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Wheat procurement: KP subsidy spending to go up

May 26, 2013

PESHAWAR, May 25: The Khyber Pakhtunkhwa government’s wheat subsidy expenditure are likely to exceed the official estimates as the province is required to procure 400,000 tons of wheat this year, according to officials sources.

The centre, according to sources, wants Khyber Pakhtunkhwa to procure 100,000 tons more wheat this year against 300,000 tons of wheat procured in 2012, making it to undergo increase in its annual subsidy bill.

“The government has not yet calculated the subsidy figure, but the expenditure will be higher than the last year,” said an official source.

The province spent Rs2 billion on account of subsidy on wheat in the financial year 2011-12. This year, the provincial government has allocated Rs2.5 billion for subsidy on wheat. However, the final subsidy figure is likely to jack up as a consequence to the government’s plan to procure larger quantity of wheat.

“The province does not have the capacity to store 400,000 tons of wheat, but it has to go for it in line with an instruction by the federal government,” said a knowledgeable official.

The official wheat procurement process has yet to pick up momentum though the Khyber Pakhtunkhwa directorate of food has opened 18 centres in different parts of the province to purchase wheat.

Some centres, said an official, had already made purchases, including 14,000 tons of wheat purchased, so far, by the Dera Ismail Khan centre. Similarly, the centres in Peshawar, Kohat, and Serra-i-Naurang, added the official, had also started purchasing wheat.

“The wheat purchasing spree,” said the official “will pick up speed in the next eight to ten days once wheat from Punjab start arriving in Khyber Pakhtunkhwa.”

The province had planned to procure 325,000 tons of wheat to store this year. This much quantity would have easily been stored in its stores with a combined storage capacity of 354,000 tons.. “Additional arrangements will have to be made to maintain the wheat stores as required by the federal government,” said the official.

Khyber Pakhtunkhwa maintains wheat stocks to regulate local wheat market, supplying wheat to local flour mills on subsidised rate to keep prices of wheat flour under control in the September-April period every year.

The provincial government, said the official, supplied wheat to flour mills at rates lower than the market price, subsidising transportation cost in the eight month period from September to April every year.

Last year, the official price of wheat was fixed at Rs1,125 per 40 kilogrammes against which the provincial government had extended subsidy, spending a total of Rs2 billion last year.

“Though the official price has not yet been determined for this year, it is likely to be fixed from Rs1,200 per 40 kilogram to Rs1,250 per 40 kilogramme,” said a knowledgeable official.

Officials said that the government’s procurement centres purchased wheat from local farmers and the suppliers from Punjab. “As a policy we give preference to procure wheat from local farmers after which, if needed, procurements would be made from suppliers from Punjab,” said an official.

Khyber Pakhtunkhwa, according to official estimates, produces around 1 million tons of wheat annually. Its total annual wheat consumption requirement stands at 3.9 million tons, reflecting a deficit of 2.9 million tons for which it heavily relies on supplies of wheat flour from Punjab.

“Apart from subsidising transportation charges, the government spends a substantial amount on account of mark up against loans it gets from banks to procure wheat,” said the source.

He said the government followed a set criteria and quality standard to procure wheat from the suppliers who brought their supplies to the official directorate’s purchasing centres. The government, the official added, incurred net annual savings of Rs1 billion every year by purchasing at its centres.

The offical said the provincial government no more transported wheat from Punjab or made purchases from Passco, instead it buyed wheat from local farmers, local businessmen, and suppliers from Punjab, who brought their consignments of wheat to the official godowns set up in different parts of the province, saving substantial amount of money to the provincial kitty.