KARACHI, April 14: Wheat is being sold at Rs380 to Rs390 for 40 kg in the open market as against Rs400 officially fixed prices. Officials, traders and millers predict a further drop in open market prices as wheat from Seraiki belt in Punjab starts trickling in Sindh and in Karachi grain market. “Advance contract for Punjab wheat for delivery in next ten days to two weeks are now being done in Sindh,” Akhtar Sheikh a leader of the flour millers in Karachi said.
Former leaders and millers attribute falling trend of wheat prices in open market to the delay in announcement of bank credit policy for wheat trade by the State Bank. Millers and traders believe that the State Bank is delaying the credit policy announcement because the federal food ministry wants the millers and traders to enter wheat market some time in June. Market speculates a cash margin of 25 to 30 per cent on wheat loans.
“June is too late”, Akhtar Sheikh argued who said that it was hurting the small growers. “Small growers do not have the capacity to hold on wheat for long and hence the trend of falling prices in open market.” He was also unhappy with the rumours that banks were putting a condition of 25 per cent to 30 per cent cash margin on loans for wheat trading.
With interest touching 9 per cent after the recent decision of the State Bank to push up discount rate, millers assess effective rate at 12 to 13 per cent with condition of 25 to 30 per cent. “It means keeping Rs25 to Rs30 in the bank account on a loan of Rs100 and that too without any return.”
In this game of Rs22 billion wheat trade, the small grower — with holding up to 16 acres — is the worst victim at whose expense the big feudal, bania brokers in rural areas, seths in Karachi and other urban centres of the province, millers and officials of food department thrive and make quick and big money. Then it is manipulation of traders, millers and food department to cheat flour consumers who never benefit from Rs14 to Rs16 annual subsidy on wheat trade.
Small growers have no access to the agricultural bank loans which are expected to touch Rs100 billion figures this fiscal year. Jehangir Tareen, the Federal Industries and Production Minister and a modern agriculturist in his well argued and illustrated report to State Bank, has established that big farmers hijack the bank loans. The small farmers — as many as 70 per cent — depend entirely on the informal sector that is the big farmers, banias and brokers who charge 100 per cent and even more on the loans advanced for seeds and other inputs.
Small farmers are forced to hand over their entire crop to the lenders at virtually throw away price and never gets the officially fixed price be it wheat or cotton. “Against an officially fixed price of Rs400 for 40 kg, the small farmer gets hardly Rs250,” a market analyst said. The chain of the middlemen gobbles up Rs150 on every maund of wheat sold by the small farmer.
With an expected harvest of 2.2 to 2.3 million tons in the province, the Sindh food department is reported to have procured 125,000 tons of wheat in last five weeks. It is impressive performance when compared to 46,000 tons wheat purchased from farmers during April 2004 when government had adopted coercive measures. This year there is no restriction on wheat movement.
A senior official of the Sindh food department said that miller would start getting wheat from government stock by August. He said that there was enough wheat in the open market and millers could buy their requirement.
He said that the government provided wheat on the basis of eight hours grinding capacity every day. In this regard, the department was carrying out an exercise aimed at ascertaining the needs of the mills from the electricity bills and weekly returns filed by the flour mills. The Sindh government is procuring 0.5 million tons of wheat. Of this 0.4 million tons would be operational stock and 0.1million ton would be strategic reserve.
Consumers in Karachi are paying higher prices on wheat flour for last over two years because of its location at more than 100 miles away from the wheat producing fields. With an ineffective government regulation and monitoring, the profiteers find it easy to manipulate and exploit the consumers.
