A TWISTED subsidy regime, trade and milling pattern and government’s incorrect estimates about the crop size last season lies at the heart of the current wheat and flour crises. The first two factors have been there for the last 15 years, but they did not hurt as long there was sufficient wheat and smooth supplies. But once the artificial or real shortage took hold of the wheat market, the consumers were made to pay a heavy price.

Till the 1991 Finance Award, the federal government used to pick up subsidy on wheat. After that year, the provinces were told to foot subsidy bill, and they started arranging funds according to their needs. The pattern changed in 1999-2000, when the country suddenly had a bumper crop and the Punjab Food Department was forced to buy around 6.3 million tons of wheat from farmers. With such huge stocks , the department kept feeding most of the country’s population for the next three years. During this period, the Sindh, NWFP and Balochistan were getting flour from the mills in Punjab. Once the depleted stock stopped supplementing wheat supplies and wheat shortages hit the market, Punjab started sealing its borders with other provinces on the plea that it was subsidising wheat only for the people living in its territorial limits. It cannot feed the entire country from its own budget.

Since Punjab constitutionally could not seal its borders, the federation came under increasing pressure from the other three federating units. Punjab yielded to the federal pressure, but only partially. It kept arguing that either the federation pays the subsidy bill, or let it close its borders because it cannot feed the entire country from its coffer. The federal government turned down both the proposals; it neither paid the bill nor let Punjab seal its borders.

Punjab, on its part, kept a vigil on the orders and hindered supplies. But the surplus milling capacity in Punjab worked to the advantage of other provinces. The mills have four times the grinding capacity of what is required by the province. Naturally, it is in millers’ interest as well that flour should be marketed in other provinces.. Since then, Punjab has been pressing millers that they should not send flour out of the province, especially made of wheat supplied to them from the subsdised stocks.

With the current wheat crunch, which is largely government’s own making, Punjab has renewed its argument. Punjab pays, at the current rate, a subsidy of Rs1,000 per ton or spends some Rs2.9 billion on its own stocks. It is getting 250,000 tons wheat from the Pakistan Agriculture Services and Storage Corporation (Passco), which would cost it another Rs200 million. The subsidy on imported wheat would be even higher, at around Rs2,000 per ton at the current price. It insists it should not be made to pay for the rest of the country.

The Punjab government argues that Sindh, NWFP and Balochistan also got allocations from the Passco. But, none of them has so far lifted full quota of wheat. Instead, they are relying on flour from Punjab. It also maintains that Sindh, according to its population, needs some 8,000 tons wheat daily. But it is issuing only 3,000 tons from its Food Department stocks. Similarly, NWFP needs to issue 6,000 tons daily to feed its population, but was releasing only 1,500 tons. On the other hand, Punjab needs to issue 10,000 tons daily, but it was ending up issuing 18,000 tons. Even then, there is such a huge shortage in the market and Punjab had to increase releases to 21,000 tons from December 12. It costs the province a fortune.

The flour crisis was sparked by the federal government in May, when it exaggerated the crop size to inflate its GDP growth rate. The actual crop size was a little less than 22 million tons, just below the national requirement. With crop size at 22 million tons, the GDP growth rate worked out to be 6.6 per cent, which was not acceptable to the then government. It quietly increased crop size figure to 23.5 million to inflate GDP growth rate to 7.2 per cent. Instead of playing safe, it allowed 500,000 tons of wheat export in order to substantiate its claim of crop size.

The private sector, taking advantage of the rising international cereal prices, connived with the officials concerned and reportedly exported 800,000 tons. Smuggling to India, which was experiencing the worst shortages, added to the consumers woes. As if it all was not sufficient, the government kept allowing duty-free export of flour to Afghanistan as late as first week of December. All these follies have now come back to haunt every citizen.