Importance Wheat in Pakistan Provincial Division Wheat Price Support Policy Issues created by the Policy Financial Consequences of Wheat Stocks and Storage in Punjab Financial Repercussions of Wheat Procurement Financial Repercussions of Bank Borrowings Minimum Support Price (MSP) in Pakistan and India Cost of Production & MSP Comparison Analysis of Cost of Production Cost of Production by Inputs Comparison of Fertilizer Prices Conclusion

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Can Extend to Two Lines
On Wheat Price Support Policy
in Pakistan
PresentedBy:
• FahadFarooq
• HamzaIltaf
• OsamaWaheed
• HuzaifaIjaz Minhas
• MuhammadShuja

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• Importance Wheat in Pakistan
• Provincial Division
• Wheat Price Support Policy
• Issues created by the Policy
• Financial Consequences of Wheat Stocks and Storage in Punjab
• Financial Repercussions of Wheat Procurement
• Financial Repercussions of Bank Borrowings
• Minimum Support Price (MSP) in Pakistan and India
• Cost of Production & MSP Comparison
• Analysis of Cost of Production
• Cost of Production by Inputs
• Comparison of Fertilizer Prices
• Conclusion
Contents:
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• Wheat is a staple food crop of Pakistan, dominating all crops in acreage and
production.
• 80 percent of farmers growing it on an area of around nine million hectares.
• Contributes about 10% of value in agriculture and approximately 2.0% of the
country’s GDP.
• In 2020, wheat production for Pakistan was 24,946,000 tons.
• Forecasted procurement in 2021-2022 was 27,000,000 tons.
• Due to heat wave couldn’t reach the target.
Importance Wheat in Pakistan:
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Provincial Division:

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• The wheat price support policy is amended from time to time by the Cabinet’s
Economic Coordination Committee.
• aims to increase wheat productivity, support farmers' incomes, and provide food
security
through various subsidies and price controls.
• Intervention policy helps protect farmers and consumers from monopolists.
• Maintaining national reserves and ensuring food security at the low and subsidized
prices
are a major concern for the government.
Wheat Price Support Policy:
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• support prices and wheat procurement policies have put financial pressure on the
government.
• The purchase at well above international prices and the inability to sell in
international market at the right price at the right time.
• Support price of one crop affects the composition of other crops.
• However, the literature is silent on suggesting the optimal choice based on careful
investigation of economic and financial impacts of intervention.
• This presentation aims to analyze the shortcomings of current policies and propose
future action plans.
Issues created by the Policy:
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• According to FAO, the existing wheat system in Punjab is facing problems with
storage facilities.
• Statistics show that the Godowns store about 70% of the wheat.
• Binishels store 13%, hexagonal bins 7%, bunkers 6%, concrete silos 4%, and the rest
of the stock is covered with polyethylene.
• This heavy government intervention in the wheat market has limited private sector-
driven development.
• According to ADB, targeted wheat subsidies and public strategic reserves are an
effective policy mix to reduce food insecurity in Pakistan.
Financial Consequences of Wheat Stocks and Storage in
Punjab:
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• The financial consequences of large-scale procurement of wheat are severe enough
to expose the government to the financial burden seen in recent years.
• For example, in 2016-2017 the government purchased 3.92 million tons of wheat at a
minimum support price (MSP) of rupee. 1300/40 kg (32.50 / kg).
• This wheat stock was purchased by providing a subsidy of 9.51 rupee. per kilogram,
resulting in a total loss of rupee. 37.36 billion.
• The total cost of procurement in 2016-17 was 164.68 billion rupees while the
expected return on stock sales was Rs. 127.4 billion.
Financial Repercussions of Wheat Procurement:
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• The procurement, processing, storage, maintenance and distribution of wheat stocks
are financed through bank loans.
• The Punjab Food Department borrows from commercial banks every year, with
interest rates between 9-12%.
• The government's wheat subsidy costs exceed Rs 5,500/ton.
• Only last year, the government lost the rupee. 37.36 billion in wheat subsidies.
• Debt servicing of heavy loans constitutes a major component of the total payables.
• In the period 2013-2017, loan payables increased by nearly 62%.
Financial Repercussions of Bank Borrowings:
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• Compared with regional competitors such as India, Pakistan has a higher MSP.
• The wheat MSP in India in 2016-17 is INR 650/40kg which is equal to1014/40kg
PKR, a difference of PKR 286.
• In the last five years from 2012 to 2017, the average MSP price difference between
India and Pakistan was about PKR 275 / 40 kg.
• Compared with India in 2016-17, Pakistan's wheat prices have increased by 22%.
• Despite subsidies, wheat prices still hurt the consumer surplus because they have to
pay higher wheat prices each year.
Minimum Support Price (MSP) in Pakistan and India:
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Cost of Production & MSP Comparison:
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• Costs of land preparation, irrigation, fertilizer and seeds all increased over time.
• In the past few years, production costs have risen sharply, which has damaged
farmers' profitability.
• Fertilizers account for the highest proportion of wheat input costs.
• Input costs can be reduced by subsidizing land preparation, seed costs, irrigation
costs, and providing fertilizer to farmers at affordable prices.
• In addition, total fertilizer subsidies increased by 2.8% (INR 709.67 billion in
2014-15 to INR 729.68 billion in 2015-16).
Analysis of Cost of Production:
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Cost of Production by Inputs:

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Comparison of Fertilizer Prices:
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• The minimum support price policy encourages farmers to produce more wheat.
• However, this policy has brought a heavy economic burden to the Punjab
government.
• Our results indicate that the higher wheat minimum support price (MSP) has made
the country lose its competitiveness in the international market.
• we found that the cost of wheat production in Pakistan is much higher than in India.
• In addition, the rise in wheat prices in recent years has also hurt consumers.
• Policymakers can redistribute subsidies by subsidizing wheat inputs, especially
fertilizers and seeds, to reduce production costs.
Conclusion:
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