Punjab’s new wheat procurement strategy faces setbacks amid pricing, financing issues

Punjab government’s wheat procurement strategy is facing delays as most private companies selected under the new model have yet to begin large-scale purchases amid financing difficulties, pricing disputes and resistance from farmers, Dawn reported.

According to industry sources, at least nine of the 11 selected firms have not purchased enough wheat so far because growers are unwilling to sell at the official rate of ₨3,500 per maund while market prices hover around ₨3,700 per maund.

Many farmers have either held back wheat stocks in anticipation of further price increases or sold directly to private traders and arhtis instead of procurement centres.

The provincial government this year moved away from direct procurement and planned to secure 3 million tonnes of wheat through 11 private-sector firms. Under the arrangement, the government offered subsidised financing, free storage at Food Department warehouses and operational assistance through hundreds of procurement staff.

However, procurement activity has remained limited as wheat prices in the open market rose above the government-backed procurement rate.

Officials said financing arrangements also became a major hurdle for participating firms. One company representative said banks and shortlisted firms failed to agree on financing terms despite initial expectations that borrowing costs would remain manageable.

Sources said banks were expected to charge around 9% markup until September, with rates increasing by an additional 1% every month afterwards until repayment. Companies feared the structure would significantly raise the cost of holding wheat inventories.

Dawn report cited a representative of a participating firm as saying that the company initially submitted its financing proposal at Karachi Interbank Offered Rate (KIBOR) plus 1%, but firms later had to arrange capital through less favourable financing terms after negotiations with banks stalled.

Authorities have meanwhile stepped up enforcement measures against the movement of wheat from Punjab to other provinces. Teams from the Food Department and Punjab Enforcement & Regulatory Authority have intercepted wheat consignments and redirected them to state-linked storage facilities.

Farmer organisations criticised the government’s intervention in the market and questioned the implementation of support measures.

President of Pakistan Kisan Ittehad Khalid Khokhar said many growers in South Punjab had already sold nearly half of their wheat crop earlier at prices between ₨2,800 and ₨3,200 per maund, averaging around ₨3,100 per maund.

He said the Minimum Support Price mechanism was intended to protect farmers when market prices dropped, but authorities intervened only after wheat prices increased in the market.

Khokhar also alleged that procurement centre staff were deducting up to 15kg from every 100kg wheat bag on the grounds of impurities and claimed weighing machines were operating against farmers’ interests.