cost an estimated Rs5 billion to the government. Necessary funds have been released.
According to official figures, 10 kg wheat is required per head per month. Thus, 120 kg wheat is allocated per head per annum. Sindh has produced 2.2 million tons during the current season against the (official) requirement of four million tons. A shortfall of 1.8 million tons will be met by the federal government through imported wheat or supply from the Punjab. Imported wheat exerts more pressure on the already fragile exchequer of Sindh. Therefore, maximum efforts should be made to procure more wheat than the target.
The official flour rate ranged from Rs9 to Rs10 (chaki atta) but during the entire season flour prices were between Rs14-Rs18 per kilo.It was a big failure on the part of the Sindh food department which spends millions of rupees on its establishment and ongoing subsidy but has no capacity to achieve targets or maintain prices.
The food department asserts that maintaining wholesale price equilibrium is the provincial governments’ responsibility but controlling retail prices is district government’s responsibility. This may be true, but this passing on the buck has to stop somewhere.
The procurement policy needs to be revised and professionals need to be engaged in the procurement drive, otherwise failure will be repeated.
