LAHORE: The Punjab government’s new wheat procurement mechanism is struggling, as private firms are experiencing buying failures due to pricing disputes, financing issues, and farmer resistance.

Under the 2026 strategy, the government aimed to procure 3 million tonnes of wheat through 11 private companies, shifting away from its traditional state-led buying model. To incentivise participation, authorities offered extensive support: negotiating bank loans, covering 70 per cent of markup costs, providing free storage in Food Department warehouses, and assigning around 400 experienced personnel to assist firms during procurement.

Despite these concessions, the initiative has struggled to take off.

A representative of one participating firm revealed that their financing bid was based on KIBOR [Karachi Interbank Offered Rates] plus 1 per cent, but talks between banks and the shortlisted companies failed to reach a workable agreement. As a result, firms were forced to arrange their capital under less favourable terms.

Nine of 11 firms fail amid financing, pricing disputes

According to officials, banks were initially expected to charge around 9pc markup until September, with an additional 1pc increase each subsequent month until repayment, a structure that raised concerns about mounting financial risk for companies holding large wheat stocks.

The most immediate challenge, however, has come from the market itself. With wheat selling at around Rs3,700 per maund in the open market, farmers have shown little interest in selling to procurement firms offering the official rate of Rs3,500 per maund.

As a result, many growers have either held onto their produce in anticipation of better prices or sold directly to private traders, including arhtis (middlemen). Industry sources confirm that at least nine of the eleven firms have not purchased any wheat so far, effectively stalling the procurement drive.

Authorities have attempted to control supply by cracking down on what they term “illegal transportation” of wheat from Punjab to other provinces. Enforcement teams from the Food Department and Punjab Enforcement & Regulatory Authority (PERA) have been intercepting shipments and redirecting them to state-linked storage facilities.

Confiscated wheat is being purchased at the official rate of Rs3,500 per maund. In Rahim Yar Khan alone, around 800 tonnes have reportedly been collected through such actions, raising concerns among traders and farmers about forced sales.

In Sargodha, consignment of a flour miller of Rawalpindi was confiscated though the industrialist had a permit of it and the forfeited wheat was unloaded at a procurement centre. Similar reports are being received from other districts.

Farmer groups have strongly criticised the government’s handling of the wheat market. Pakistan Kisan Ittehad (PKI) President Khalid Khokhar said most farmers of South Punjab had already sold about half their produce at lower rates, averaging around Rs3,100 per maund, when prices dipped to between Rs2,800 and Rs3,200.

He argued that the Minimum Support Price (MSP) mechanism is meant to protect farmers when prices fall — not to suppress the market when prices rise. “The government intervened when prices increased to Rs3,700, instead of when farmers were forced to sell at lower rates,” he lamented. He also alleged that staff at the so-called procurement centres were deducting at least 15kg per bag of 100kg on the pretext that the wheat contained sand and other impurities, while the weighing machines there were also faulty to the disadvantage of the growers.

Mian Umair Masood, the leader of another PKI faction, accused the government of mismanaging support schemes. He rejected official claims that Rs6 billion worth of gunny bags were distributed to farmers, alleging widespread misappropriation.

Published in Dawn, May 9th, 2026