ISLAMABAD: Amid criticism over the distribution of free wheat flour in Punjab and Khyber Pakhtunkhwa, the federal government has called upon the Gilgit-Baltistan administration to urgently rationalise the cost of subsidised wheat for citizens in a phased, targeted manner and charge the affluent people market rates to ensure a sustainable supply.

The GB’s elected government has recently made a commitment to increase flour prices, which are more than ten times lower in the mountainous region than those in the rest of the country.

About Rs8 billion wheat subsidy earmarked for Gilgit-Baltistan in this year’s federal budget has already been exhausted against the supply of about 90,000 tonnes early this year, as prices went up amid expensive imports.

The finance ministry has been critical of the huge price gap and rising subsidy account amid fiscal reviews with the International Monetary Fund. The ministry has been trying to either clip or contain subsidies while the political government tends to appease the population ahead of general elections.

Region has already exhausted its Rs8bn annual subsidy as flour sells for Rs12.5 per kg

The finance ministry last week conceded at a meeting of the Economic Coordination Committee (ECC) of the cabinet to provide Rs2.9bn additional subsidy to cover the supply cost of 25,000 tonnes to Gilgit-Baltistan for only two months — March and April — to avoid any difficulties to the region’s people during Ramazan because of supply shortages.

The committee, however, set a condition that the GB government and the Ministry of Kashmir Affairs and Gilgit-Baltistan must reach a consensus on rationalising wheat prices within a month.

Wheat supply to GB on subsidised rates has been going on since the 1970s. This was necessitated due to exorbitant prices of wheat flour in the area as the staple was sparsely cultivated in the region and transportation was too costly due to underdeveloped infrastructure.

However, the difference between the prices of GB’s subsidised wheat and the unsubsidised one sold in the rest of the country has substantially widened over time, as the flour sale price in Gilgit-Baltistan has not been enhanced for quite some time.

A record seen by Dawn shows that flour currently sells for Rs12.5 per kg in Gilgit-Baltistan against Rs140 or more across the country.

The federal government provides Gilgit-Baltistan with about 160,000 tonnes of wheat per year. With the purse in hand, the finance division gives the go-ahead to the Pakistan Agricultural Storage and Services Corporation (Passco) for wheat supplies in a manner that subsidy should stay within the budgetary allocation.

During the current financial year, Rs8 billion was allocated for wheat procurement for GB, but the amount has been fully utilised with around 90,000 tonnes of supplies due to the high cost of imported wheat and increased transport charges.

As a result, supplies are held up and wheat prices in Gilgit-Baltistan’s shadow market have increased substantially.

In view of the situation, Prime Minister Shehbaz Sharif directed the Kashmir affairs and GB ministry to present the case to the finance ministry, which raised concerns about the low sale price of wheat and the untargeted subsidy that reached the rich and the poor alike.

The matter was, therefore, placed before the ECC, which recommended political engagement to pave the way for broader consensus on realistic flour prices. Accordingly, the representative leadership of the region was engaged by Finance Minister Ishaq Dar and the prime minister’s adviser on Kashmir Affairs and GB, Qamar Zaman Kaira, to develop a consensus on the issue.

In a March 1 meeting, Gilgit-Baltistan’s chief minister agreed that the region’s government would shortly announce a plan to increase the sale price gradually. He also shared a plan to incentivise wheat cultivation in the region along with the assurance to procure the local wheat on the official support price.

In a recent meeting of the Economic Coordination Committee, Gilgit-Baltistan’s finance secretary reported that the region’s cabinet had considered the proposal to have a targeted wheat subsidy and measures were being taken to pass on the actual cost to the affluent segments of society. However, the GB government has yet to make a formal announcement in this regard.

The ECC was informed last week that the Gilgit-Baltistan government would announce its plan in the coming days, but with the advent of Ramazan, every passing day was pushing up wheat flour prices in the open market and any delay in wheat supply would aggravate people’s miseries.

Therefore, the committee allowed an additional subsidy of Rs2.9bn for 25,000 tonnes of wheat for March and April. It asked Passco to supply wheat to Gilgit-Baltistan immediately and directed the National Logistics Cell to get engaged for transport at discounted rates.

Meanwhile, the GB government’s certain payments for the next year may be partially diverted to wheat subsidy this year, given the tight federal kitty. In the interim, the Gilgit-Baltistan government would appropriately raise wheat prices and encourage local wheat cultivation with the guarantee to procure it at the support price for future needs.

Published in Dawn, March 27th, 2023