LAHORE, May 16: Wheat price in central and upper Punjab areas has shot up to Rs450 per 40kg, generating fears of rise in the flour price in the next few weeks.

Only three divisions in the province — Multan, Bahawalpur and Dera Ghazi Khan — have registered a better yield and left the rest of five divisions either teetering on the brink or facing outright shortages, wiping off the impression of a bumper crop.

Millers say the price is going up because of two factors — the below expectation yield in most parts of the province and the heavy buying by potential exporters.

The government had allowed export of 500,000 ton wheat at the beginning of this year. It has recently allowed another 500,000 tons. From the previous export permission, only 125,000 ton wheat was sent abroad. These exporters still have permission to send 375,000 tons. Thus, they need 875,000 tons export permission. They are now purchasing wheat for export, creating an additional demand.

Now, all purchase pressure has transferred to the three divisions having the bumper wheat crop, increasing the price of the commodity there as well. On Wednesday, the wheat was being sold at Rs440 per 40kg in Multan.

“This government has a tendency of taking wrong decisions at the wrong time,” says Bilal Sufi, a miller and former chairman of the Pakistan Flour Mills Association.

He said it had delayed the export permission for over three months last year and the country lost a potential profit of $250 million. Now, the government had allowed export even before the crop hit the market on mere speculation of better crop. That expectation did not come true, and the wheat market was in tale’s spin.

The millers, he said, could not procure wheat at current exorbitantly high interest rates as one bag of 100kg would cost them Rs110 at this rate. He said this was in addition to fumigation and storage charges.

The government plans to release wheat at Rs445 per 40kg owing to political compulsions of an election year. In these circumstances, it hardly makes fiscal sense for millers to procure wheat and they are buying wheat only for daily grinding.

He predicted that millers would soon be knocking at the official door for wheat releases because they did not have stocks of their own. Should that happen, the government would be forced to release wheat as early as July or August, putting extra pressure on its stocks that would not be healthy enough to meet additional pressure, he claimed.

Officials of the Food Department agreed that their procurement drive was expected to terminate at 2.6 to 2.7 million tons, substantially less than the requirement of the country.

Statistics showed that the department had procured 2.04 million tons till Wednesday and distributed gunny bags for 2.4 million tons. But, its daily arrival had dropped from 110,000 tons to 72,000 tons. Out of these 72,000 tons, over 50,000 tons are coming from the three divisions of the southern Punjab.

“The department hopes to buy another 500,000 tons before the market dries out,” maintains an official. The millers have started buying wheat, mostly for daily grinding, but the purchase is less than previous years.