Details

Technical Note

Educator Copy

THE POLITICAL ECONOMY OF WHEAT PROCUREMENT IN PUNJAB

Muhammad Ahsan Rana


INDUSTRY : Agriculture

AREA : Agribusiness

ORGANIZATION : Government

LENGTH : 15

LUMS No : 13-107-2019-2

PUBLICATION YEAR : 2019

DESCRIPTION

KEYWORDS:

Wheat, Food, Flour Mills, Punjab, Pakistan, Public Sector


DESCRIPTION:

Each year at wheat harvest the Punjab government faces an awkward situation. It must buy millions of tons of wheat at an arbitrarily determined (high) price despite massive carry-forward stocks already lying in its granaries. Cost of procuring and storing such huge quantities and subsidising sales to flour mills is enormous, and is met with commercial borrowing. In recent years, the government has struggled to balance its accounts for wheat operations; its outstanding liability to commercial banks stood at Rs 444.7 billion in June 2018, viz. 22% of the total budget of the Punjab province in 2017-18. Clearly, the government procures more wheat annually than it needs with borrowed money that it cannot pay back. Ostensibly, the government carries out its wheat operations to benefit small farmers. But its procedures are designed to exclude, rather than include them. On the other hand, rural and urban consumers end up buying expensive wheat flour. The biggest beneficiary of the wheat subsidy regime appears to be commercial banks who finance the procurement and earn interest thereupon. This appears a case of damage by friendly fire, as a public intervention designed to help the poor ends up hurting their interests.


LEARNING OBJECTIVES:

The objective of this note is to familiarise students with the wheat subsidy regime in Punjab, particularly the micro-processes of procurement that exclude small farmers and tenants from benefiting from this large subsidy maintained in their name. This technical note will be used in the Executive Certificate on Agribusiness Management (ECAM), and in various undergraduate courses, such as Rethinking Policy: Critical Perspectives on Pakistan’s Agricultural Development, Reforming the Public Sector, Introduction to Policy.


SUBJECTS COVERED:

Agricultural Business