LAHORE, May 1: The Punjab government has reportedly fixed release price of wheat at Rs1,100 per 40kg for the next season, taking a first big leap to stabilise the price that has been sliding because of reluctance of the private sector to purchase the commodity.

In run-up to provincial procurement drive, rumours had gripped the market that the Punjab government had plans to keep wheat price at Rs1,000 per 40kg, at least for carry over (1.75 million tons) stocks to “reap political benefit in an election year”.

These rumours have so far kept private sector out of purchase as it was hoping to get cheaper wheat from the official stocks rather itself buying the commodity. By fixing the price on the higher side, the Punjab government hopes to activate private sector into buying and stabilise wheat price that has so far been hovering between Rs900 to Rs950 per 40kg in different parts of the province.

“The millers always consider release price as a benchmark because price of flour depends on it,” says a miller from Lahore. The millers had feared provincial government releasing wheat cheaper than even its purchase price for “political and social motives,” twisting the millers’ business calculations.

With new release price, the millers would now be able to calculate at what price they could afford to purchase the commodity. After all, they have to add mark-up and other incidentals they had to bear for the next six months. The higher the release price, the more millers would buy.

“With the existing price, which is almost Rs150 per 40 kilo lower than the new release price, the millers should come in a big way as it makes highly lucrative business proposition for them,” he hopes.

On the second plank, the Punjab government on Tuesday also decided to reduce gunny bag distribution cycle from 15 to 10 days. Now, every farmer can get second installment of bags within a week. With the entire procurement campaign now reduced to even less than 25 days, against traditional 45 days, in some parts of the province as weather delayed harvesting, the food department has also reduced the gunny bag distribution cycle, hoping it “can send signal for aggressive buying and keep the price stable.”

“We should be able to distribute more than 50 per cent of gunny bags in the first two weeks (of May), sending strong signals of official presence in the market,” says a food department official. If the department could quickly absorb half of marketable surplus, which was much lower than the earlier estimates, the market should stabilise on the higher side, he said and added: “Reduced crop size, new and higher release price and aggressive official buying should keep the market stable against earlier fears of price crash. But still, next two weeks would be crucial because they would test the departmental capacity to its limits. Whether the department can handle the pressure or not would impact the market hugely.”