Pakistan’s farmers are in a toxic relationship with the country’s government. Every year the government announces they will buy wheat from farmers at a particular rate and the price that they set is what flour mills buy the wheat at as well.
This means year in and year out farmers are dependent on the prices announced by the government. Normally, the government has a lot of interest in buying this wheat. For starters they can use this wheat to support farmers, keep an eye on shortages, and have a steady supply of the commodity to control any shortages or possibly any problems with the market.
At the same time, the farmers know that so long as they can keep producing wheat they will have the government ready and available to buy wheat from them at a good price and when that price is announced flour mills will also be forced to buy at the prevailing market rate being set by the government as the major buyer.
It is all hunky-dory most years. Except when it isn’t.
Just take this year as an example. The government of Pakistan has refused to pick up as much wheat as they normally do. The big reason for this has been that, as the government claims, the caretakers imported far too much wheat last year and the surplus has meant the government does not know what to do with all the wheat that the farmers want them to buy.
The immediate results have been catastrophic. Farmers have come out in protests. Instead of giving them a helping hand, the government has used police to beat them purple and blue and send them back home with stern warnings. The farmers on the other hand have no other option. They are expecting a major bumper crop this year and their biggest buyer is saying they’ve imported wheat from outside. So what exactly happened?
The entire matter boils down to some 3.6 million metric tons of wheat that the government ordered in surplus to expected figures. Why did they order the extra wheat? What do the farmers have to say and how did this come about? Profit dives into the mechanics of
What happened?
The process is normally very simple. The government procures wheat from producers directly; it releases wheat to flour mills directly and wheat flour consumers through publicly owned utility stores.
Our current crisis can be traced back to the floods of 2022. Following devastating floods in Pakistan in 2022, the impact on wheat farming caused a shortage of wheat in early 2023. While Pakistan consumes around 30 million tonnes of wheat per year, only 26.2 million tonnes were produced in 2022, pushing up prices and resulting in long queues of people in cities trying to buy wheat. There were even instances of people being crushed in crowds trying to access wheat.
As a result, the government decided to allow the private sector to import wheat. Before the 18th constitutional amendment, the practice of fixing support prices was with the federal government (now provinces are free to fix their support price). Now, the Provincial food departments and PASSCO procure wheat in harvest months at the government’s announced price. The provincial food departments release wheat in lean months at the ‘issue price’. Until recently issue price was the same throughout the year and now the government has introduced cascading price mechanism to smooth out seasonal variation and cover the transaction cost. The public sector procures on average about six million tons of wheat or nearly 24% of total production.
The extra import
The part where there is controversy is a small period between September 2023 and March 2024, more than 3.5 million tonnes of wheat were imported into Pakistan from the international market, where prices were much lower.
Documents reveal that the decision to allow regulatory duty free imports of wheat by the private sector, coupled with an absence of restrictions on import volume and timelines, was taken by the caretaker government and has exacerbated the situation, causing significant losses to both farmers, badly affected procurement drive of the province food departments and the national exchequer.
According to documents obtained by this publication, a summary initiated by the Ministry of National Food Security and Research (MoNFS&R), subsequently approved by the Economic Coordination Committee (ECC) and the Federal Government, permitted unlimited import of wheat in the country with waiver of regulatory duty and taxes even after bringing in estimated shortfall quantity of 2.4 million metric tons first time ever in the history of Pakistan under the garb of escalating prices of wheat due to shortfall. This move allowed private entities to flood the market with additional wheat stocks available at much less prices internationally than the reserved domestic wheat stock, consisting of politically motivated support price, marks up of banks, storage cost as incidental charges.
Despite an estimated shortfall of 2.4 million metric tons by the Ministry of National Food Security and Research, Pakistan reportedly imported around 3.6 million metric tons of wheat, resulting in import of surplus wheat of 1.2 million metric tons without duty and taxes also. This continuous arrival and surplus stock of wheat after shortfall without RD kept halting release and maintaining the procured strategic reserves of provinces and PASSCO being procured at higher prices than the import. As per past practice, the provinces complete maximum releases by March of each year to procure new crop but this time, due to coincidence of wheat import with the peak domestic wheat season and leftover stock of wheat compelled the provinces to drop their strategic wheat procurement targets that sparked indignation among the farmers country wide and give rise to this wheat crises.
As sources M/o National Food Security and Research in the past has been proposing to the federal government for imposing of regulatory duty on import of agricultural goods particularly wheat, maize, sugar, etc., when they are produced in surplus in the country for bringing price of the imported produce at par with the domestic produce to regulate import and protect domestic industry. It suggests the Federal Government for exemption of RD to allow import of agricultural products which are insufficient and in great demand for the country to meet shortfall and ensure food security. As RD is linked with the availability of the agricultural merchandise in the country, it necessitates constant and regular review by the Ministry of National Food Security and Research ensuring convenience of goods.
According to the Import Policy Order (IPO), wheat is not classified under banned items for import in Pakistan. However, it has been classified under restricted commodities for import in Pakistan and can be imported in Pakistan from any country approved by Department of Plant Protection (DPP) and Ministry of National Food Security and Research (MNFSR) with certain sanitary and phytosanitary measures.
The DPP prepares and establishes phytosanitary import conditions for import of agricultural commodities in Pakistan. These are issued to the importers in terms of import permit. These phytosanitary requirements are needed to have been complied in the country of origin to mitigate pests associated with the import possessions. If on arrival of consignment, if any condition is not fulfilled in the country of origin or insects are detected in the consignment, DPP issues Emergency Disinfestation Notification to the importers and after disinfestation, it gives biosecurity clearance and plant protection release order. These measures are taken with an objective to prevent entry of invasive biosecurity risks i.e., insects, plant pathogens, weeds, contaminants in the country and safeguard domestic agriculture, natural resources and public health like other countries under guidelines of International Plant Protection.
Currently, neither Pakistan Plant Quarantine Rules, 2019 (PPQR, 2019) nor IPO nor any other SRO or law nor the Federal Government has stipulated any quota or capping on import of wheat in Pakistan. It is MNFS&R that decides quantity and timeline for import of wheat including other agricultural goods after estimating availability and shortfall of wheat and other goods in Pakistan. It also decides when and to what extent RD will be levied on importable wheat in order to regulate its import in view of Pakistan’s own wheat harvesting season.
Notably, the summary initiated by the former M/o NFS&R Secretary and current Ministry of Information Technology Secretary, Capt. (Retd.) Muhammad Mahmood and endorsed by former Minister, Dr. Kausar Abdullah Malik includes unprecedented proposal for permitting unlimited import of wheat without regulatory duty even beyond arrival of shortfall wheat of 2.4 million metric tons and without fixing and limiting timeline somewhat by February for import of wheat that led to the unprecedented loss to foreign reserves of more than one billion US dollar and inflicted similar loss to farmers abandoning procurement of their produce by the government.
Furthermore, the absence of caps on import quantities and timelines incentivized importers to continue their operations unabated, even after the arrival of domestic wheat in the market because there was continuous profit for wheat in the market till end February.
The brewing crisis
Usually, the government purchases around 20 percent of all the wheat produced by local farmers at a fixed price (about 5.6 million tonnes, based on a 2023 yield of 28 million tonnes). These interventions are typical and normally appreciated by wheat farmers. But this year the situation is rather dire. The government of Pakistan is refusing to buy wheat from these farmers.
The government initially announced they would only buy around 2 million tons. This, going by last year’s figures, is barely 7% of the total crop. And farmers are expecting a bumper crop this year.
The crisis has prompted widespread protests from farmers, particularly in Punjab, demanding government procurement of their wheat stocks at approved rates. The government, however, citing the surplus created by imports, has scaled back its procurement targets, exacerbating tensions.
Addressing the Punjab Assembly, Food Minister Bilal Yasin acknowledged the wheat crisis, attributing it to the influx of imported wheat, particularly near the harvesting season. He pledged government support for small farmers but provided no specifics on the nature or timeline of this assistance. A fact-finding probe into the import process has been promised, with the findings to be presented to the assembly.
In its justification for the wheat imports, the Ministry highlighted an estimated shortfall of 2.4 million metric tons against the national requirement for the year 2023-24 and initially recommended importing 1.00 million metric tons of wheat through the Trading Corporation of Pakistan (TCP), aiming to balance strategic reserves with PASSCO while maximizing private sector involvement in wheat imports. However, the ECC deferred this decision in August 2023. Subsequent consultations with both public and private sectors resulted in a revised strategy.
As per the revised summary, Capt. Retd. Muhammad Mehmood, former Secretary, M/o NFS&R recommended the ECC to approve import of 1.00 MMT of wheat through TCP in two phases. Immediate import of 0.50 MMT under G2G arrangements by adopting options like: deferred payments, multi-currency option and arrival on need basis. Revision of import requirement in January 2024.
- a) PASSCO will be the recipient agency for TCP to maintain strategic reserves of the country.
- b) Private sector will be encouraged to import specified milling wheat to cater the shortfall in the present customs and duties exemption structure., in order to stabilize wheat/Atta prices.
- c) Import of specified milling wheat shall be allowed in the country subject to import conditions regarding “Commodity and Specification” as provided under Notification of MinFA dated 14th November 2008 and import requirements under Import Policy Order 2022 (Annex-J (i) & J (ii), for both public and private sector.
- d) Monitoring mechanism of private sector will be supervised by the Department of Plant Protection through Import permit and Biosecurity clearance and release order issuance and opening of LC’s in commercial banks.
- e) Ministry of Maritime Affairs may be directed to provide priority berthing to imported wheat on arrival at the Sea-Ports.
Shuffles in the bureaucracy
Prime Minister Shehbaz Sharif has ordered an investigation into the wheat crisis. Bilal Yasin, provincial food minister for Punjab, told the provincial assembly earlier this week that the crisis had been caused by decisions made by the caretaker government that took over in August last year after the tenure of the previous elected government came to an end. Elections, which should have been held within three months, were delayed by the need to redraw constituencies following the latest census. They were eventually held in February this year. “Those people who allowed the import of the wheat close to the wheat harvest season are responsible for this crisis. However, despite this, the government will fully support the small farmers,” the minister said.
Following the wheat import issue, Prime Minister Shehbaz Sharif on Thursday, changed the Secretary of the food ministry. Interestingly, instead of taking action against real culprits, Mr. Muhammad Asif, present secretary incharge of the Ministry has been made scapegoat by making him OSD. The former secretary Mehmood, is considered close to the ruling party and liked by Shahbaz Sharif.
Muhammad Asif has been replaced by Fakhar Alam, a BS 22 officer.
Sources within the Ministry of National Food Security have claimed that the import of wheat took place allegedly in league with flour mafia and wheat importers. and defrauded the country of more than one billion dollars of foreign exchange.
This import has inflicted a loss of above Rs 300 billion to the farmers and Rs 104 billion to the government exchequer, according to sources privy to the development. Sharing details, the sources said wheat stocks with PASSCO and provincial food departments were 43,65,220 metric tons on April 1, 2024 and there was no need for private import of wheat.
They said as the private sector and flour millers imported wheat, PASSCO and provincial food departments could not sell their stocks of 43,65,220 metric ton and have incurred average incidental charges of Rs 950 per maund/40 kg, and total loss to government because of incidental amounted to Rs 104 billion which has allegedly indirectly gone to the pockets of flour millers, traders and bureaucracy.
They said due to unnecessary and unwanted import, prices of wheat have crashed to Rs 2800-3000 per maund against government price of Rs 39,000/maund and the farmers will be forced to sell 50 percent i-e 16 million metric tons out of estimated 32 million metric tons of total produce as government is allegedly purchasing very little wheat.
Thus, more than Rs 300 billion will allegedly be looted from the farmers and will go to the pockets of flour millers, import traders and bureaucracy, said sources.The import was kept uncapped and ships continued to dock at Karachi even during the entire month of March, 2024 when wheat from Sindh province was coming to market, the sources added.
It is also learnt from the sources that 71 cargos of wheat were imported from Russia, Ukraine, Bulgaria and private importers continued the import of wheat till March 31 instead of March 15. They said that over 3.5 million tons of wheat was imported under the pretext of importing one million tons of wheat.
They said live insects were found during the inspection in 26 cargoes of wheat out of 71 cargoes of wheat imported from September 2023 to March 2024. Inspection of imported wheat was done by a subordinate department of the Ministry of National Food Security, said sources.
Sources also informed that the private sector was given an open exemption for the import of wheat instead of a fixed limit allegedly on the recommendation of the Ministry of Finance.
They said that the Ministry of National Food Security had ignored the important suggestions of the Ministry of Commerce and Trading Corporation of Pakistan (TCP). Additional wheat was imported under the systematic plan, which caused billions of rupees loss to the country, said sources.
Khalid Mahmood Khokhar, President Pakistan Kissan Ittehad has requested the Prime Minister Shehbaz Sharif to conduct an inquiry into this mega scandal through a high-powered committee and those who made proposals and gave permission for import of wheat must be punished.
