A Study of Commodity Debt of the Province of Punjab-Pakistan

The system has been evaluated several times by national and international agencies and found to be ineffective in meeting its goals of supporting poor farmers, stabilizing prices, and providing cheap flour to urban consumers. The system is plagued with patronage and rent-seeking, particularly in the distribution of gunny bags, delivery of wheat to the purchase points, and in releases to flour mills. The policy objectives of wheat procurement in the public sector attempt to balance the competing interests of producers and consumers while enhancing food security in terms of both availability and access to food. On the supply side, policy aims at increasing wheat productivity, supporting poor farmers' income, and reducing dependence on food imports. On the consumption side, the policy goals were to ensure availability of wheat flour at affordable prices for consumers, particularly urban consumers, and price stability. The wheat procurement system in Punjab Province-Pakistan has been evaluated in terms of its effectiveness in achieving the policy objectives. The system has been found to be ineffective in meeting its goals, and it has been argued that the government's rational to take responsibility of supplying wheat to flour mills is flawed and costly. The system triggers huge financial loss/subsidy on recurring basis and leads to a rising food account debt level because of rising incidentals. The wheat procurement system in Punjab Province-Pakistan has been found to benefit large farmers, millers, and middlemen, while penalizing urban consumers and rural poor who are net purchasers/consumers of wheat/wheat flour. The system also crowds out the private sector and poses serious governance challenges in terms of inefficiencies, adulteration, misappropriation, and rent-seeking. The wheat procurement system in Punjab Province-Pakistan has been found to have a number of financial implications, including a rising food account debt level because of rising incidentals. The system has been found to trigger huge financial loss/subsidy on recurring basis, and it has been argued that the government's rational to take responsibility of supplying wheat to flour mills is flawed and costly. The system has been found to have a number of negative consequences, including the diversion of credit from the banking system, a disincentive to the private sector for building storage facilities, and a consequent underproduction of other higher-value commodities. The wheat procurement system in Punjab Province-Pakistan has been found to have a number of policy implications, including the need to reform the system to make it more effective and efficient. The system has been found to be ineffective in meeting its goals, and it has been argued that the government's rational to take responsibility of supplying wheat to flour mills is flawed and costly. The system has been found to benefit large farmers, millers, and middlemen, while penalizing urban consumers and rural poor who are net purchasers/consumers of wheat/wheat flour.