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Business Recorder
a day ago
- Business
- Business Recorder
Pakistan's wheat market at a crossroads: a call for rational liberalization
Pakistan's wheat market is undergoing a critical transformation. During the 2023–24 procurement season, the government, along with the Pakistan Agricultural Storage and Services Corporation (PASSCO), stepped back from active procurement, opting for a market-led approach. However, this shift occurred without adequate preparation or confidence-building measures for the private sector. Private traders hesitated to procure wheat due to the government's carryover stock of 3-4 million tons—enough to unilaterally influence market prices. Although the state claimed to liberalize the market, it continued to exert control, particularly through price caps on wheat flour enforced by Deputy Commissioner (DC) offices. This duality—market liberalization on paper but intervention in practice—left private actors operating with thin margins and high risk. Farmers, without a guaranteed public buyer, faced severe financial distress as prices dropped below expectations. In the 2024–25 season, the government again refrained from direct procurement, but the policy landscape became even murkier. The state still controls flour prices via DC offices, distorting the wheat value chain. Farmers receive no price support, while millers and retailers operate under price ceilings that limit profitability and disincentivize investment. Previously, the government purchased 6–8 million tons of wheat annually—equivalent to Rs. 4 billion at current farm-gate prices (Rs 2300 per maund). Transferring this procurement responsibility to the private sector necessitates reasonable profit margins. However, with cap prices on flour set between Rs. 2800-2900 per maund, the private sector can only offer Rs. 2200–2300 per maund to farmers. The Rs. 700–800 spread is required to cover transportation, storage, spoilage, and returns on investment. The government may be trying to align domestic wheat prices with international rates (approximately Rs. 2350 per maund), but this overlooks essential logistical costs of import, and financing costs. Moreover, international prices are projected to rise before the next harvest. By that time, if the cap is lifted or enforcement weakens, private investors—rather than farmers—will reap the windfall A genuinely liberalized market would allow private traders to offer farmers higher prices today, anticipating future profits. This would create a win-win scenario, aligning incentives and narrowing the gap between local and international markets. However, current policy uncertainty suppresses this natural market function. Pakistan requires a balanced and rules-based liberalization strategy—one that protects producers, traders, and consumers alike. If the state fears monopolistic behaviour or hoarding, it should establish clear, pre-announced mechanisms for market intervention. A price-band model could offer a solution: If local prices exceed international prices by more than 20%, the government could allow imports to cool the market. If they fall more than 20% below global benchmarks, exports should be permitted to support farmers and traders. This 20% buffer reflects the cost of transportation, storage, losses, and expected returns on investment. While the percentage can be debated, it offers a rational starting point and introduces predictability. Clear pre-announced rules would provide all stakeholders—farmers, traders, and consumers—with a fair understanding of the market structure. Such rule-based frameworks would reduce the need for ad hoc interventions, avoid panic-driven decisions, and encourage long-term investment planning in agriculture. If the government completely refrains from interfering in the wheat market—including ceasing indirect controls via DC offices—private actors would be better positioned to offer fair prices to farmers. Expecting future international price increases, they would naturally share some of those anticipated gains at the time of procurement. This would increase farmer incomes and make the supply chain more efficient, with local prices aligning more closely with international benchmarks. Despite the promise of liberalization, one critical constraint remains: limited liquidity in the private sector. Large-scale procurement requires substantial capital—something many traders and millers lack. The government can facilitate this transition by offering subsidized credit lines to support private wheat procurement. This would ensure the private sector has the financial muscle to absorb the former role of public procurement agencies. In parallel, PASSCO's aging and inefficient storage infrastructure poses another challenge. Modern warehouses are essential to reducing post-harvest losses and preserving grain quality. Investments in such infrastructure could be spurred by a clear and stable policy environment, enabling private actors and public-private partnerships to participate effectively. The government is also attempting to operationalize an Electronic Warehouse Receipt (EWR) system. In theory, EWRs could transform the wheat market by allowing farmers to store their harvest, receive a digital receipt, and use it as collateral for loans or to sell on commodity exchanges. This could enhance price discovery, reduce distress selling, and improve access to finance. However, without a liberalized policy environment, the EWR system will struggle to gain traction. Price caps and unpredictable interventions undermine the trust required for such instruments to function. Farmers won't store wheat in accredited warehouses if future retail prices are caped, and banks won't lend against such receipts without confidence in price transparency and enforcement. Pakistan stands at a crossroads in wheat sector reform. The current hybrid model—government withdrawal from procurement coupled with ongoing market control—has paralyzed the system. Farmers lack protection, private traders lack incentive, and consumers remain vulnerable to price shocks. To build a functional and resilient wheat market, the government must commit to a consistent liberalization framework. Price interventions should be tied to clear, transparent benchmarks. Support systems such as subsidized credit and infrastructure upgrades must enable private actors to fulfill their new role in procurement and storage for at least next couple of years until their trust build on market forces. Only by removing ad hoc interventions and empowering market forces can Pakistan build a sustainable wheat economy—one where all stakeholders have a fair stake and where food security is driven by efficiency rather than distortion. Abedullah (The writer is an ex-Chief of Research at Pakistan Institute of Development Economics (PIDE), Islamabad, Pakistan)
Indian Express
30-05-2025
- Business
- Indian Express
How IMF has forced Pakistan to reform its farm sector
Can one imagine India dismantling minimum support price (MSP)-based procurement operations in wheat and rice? Or the government dissolving the Food Corporation of India (FCI)? Both political and economic considerations – not risking farmer displeasure and ensuring adequate grain reserves for the public distribution system, as well as to curb excessive open market price volatility – practically rule these out. But Pakistan has done that and much more – under pressure from the International Monetary Fund (IMF). The Pakistan government did not declare any MSP for the 2024-25 wheat crop, sown in November-December and being marketed from April. Nor has Pakistan Agricultural Storage & Services Corporation Ltd – PASSCO, the country's equivalent of FCI – procured a single tonne this time. Last year, the MSP for the 2023-24 crop was fixed at Rs 3,900 per maund (40 kg), i.e. Rs 9,750/quintal, and PASSCO procured 1.79 million tonnes (mt) of the cereal grain. Reform at gunpoint Pakistan's decision to dispense with MSP and government procurement of wheat has been externally forced, part of conditionality linked to an Extended Fund Facility loan of $7,113-million from the IMF, to be disbursed from the 2024-25 to 2027-28 fiscal years (FY: July-June). The so-called memorandum of economic and financial policies, submitted by the Pakistan government to the IMF for availing the loan, has clearly stated that in the case of wheat 'we have abstained from announcing support prices and undertaking provincial procurement operations during the 2025 Rabi season and are committed to continue this approach going forward'. That's not all. The memorandum has also committed to 'winding down PASSCO' under an overall plan to 'phase out federal and provincial government price-setting for agricultural commodities by end-FY26'. Pakistan's Minister for Parliamentary Affairs, Tariq Fazal Chaudhry, confirmed in the National Assembly earlier this month that PASSCO is being 'wound up', as the government isn't any longer buying wheat or regulating its prices. It has already appointed a consultancy firm, TAGM & Co, to assess the total value of PASSCO's warehouses, offices and other assets, and formulate a winding-up plan for the 51-year-old corporation 'within three months'. But it's not just MSP, procurement and PASSCO. The memorandum given to the IMF has promised to review all relevant legislation underpinning government interventions in commodity markets 'by end-December 2025'. These include the Price Control and Prevention of Profiteering and Hoarding Act, 1977 (similar to India's Essential Commodities Act of 1955) and provincial laws such as the Punjab Foodstuffs (Control) Act, 1958 and the Sindh Essential Commodities Price Control and Prevention of Profiteering and Hoarding Act, 2005. If these weren't enough, all the four provinces of Pakistan – Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan – have amended their individual Agriculture Income Tax legislation. These have now been fully aligned with the federal-level personal and corporate income tax regimes applicable for ordinary farmers and commercial agriculture respectively. The amendments will enable taxation of farm incomes to 'commence from January 1, 2025'. The contrast with India India hasn't been under any IMF-guided programme since June 1993, when it borrowed the last tranche of a Standby Arrangement loan of 2,207.925 million SDR (special drawing rights), equivalent to $2,394 million. This loan, taken between April 1991 and June 1993 when the country was facing a balance of payments (BOP) crisis like Pakistan is today, got completely repaid by May 31, 2000. With no IMF conditionality linked to financial assistance, there's no question of any reforms in India being imposed from outside, leave alone at gunpoint. Government agencies here have so far procured almost 30 mt of the 2024-25 wheat crop at the MSP of Rs 2,425 per quintal (the Indian rupee is over 3.3 times the Pakistani rupee). They have further purchased 85.5 mt of paddy (equivalent to 57.3 mt of milled rice) at the MSP of Rs 2,300-2,320 per quintal. Apart from MSP procurement and stocking of grain by FCI, India provides subsidies on fertilisers, electricity for irrigation and canal water, crop credit, insurance premium and other farm inputs. Income from agriculture attracts no tax either. Agriculture reforms in India – especially those leading to distorted cropping patterns (more rice, wheat and sugarcane being grown at the expense of pulses, oilseeds, maize, cotton and millets) and promoting inefficient/excessive use of nitrogen and water – are less likely under any BOP crisis-induced, IMF-dictated external pressure of the sort seen in 1991. The Central government's having to repeal the three farm laws liberalising trade in agricultural produce – which it had pushed through Parliament in September 2020 – demonstrates the limitations of reform by central fiat under the given political economy realities. The impetus to farm reform in India is more likely to come from internal fiscal, as opposed to external BOP, pressures. And that would probably be at an individual state level (Punjab, for instance) rather than from the Centre. Production comparisons The US Department of Agriculture (USDA) expects Pakistan's wheat production in 2024-25 (that crop is now being marketed) at 28.5 mt, down from last year's record 31.44 mt. The decline is due to a reduction in area sown, from 9.6 million to 9.1 million hectares. That, in turn, is attributed to the Pakistan government's decision to discontinue MSP procurement and also dry weather. Since October 2024 and throughout the growing season, rainfall was below average and temperatures well above average. While wheat is a largely irrigated crop, the 2-3 showers normally received during the winter-spring months help in supplementing irrigation water and positively impacting yields. Wheat is Pakistan's staple food, with its per capita consumption of around 124 kg per year being 'one of the highest in the world', according to USDA. The agency projects the country's consumption in 2025-26 at 31.5 mt, which will then necessitate imports. Pakistan was forced to import 3.59 mt in 2023-24 (May-April) and 2.73 mt in the previous marketing year. It's the opposite situation in rice, where Pakistan's annual production of 9.75-9.8 mt is way ahead of domestic consumption of 4.1-4.2 mt. That makes Pakistan an exporter of rice, the world's fourth largest after India, Vietnam and Thailand. Pakistan's rice shipments were at 6.49 mt in 2023-24 and 5.5 mt in 2024-25. The accompanying table shows Pakistan to be a significant producer of wheat, rice, maize and cotton. While its output of these crops is lower than India's, a more appropriate comparison would be with Uttar Pradesh (which has almost the same population) and Punjab (having similar growing conditions). Pakistan scores reasonably on the above counts, although the medium and long-term impact of the IMF-imposed reforms, plus more resources going towards military spending ('guns versus butter'), on its agricultural economy remains to be seen. Harish Damodaran is National Rural Affairs & Agriculture Editor of The Indian Express. A journalist with over 33 years of experience in agri-business and macroeconomic policy reporting and analysis, he has previously worked with the Press Trust of India (1991-94) and The Hindu Business Line (1994-2014). ... Read More
Business Recorder
30-05-2025
- Business
- Business Recorder
PASSCO: Minister ‘uncovers' nearly Rs1bn corruption
ISLAMABAD: Federal Minister for National Food Security and Research Rana Tanveer Hussain on Thursday revealed that corruption amounting to nearly Rs1 billion had been committed within the Pakistan Agricultural Storage and Services Corporation (PASSCO) during wheat procurement operations last year (2024–25). The minister, while briefing the Senate Standing Committee on National Food Security, stated that investigations had confirmed large-scale embezzlement within the state-run procurement body. In response to a query by committee chairman Senator Syed Masroor Ahsan, Hussain disclosed that the federal government, under directives from Prime Minister Shehbaz Sharif, has decided to dissolve PASSCO and establish a new institution in its place. Officials from PASSCO briefed the committee on wheat procurement activities, noting that the target for the year 2024-25 had been set at 1.8 million tons, of which, 1.785 million tons were successfully procured. They further informed the committee that as of April 28, 2025, the organisation holds wheat stocks amounting to approximately 2.43 million metric tons. However, no procurement target for 2025 has yet been issued by the federal government. Addressing the corruption issue, PASSCO officials said investigations had been initiated against 249 employees, including two senior general managers. Disciplinary actions included the termination of one officer, forced retirement of another, and withholding of salary increments for two others. Concerns were also raised over wheat stock conditions in Balochistan. Senator Danesh Kumar warned of an impending crisis if wheat procurement is not undertaken promptly, noting that some stocks in the province have already spoiled. Minister Hussain confirmed the deterioration of certain wheat stocks in Balochistan. The committee was briefed on the alarming spread of counterfeit seeds in the country. The director general (DG) Federal Seed Certification and Registration Department (FSC&RD) informed the committee about ongoing actions against companies and officials involved in the sale of fake seeds, which pose a serious threat to food security. The DG told the committee that following the third-party audits, out of 1,200 registered seed companies registered, nearly 400 companies were found involved in selling fake seeds and their registrations been cancelled. Between 2020 and 2024, over 2,700 challans were issued to fake seed sellers, he said. He said that efforts are underway to improve access to quality seeds, including the import of certified and hybrid seeds, particularly for cotton. The minister assured that visible improvements will be seen in the agriculture ministry's performance within six months. Senators Rahat Jamali, Abdul Waseh, Danesh Kumar and senior officials from the Ministry of National Food Security and Research also attended the meeting. Copyright Business Recorder, 2025
Business Recorder
28-05-2025
- Business
- Business Recorder
PASSCO's wheat reserves will not be released into open market: minister
ISLAMABAD: Federal Minister for National Food Security and Research Rana Tanveer Hussain said on Tuesday that the government will not release Pakistan Agricultural Storage and Services Corporation (PASSCO)'s strategic wheat reserves into the open market, reaffirming the government's commitment to ensuring national food security. Speaking during a meeting with representatives of farmer unions, the minister clarified that PASSCO's reserves are meant strictly for emergency situations. 'These reserves are maintained strictly for emergency situations and food security purposes,' Hussain said. Federal govt is no longer setting wheat prices, pulls plug on Passco 'Ensuring the food security of our population remains the top priority of the government.' In addition to addressing concerns over wheat availability, the minister also discussed the government's efforts to boost maize exports. He said that Pakistan is actively engaging with several countries to expand export markets for maize through diplomatic and trade-level initiatives. These efforts, he noted, are expected to yield positive results for the farming community and bolster the national economy. 'Pakistan's maize has high potential in international markets due to its quality and competitive pricing,' Hussain said. He added that the government is improving storage, logistics, and value chain mechanisms to support export efficiency. The minister also briefed the farmer representatives on various government initiatives aimed at enhancing agricultural productivity. These include improving farmers' access to quality seeds, modern machinery, and affordable fertilisers. He reiterated the government's resolve to address the grievances of the farming community through policy reforms and public-private partnerships. Copyright Business Recorder, 2025
Business Recorder
18-05-2025
- Business
- Business Recorder
Meeting on food security finalises agri innovation plan
LAHORE: Federal Minister for National Food Security and Research Rana Tanveer Hussain chaired a consultative session on Saturday to finalize the 'national innovation and growth action plan in the agricultural sector.' The meeting held at PASSCO head office here was attended by Minister for Agriculture and Livestock Punjab Syed Ashiq Hussain Kirmani, Chief Secretary Punjab Zahid Akhtar Zaman (via video link), Federal Secretary for National Food Security and Research Waseem Ajmal Chaudhry, Secretary Agriculture Punjab Iftikhar Ali Sahoo, Secretary for Livestock Punjab Saqib Ali Ateel, Secretary Forest, Wildlife and Fisheries Punjab Mudassir Riaz Malik, Secretary for Commodities and Price Control Department Punjab Muhammad Ajmal Bhatti. Also present were member of the Planning and Development Board Aslam Pervez, Director General of Agricultural Information Punjab Naveed Asmat Kahloon, and other officials. On this occasion, Federal Minister Rana Tanveer Hussain stated that the Prime Minister's goal is to enhance agricultural growth and increase agricultural exports to US$125 billion by 2030. He further noted that the Prime Minister envisions a second green revolution at the national level. To achieve this, 28 transformational initiatives will be taken across key sectors such as agriculture, livestock, and fisheries, aiming to enhance their value chains and significantly boost foreign exchange earnings. In line with the Prime Minister's given task, improvements will be brought in these sectors through six working groups. These groups will focus on technology and IT integration, research and farmer capacity building, promotion of agricultural mechanization, financial empowerment of farmers, development of legal and regulatory frameworks and overall growth in agricultural development. The Federal Minister appreciated the progress in agriculture and livestock sectors in Punjab and commended the farmer-friendly initiatives of the Chief Minister Punjab. He emphasized that measures will be taken to ensure digital empowerment of farmers so they can access all necessary facilities at their doorstep. Minister for Agriculture and Livestock Punjab Syed Ashiq Hussain Kirmani speaking at the meeting stated that under the leadership of Chief Minister Punjab Maryam Nawaz Sharif, implementation is underway on an agricultural transformation plan worth over Rs400 billion. He added that key priorities include increasing crop yields through new seed technologies and promoting high-tech mechanization. This year, four Agri Malls are being established, with plans to increase the number to 10 in the next fiscal year. Efforts are also underway to provide modern agricultural machinery for rent at the tehsil level. The Punjab Kissan Card has been introduced for the financial independence of farmers, through which Rs55 billion in interest-free agricultural loans have been disbursed. For the first time in the country's history, 9,500 farmers have been provided green tractors with a subsidy of one million rupees each. To improve agricultural extension services, 1,000 young agricultural graduates have been hired to offer technical guidance to farmers. Furthermore, in the next fiscal year, an extension mobile office and laboratory will be established in every union council to offer free soil and water testing. Chief Secretary Punjab Zahid Akhtar Zaman noted that agriculture and livestock sectors are improving under the farmer-friendly initiatives of the Chief Minister. He stressed the importance of introducing advanced seed production technologies in Pakistan to increase cotton yields. Secretary Agriculture Punjab Iftikhar Ali Sahoo highlighted that there is a 25 percent duty on local machinery and 35 percent on imported machinery, which needs to be reduced to promote agricultural mechanization in the country. Copyright Business Recorder, 2025
