ECC defers wheat support price decision due to food inflation threat

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has deferred the decision on the support price of Wheat Crop for fiscal year 2022-23 on possible increase in food inflation.

Federal Minister for Finance and Revenue Senator Mohammad Ishaq Dar presided over the meeting of the Economic Coordination Committee (ECC) of the Cabinet.

The Ministry of National Food security and Research informed the ECC that wheat is the staple and a strategic crop of the country and in order to ensure its maximum cultivation and to achieve self-sufficiency, the government fixes its Minimum Support Price (MSP) to assure fair return to the farming community. 

MSP for the current year was fixed at Rs 2200/40 Kg and on the other hand, the Agriculture Policy Institute (API) has worked out Rs 2,495/40 Kg cost of production of wheat crop Rabi 2022-23 for the average farmer and Rs 2,427/40 Kg for the progressive grower.  

It is pertinent to note that the National Assembly Standing on NFS&R also recommended that the federal government may announce the MSP of wheat not less than Rs 3,000/40 Kg. 

Sources said that the Ministry of Food has shared the estimated costs with the provincial governments in a meeting chaired by the Minister for NFS&R and their proposals range between Rs 2,600/40 Kg to Rs. 3,000/40 Kg.

Sources said that provincial cabinets of Punjab and Khyber Pakhtunkhwa have endorsed the price of wheat at Rs 3,000/40 Kg while the government of Balochistan has not announced the price yet. On the other hand, the provincial cabinet of Sindh has announced the support price of wheat at Rs 4,000/40 Kg. 

The meeting was also informed that a cabinet committee met with CM Sindh with request to review the MSP, however, no feedback has been received, sources added. The ECC meeting was informed that the recommendation of the Sindh government is expected to have multi-dimensional effects, and likely to increase food inflation.

In addition, PASSCO may not be able to procure wheat from Sindh, while other provinces may impose a ban on the movement of wheat across borders. The growers and middleman will use the price disparity amongst provinces to distort the market and hoarding and smuggling is likely to occur, sources added.  

Besides, keeping an abnormally high MSP would also have an adverse impact on the finances and subsidies of federal and provincial governments. Hence, a reasonably high profit margin, keeping in view the flood situation would be the most prudent course of action to incentivise the next wheat crop. 

Meanwhile, Pakistan Bureau of Statistics (PBS) in its reports for the period April, 2022 to September, 2022 has reported average local wheat price at Rs. 2,776.66/40. Inflation for the month of August was 26.23% with support price of wheat at Rs. 2200/40 Kg. In case of an increase of every Rs. 100/40 Kg in the MSP, the estimated rate of increase of inflation would be 0.16%. 

Therefore, in the case of the proposed MSP of Rs 3,000, Rs 3,200 and Rs 4,000/40 Kg, the estimated increase in CPI would, tentatively, be 1.27, 1.60 and 2.86%, respectively. 

The ECC requested that MSP wheat crop 2022-23 may be fixed at Rs 3,000/40 Kg as this would provide a profit margin of 20% to growers or Rs 3,200/40 Kg, this would provide a profit margin of 28% to growers. 

The ministry of Food has also asked ECC to direct the provincial governments to implement the Anti Hoarding and Anti-Profiteering Act, 1977 in letter and spirit to keep a check on inflation. 

Import of Wheat through Gwadar port  

In another summary, the Ministry of National Food Security & research presented a summary to consider proposals to use Gwadar port and revision of procedure for the pre-shipment inspection agency for import of Wheat. The ECC was informed that the reasons for higher price in limited bids received, in a tender dated 26th September, 2022, was increased risks due to change in inspection regime and port. 

In view of the higher cost on import of wheat associated with the two proposals, ECC approved the proposal that both amendments to TCP tender inspection may be dropped for the time being.  However, pre-shipment inspection should be ensured at the loading port from the top four inspection firms by TCP/Ministry of Commerce. TCP was also directed to issue fresh tenders to ensure import of the allocated quantity of Wheat.

On another summary from Ministry of Commerce, in order to keep export oriented sectors internationally competitive and sustain exports in backdrop of economic slowdown, the ECC approved continuation of Regionally Competitive Electricity Tariff for Export Oriented Sectors during CFY 2022-23 and decided that Electricity may be provided at Rs. 19.99 per kWh all inclusive to five export oriented sectors namely textile including jute, leather, surgical and sports goods across Pakistan from 1st October, 2022 to 30th June 2023.    

Further, the ECC also approved Supplementary Grant of Rs. 410.181 million in favour of Ministry of Interior for expenses relating to law and order