LAHORE, Oct 6: The Punjab government on Saturday decided to start releasing subsidised wheat from Monday (tomorrow) after the millers increased flour price on Friday for fourth time in the last six weeks.
According to the release policy, as defined by Food Secretary Irfan Ali, the government will charge Rs1,075 per 40kg – Rs35 less than the current market rate in the open market. At current rate, the government will have to bear a subsidy of Rs300 per 40kg.
It has announced liberal releases – whatever a miller wants to purchase – in five districts Dera Ghazi Khan, Multan, Sahiwal, Faisalabad and Bahawalpur. They form heavy wheat-producing districts. Other four districts – Rawalpindi, Sagodha, Gujranwala and Lahore – will have quota restrictions because food security preferences dictate releases there.
On Friday, the millers had cited two reasons for increase in flour price: rising wheat prices in the open market and the official failure to start releases from government stocks.
Responding to the increase within 24 hours, the government on Saturday opened the gates of its stocks though the official circles think that millers are only bluffing with increase and there is no pressure in the market. But still, in order to call the bluff, it has decided to start releases on a subsidised rate.
According to market analysts, the releases will bring a price stability in the flour market for two reasons -- cheaper official wheat will force stockists to throw their stocks in the market and liberal release in some district will have a spillover effect in other areas.
“With official releases, the price being much below the current market rate will certainly force traders to sell their stocks immediately, which will improve supplies for millers,” says Majid Abdullah of the Pakistan Flour Millers Association (PFMA).
He hoped: “One supplies increase, the flour price will come down because of a competitive market. So, in all probability, the price will come down a bit in the next two weeks when these releases take effect in the market.”
Secondly, the liberal releases in five districts means the mills in these areas would overwork and supply flour to adjoining districts – reaching as far as they could recover transportation cost. It would release pressure on other areas and positively affect provincial demand-supply equation, he said.
Even if the price does not come down, it will not go up in the next two months, says an official of the department.
The millers suffer some loss on account of gunny bags because they have to use their own bags which suffer wear and tear. In addition to that, the millers also spend some money on one side transportation cost – from the stocks to the mills. So, Rs1,075 will practically be costing them around Rs1,100 per 40kg. But still, it is Rs10 per 40kg less than what they claim to be currently getting from the market. In the nutshell, the new release policy will stabilise the market with better supplies and decrease in wheat cost, he concludes.