The price of wheat soared starting November 2019 and snowballed into a country-wide crisis by mid-January 2020. The situation has since been controlled, but the Prime Minister’s Inquiry Committee investigated the spike and published its findings on Saturday.
The full report can be read here, but these are the key takeaway points:
Flour mills buy wheat from the market (private sector) while the government keeps a sizable stock of wheat as strategic reserves and market stabilization reserves. The government releases these stocks, usually in October and onwards, to stabilize prices when private sector stocks deplete so it can ensure food security till the fresh crop arrives.
The federal and provincial governments procure 20% of the total stocks every year to accumulate reserves so they can intervene in the market to ensure price stability and food security.
The Ministry of National Food Security and Research is responsible for setting a support price and procurement targets for wheat and its overall stock management. It is the job of this ministry to monitor whether the Pakistan Agriculture Storage and Services Cooperation and provincial food departments achieve those targets, and advise the government on importsand exports.
The ministry as well as provincial food departments failed to do their job and are responsible for the crisis.
In May and June, the ministry had told the government that wheat above national requirements was available and the procurement met targets. However, this wasn’t the case. Public procurement of wheat was 35% less than the target set by the ministry itself, which was the single-largest factor behind the crisis.
The ministry’s failure took place in a year when wheat production fell 1.5 million tonnes or 5.5% short of demand and carry-over stocks or strategic reserves were at their lowest levels in five years.
Amid critically low reserves, Punjab, which accounts for more than half of total domestic demand, delayed procurement by three weeks and failed to meet its target. This played a crucial role in the crisis.
Running low on stocks, Punjab prompted the center to check inter-provincial movement of wheat in January, causing shortages and prices to soar in KP and Sindh. There was panic in the country.
Sindh’s decision not to procure wheat, a lack of clarity on stock positions and delays in dispatching public stocks till November 2019, triggered the crisis. KP’s food department missed its procurement target of the last two years.
The ministry was informed in May 2019 about low stocks, but the Economic Coordination Committee, a top-level government body on economic decision making, allowed exports before a partial ban was imposed in July and a complete ban in November. The exports and delayed ban became controversial and led to wide-spread panic in January.
Hoarders and profiteers exploited the situation to make maximum gains. Some mill owners from Punjab were also involved.
The ECC should have banned exports in June when the stock position was very low, the committee report said. The Federal Minister for National Food Security and Research Khusro Bakhtiar, whose name also surfaced in a separate report on the sugar crisis, is a member of the ECC.
The report has named several key officers from the provincial and federal food departments as responsible for the crisis because they failed to do their job.
The committee found that the provincial wheat mechanism is riddled with malpractices in the management and procurement of public stock. It proposed stringent and immediate action to plug gaps in planning and policy.
It proposes monitoring private stocks to ensure there is no artificial shortage and IT-based tracking of every bag of public stock. It proposes a post audit of flour mills to verify allegations of malpractice in grinding of public wheat and that the quota allocation of public wheat to flour mills should be based on the population of the district, not the capacity of a mill.