Pakistan: Federal Govt faces criticism over free wheat distribution in Punjab

Pakistan: The federal government has faced criticism for how it distributed free wheat flour in Punjab and Khyber Pakhtunkhwa. In response, they have asked the Gilgit-Baltistan administration to reduce the cost of subsidized wheat for citizens in a targeted way and charge wealthy people market rates to ensure a sustainable supply. The GB government has agreed to raise flour prices, which are currently much lower in the region than in the rest of the country.

The federal budget allocated approximately Rs8 billion for a wheat subsidy in Gilgit-Baltistan this year. However, due to a rise in prices caused by expensive imports, this subsidy has already been used up with a supply of around 90,000 tonnes earlier this year.

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The finance ministry has expressed concern about the significant price difference and increasing subsidy expenses during fiscal reviews with the International Monetary Fund. The ministry aims to reduce or limit subsidies, while the political government seeks to satisfy the population before the upcoming general elections.

During a recent meeting of the Economic Coordination Committee (ECC) of the cabinet, the finance ministry agreed to provide an additional subsidy of Rs2.9 billion to cover the supply cost of 25,000 tonnes of wheat to Gilgit-Baltistan for two months, March and April.

This decision was made to ensure that the people in the region do not face difficulties during Ramazan due to supply shortages. However, the committee stipulated that the GB government and the Ministry of Kashmir Affairs and Gilgit-Baltistan must agree on a plan to rationalize wheat prices within a month.

Wheat has been supplied to GB at subsidized rates since the 1970s because of the high prices of wheat flour in the region, where wheat cultivation is limited and transportation is expensive due to underdeveloped infrastructure. However, over time, the price difference between the subsidized wheat in GB and the unsubsidized wheat sold in the rest of the country has significantly increased as the sale price of flour in Gilgit-Baltistan has not been raised in a while.

According to a document viewed by Dawn, the current price of flour in Gilgit-Baltistan is Rs12.5 per kg, while it costs Rs140 or more in the rest of the country. The federal government provides around 160,000 tonnes of wheat to Gilgit-Baltistan annually, and the finance division approves wheat supplies from the Pakistan Agricultural Storage and Services Corporation (Passco) to ensure the subsidy remains within the budgetary allocation.

However, during the current fiscal year, the entire Rs8 billion allocated for wheat procurement in GB has been used up with the supply of around 90,000 tonnes due to the high cost of imported wheat and increased transportation charges.

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As a result, there have been delays in supplies, and wheat prices in Gilgit-Baltistan’s black market have significantly increased. In response to the situation, Prime Minister Shehbaz Sharif instructed the Ministry of Kashmir Affairs and Gilgit-Baltistan to present the issue to the finance ministry.

The finance ministry expressed concerns about the low sale price of wheat and the untargeted subsidy that benefited both the rich and poor. Therefore, the matter was brought before the ECC, which recommended political engagement to reach a consensus on realistic flour prices. Finance Minister Ishaq Dar and Prime Minister’s Advisor on Kashmir Affairs and Gilgit-Baltistan, Qamar Zaman Kaira, engaged the representative leadership of the region to develop a consensus on the issue.

During a meeting on March 1, the chief minister of Gilgit-Baltistan agreed to announce a plan to gradually increase the sale price of wheat. He also shared a plan to encourage wheat cultivation in the region and assured that local wheat would be procured at the official support price.

In a recent meeting of the Economic Coordination Committee, the finance secretary of Gilgit-Baltistan reported that the cabinet had considered a proposal for a targeted wheat subsidy, and measures were being taken to charge market rates to the affluent segments of society. However, the GB government has not made a formal announcement about this yet.

Last week, the ECC was informed that the Gilgit-Baltistan government would announce its plan soon. However, with the approach of Ramazan, each passing day was causing the wheat flour prices in the open market to rise, and any delay in wheat supply would worsen the people’s suffering.

Therefore, the committee approved an additional subsidy of Rs2.9bn for 25,000 tonnes of wheat for March and April. It instructed Passco to immediately supply wheat to Gilgit-Baltistan and directed the National Logistics Cell to provide transportation at discounted rates.

Given the limited federal budget, it is possible that some of the GB government’s upcoming payments for the next year may be allocated towards the wheat subsidy for this year. In the meantime, the Gilgit-Baltistan government plans to gradually increase wheat prices and promote local wheat cultivation, with the assurance of purchasing it at the official support price for future requirements.

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