July 28, 2011

Nearly two million tonnes of wheat in Punjab government's carry-over stocks have become a heavy burden as they lost nutritional and monetary value due to a lack of proper storage capacity.

Every year, the Punjab government's wheat procurement campaign starts in mid-April and continues for the next 45 days during which huge quantities of wheat are purchased to ensure proper supply of wheat and flour to the people.

The government gets loans from a consortium of banks on an interest rate of 16% to stock large quantities of wheat, which is then issued to flour mills on subsidised rates. Presently, the government has more than five million tonnes of wheat in its stock, with 3.2 million tonnes procured this year alone, while the rest carried over from previous years.

The government has been purchasing wheat from farmers at a support price of INR950 (US$21) per 40 kg since 2009, the year when the government procured 5.78 million tonnes to avoid flour crises of previous years.

According to sources, the government bears an additional INR5,000 (US$113) per tonne as keeping cost, which includes salaries, transportation, godowns and tarpaulins.

The Punjab government has incurred a loan of more than INR150 billion (US$3.4 billion) to procure wheat with a mark-up of 16% while nearly two million tonnes of wheat from previous years is still in government stock.

Around 80% of the keeping cost is bank interest, sources said, adding that INR1,150 (US$26) per 40 kg wheat procured by the government from farmers is then given to flour millers at INR1,050 (US$24), with a subsidy of INR100 (US$2) per 40 kg.

However, the government has a capacity to store only around 2.8 million tonnes of wheat while the rest, which is kept outdoors in covers, is vulnerable to heat and moisture, the two major factors affecting the nutrition and quality of wheat.

The other cause comes from the pest attack, which also severely affects the quality of wheat, said Dr Nawaz, an agriculture researcher.

Sources said the government offered to sell open stock at INR50 (US$1) lesser than the godown stock to release the large quantities in store. Recently, the flour millers again expressed their reservations on getting wheat from the old stock for Ramadan package, a demand which the government accepted and consented to release fresh wheat for the holy month.