HE recent increase in wheat flour prices in Sindh is a grim reminder of flawed wheat policy in the country. Removing structural flaws in the policy is a must to keep prices stable and ensure fair return to all those involved in wheat value chain, including farmers and millers.

The price of a 50kg bag of ordinary wheat flour (known in the flour millers` jargon as flour No. 2.5) has risen from Rs1,775 to Rs1,900 in the last two months.

Flour millers cite various reasons for the price hike, including higher transportation cost following an increase in fuel prices in the past two months and higher wheat prices due to higher demand for wheat flour in winter.

However, a rise in wheat flour prices is also owing to poor forecasting of seasonal requirements.

The provincial food department is expected to begin releasing subsidised wheat from the next month out of its stocks built up through procurement from farmers in the province and purchases made earlier from Punjab. An earlier start of such releases could havehelped millers get additional supplies in time.

The production of wheat in Sindh is not enough to feed its population.

Provincial requirements also remain unusually high because Karachi is home to a lot of food processing industries. So, even when the province produces a bumper wheat crop, as it did last year, wheat from Punjab has to come to Sindh.

This is where the big and the powerful manipulate things. While Sindh bans the movement of wheat outside the province to ensure that home requirements are met first, politically connected big landlords manage to sell it to Punjab if they get higher prices.

This creates shortage of the commodity in Sindh, forcing provincial authorities to look towards Punjabgrown wheat. Punjab officials, based on their own circumstances, then decide whether or not to allow the movement of wheat outside the province.

Politically well-connected landlords of Punjab play the same game, and truckloads of their wheat come to Sindh only to be sold at higher rates as the ban remains effective for all others.This story is repeated year after year, industry sources say.

`No such ban is in place right now, as wheat crop harvesting is long over. But wheat is not coming from Punjab as the provincial surplus has already been sold to the Pakistan Agricultural Supplies Storage and Services Corporation (Passco),` says Muhammad Shahid, a local commodity trader.

`So, prices are high in the open market, both due to higher transportation cost as well as because of some supply constraints,` he says.

There are about 200 wheat flour mills in Sindh, half of them in Karachi alone.

They vary in size, corporate status, production capacity and brand power.

`Producers of popular wheat flour brands cannot afford to let supplies slip just because they are not getting subsidised wheat from the food department or from open market where prices are up,` says a Karachi-based flour miller.

`Delays in subsidised wheat release compel them to buy more from the open market then they regularly do.

He claims that in recent weeks he had to purchase high-quality wheat from the open market at around Rs1,350-Rs1,400per 40kg to meet growing demand for the wheat flour his mill produces.

About two months ago, he had bought wheat from the open market even below the support price of Rs1,300 per 40kg.

Officials of Sindh`s food department, however, say that the current price hike of wheat flour has nothing to do with supply of subsidised wheat to flour millers as per quotas.

`Our job is to ensure that once flour mills get subsidised wheat according to their quota, they do not misuse the incentive by selling the subsidised commodity on the open market,` an official says. `If prices of wheat flour rise for other reasons, such as higher transportation cost, we can`t do anything.

But he explained that not all millers get subsidised wheat from the department as they don`t meet the criteria.

Sindh produced some two million tonnes of wheat in the last cropping season and for the next season production target has been set at 2.2m tonnes.

During the past 10 years, support prices of agricultural commodities, including wheat, have been raised several times.

These hikes have helped in boostingthe production of food crops to some extent, historical data suggests.

But their effect on income distribution has not been as helpful. According to a study conducted by Ayesha Afzal ofthe Lahore Universityof Management Sciences, increase in support prices in our context benefits big landlords at the cost of small farmers. It also widens the gap in productivity of big and small farmers and, thus, worsens income inequalities between the rural rich and the rural poor.

It was because of high support price of wheat and delayed decision on exports that Pakistan could not export any sizable quantity of the commodity during this year and even the year before.

On the other hand, the country is sitting on historically high wheat stocks of 7m to 8m tonnes as of now, industry source say. However, the quality of the stocks continues to suffer owing to improper storage facilities.

This is such an important issue that flour millers in Sindh have told the provincial food department that they would not accept subsidised wheat out of the reserves the department might have built through purchases of low-quality grains from Passco or Punjab. • Mohiuddin Aazim