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Recommended MSP being resisted by Finance Ministry

ISLAMABAD: Ministry of National Food Security and Research (MNFS&R) has recommended Minimum Support Price (MSP)...
22 Oct 2020

ISLAMABAD: Ministry of National Food Security and Research (MNFS&R) has recommended Minimum Support Price (MSP) of Rs 1745 per 40kg for wheat crop 2020-21, which is being resisted by the Finance Ministry, sources close to Minister for MNFS&R told Business Recorder.

A number of meetings have been held to finalise MSP of wheat but some members of the cabinet and top bureaucrats are blatantly opposing the proposal.

The Ministry argues that in order to incentivize and safeguard the interest of growers, the federal government in consultation with provincial governments reviews/announces MSP of wheat crop annually. Since 2010-11, MSP for wheat has been revised four times only.

During 2014-15 to 2018-19, MSP for wheat remained unchanged, which eroded farmers profitability and made the crop relatively unattractive.

Notwithstanding the fact that abundance of wheat is available at the global level, yet, according to International Grains Council, London, the world wheat prices are fluctuating but the higher side. Black Sea (Rouen) price as on 12-10-2020 was reported @ $242/-MT (FOB), whereas HRW wheat and SRW wheat prices were $274 and $273/- MT respectively.

The price trend shows average increase of 24% for Black Sea (Rouen) and 28% US HRW over corresponding period of last year. Due to devaluation of rupee, the local wheat price became cheaper in comparison to the price prevalent in the global market.

Pakistan has been exporting wheat in the past, however, due to less production in 2019-20, Pakistan is importing wheat and its price has moved upward. Support price mechanism plays a pivotal role in boosting wheat production, as it stabilizes the market and increases profitability of the farmers. Key factors in determining MSP include cost of production, relative profitability and opportunity cost, international and local prices, export/import parity, inflation etc.

Agriculture Policy Institute (API), an autonomous body working under the MNFS&R, on the basis of its annual survey, has worked out the cost of production of wheat crop 2020-21 @ Rs 1,586.88 and the recommendation for MSP is made for Rs 1,745.57/40kg.

A meeting of Wheat Review Committee was held on September 24, 2020, under the chairmanship of the Minister for NFS&R to get provincial input for determining MSP for wheat crop 2020-21. All the provincial governments have provided their recommendations in writing except Sindh. Khyber Pakhtunkhwa has proposed Rs 4700/100KG or Rs 1880/40kg, Balochistan Rs 1700/40kg and Punjab Rs 1650/40kg as MSP for wheat for 2020-21. President Pakistan Kissan Ittehad has proposed Rs 1850/40kg as MSP.

According to sources, MNFS&R observed that during the current year, just after post-harvest, the market price of wheat remained much higher than MSP. Therefore, the public sector has to face tremendous difficulties to meet the procurement targets. Those farmers who sold their wheat to public sector suffered a financial loss vis-a-vis those who sold it in the open market to private parties. The local market wheat price, as reported by the PBS, for the week ended on 08-10-2020 is Rs 2256.56/40kg whereas import parity (compared to recent import by the private and public sector ranges from Rs 1650 to Rs 1977/40kg CNF at Karachi.

The MNFS&R has recommended that the MSP of wheat crop 2020-21 may be enhanced and set at Rs 1745/40kg. This will incentivize the farmers to grow wheat by increasing the crop’s profitability and will help to re-gain self-sufficiency in the wheat production.

The sources said the Ministry was making all out efforts to get approval of MSP for wheat crop 2020-21 at Rs 1745/40kg but a few detractors in the cabinet and bureaucracy were not willing to allow MSP over and above Rs 1700/40kg.

Copyright Business Recorder, 2020