22 April 2005	Friday	12 Rabi-ul-Awwal 1426

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LAHORE, April 21: The Punjab Food Department has decided to withdraw from wheat transportation this season and ask the millers to lift the product from their nearest departmental godowns. Sources in the department claim that around Rs600 million to Rs700 million are currently being spent on this account and recovered from the millers through incidental charges. From this season, the millers will directly handle the wheat transportation.

The department had also tried to shift this responsibility in 2000, but postponed the decision on the request of the millers who wanted some time to get ready for implementation.

However, during the next two years, the department avoided taking such a decision because of small crop size, which kept flour prices high and squeezed the scope of any experiment. Since Punjab is hoping for a substantial crop size this year, it has decided to take the chance, they claim.

Talking about the effects of decision on flour price, the sources said: “Apparently, it should not affect flour prices because millers were anyway paying charges to the department. But now they will do it by themselves. As the transportation charges were part of the flour price, nothing will change,” they said.

The decision would rather save the department from corruption that was being done in the name of transportation. The millers would do it more efficiently and might help reduce the price, they claimed.

Khaliq Arshad of the Pakistan Flour Mills Association said the decision would create price differentials in many parts of the province. “Mills in surplus wheat areas will spend almost negligible amount on transportation whereas those in the deficit districts will end up paying huge amounts on them. They will naturally pass it on to consumers by enhancing the price.”

A flour market watcher from Lahore termed the decision as a first step towards rationalization of flour industry. Most of the flour mills had been established in wheat deficit areas and thriving on official protection through quota and transport charges support, he said.

“Once the system takes hold, inefficient mills from the wheat deficit areas will either have to be more efficient to ensure survival or close down. The efficient mills from wheat surplus districts will have to compete both for prices and market share, which will be creating healthy market competition,” he said.

However, the government would run the risk of cartelization of efficient flour mills, as recently happened in the case of sugar industry. The sugar industry kept making wrong claims about the sugar production till shortages hit the market and price started spiralling. The government had to guard against such a risk if it wanted the new system to succeed, he said.