ISLAMABAD: The Federal Cabinet has constituted Ministerial Committee to recommend Minimum Support Price (MSP) for wheat 2021-22, as many cabinet members raised objections on price of Rs 2,050/40 kg proposed by Ministry of National Food Security and Research (MoNFS&R), well informed sources told Business Recorder.

Wheat, being strategic crop and staple diet of the population, occupied largest area under the crops in Pakistan. The crop accounted for 9.2 per cent of value added in agriculture and about 1.8 per cent to GDP of the country.

According to sources, the matter of MSP was discussed in the Wheat Review Committee (WRC) in its meeting held on September 27, 2021, chaired by the Federal Minister for NFS&R. Provinces were sensitized for their submission of endorsement of their Provincial Cabinets.

The sources maintained that after due process, provinces had conveyed their endorsements on MSP, except Sindh whose response was awaited. Punjab had recommended MSP @ Rs. 1950/- 40 Kg, Khyber Pakhtunkhwa @ Rs. 2,000/- 40 Kg. Balochistan’s first response was @ Rs. 2,000/- Kg; however, on the basis of rising pricing trend and high cost of production the province later recommended @ Rs. 2,400/- 40 Kg. Therefore, the average recommended MSP was at the level of Rs. 2,088/- 40 Kg.

The sources said, National Assembly Standing Committee on NFS&R in its meeting held on October 11, 2021 recommended fixing the MSP of wheat crop 2021-22 @ Rs. 2,200/- 40 Kg.

MNFS&R recently informed the Cabinet that it has evaluated the entire scenario and concluded that in wake of higher cost of production and to meet the production target of 29 MMT, a reasonable MSP was necessary before sowing season of wheat crop, i.e., before November.

The average cost of imported wheat (after 5 tenders) at seaport Karachi was calculated @ Rs. 2,533/- 40 Kg. Additional cost would be borne on its inland transportation. International wheat prices have been higher during the last 10 years. International wheat prices reported by the International Grains Council were at the level of $ 329/- MT as on October 22, 2021. CNF price of Black Sea wheat (FOB price + $ 70/-MT) was equal to Rs. 2,791/-40 Kg CFR at Karachi and Rs. 3,036/- 40 at Multan and Lahore. Local wheat prices were at the level of Rs. 2332/-40 Kg.

The Ministry of NFS&R had analyzed the situation, in wake of rising pricing trend in the local and international markets, higher inflation of 8.67%, higher fertilizer prices, especially phosphatic fertilizers and a reasonable profit margin of around 20% over and above the real cost of production of this strategic crop. For the next year the Government had chalked out its alternate strategy for taking appropriate measures for crop productivity enhancement including 20% higher certified seed availability, timely sowing, reasonable MSP, approval of Rs.8 billion subsidy on fertilizers off-take. These initiatives would not only boost local wheat production, ensure food security of the country, assure profitability of farmers but also reduce the import bill and the drain of foreign exchange from the economy.

The inflationary impact would increase CPI by 0.45%, i.e., increased from the level of 8.67% to 9.12 %, in case of approval of the proposed MSP @ Rs. 2,050/- 40 Kg and the annual additional expenditure of an individual could rise to Rs.719/- annum. However, the proposed MSP @ was even lower than the current local wheat prices @ Rs. 2,349/- 40 kg as reported by the PBS for the week ended on October 21, 2021 and international Black Sea wheat prices were at the level of $ 329/- MT as on October 22, 2021.

Keeping in view the food security scenario, cost of production worked out by agriculture policy institute (API), profit margin of farmers, recommendations of the National Assembly Standing Committee on NFS&R and endorsement of the Provincial Governments, Ministry of National Food Security & Research has recommended MSP of wheat crop 2021-22 at the level of Rs. 2,050/- 40 Kg.

The Ministry of Commerce and Finance Division had supported the proposal of the summary however Ministry of Finance gave some suggestions, which were incorporated in the proposal.

During discussion in Cabinet some of the members extended arguments in favour of recommended MSP, while others expressed concern over the impact of higher MSP on prices of Atta, which would further burden the urban consumers. It was suggested that a committee be constituted to analyze the benefit to farmers vis-à-vis the impact on urban population and recommend a reasonable MSP for wheat crop 2021-22.

After detailed discussion, the Cabinet constituted a Committee comprising Minister for National Security and Research (Convener), Minister for Federal Education and Professional Training, Minister for Planning, Development & Special Initiatives, Minister for Aviation, Adviser to the PM on Finance and Revenue and Adviser to the PM on Commerce and Investment.

The Committee will recommend to the ECC a reasonable MSP for wheat crop 2021-22, which strikes a balance between fair price to the farmers and impact on urban population.

Copyright Business Recorder, 2021

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