Pakistan raises wheat support price for farmers

March 29th, 2008 Aimon · No Comments

Source:Reuters
By Augustine Anthony

ISLAMABAD - Pakistan is raising the price it pays to farmers for wheat by nearly 23 percent, Prime Minister Yousaf Raza Gilani said on Saturday, after failing to tempt producers to sell the grain for strategic stocks.

The government plans to build a 5-million-tonne strategic reserve from the 2007/08 crop, but farmers had rejected the procurement price of 510 rupees ($7.9) per 40 kg as below domestic and international market levels.

“The wheat support price is being increased from 510 rupees to 625 rupees ($9.9),” Gilani told parliament in a speech in which he set out his government’s priorities for its first 100 days in office.

Gilani’s government, being set up after opposition parties won a Feb. 18 general election, has inherited a range of economic problems including widening trade and fiscal deficits, rising prices and food and power shortages.

Gilani said his government would ensure smooth supplies of wheat, adding that a crop insurance scheme for farmers would be introduced.

An official of the Food and Agriculture Ministry recently said it had proposed that the government increase the support price to at least 600 rupees.

Industry officials said a support price of 600 rupees would push up flour prices by up to 40 percent.

The increase in the support price came after food officials told the government they had failed to persuade farmers to sell wheat for strategic stocks in Sindh province, where fresh wheat arrivals from the new crop have begun.

Pakistan saw a surge in wheat and flour prices in the domestic market after a shortage in September and had to import nearly 1.6 million tonnes in spite of producing 23.3 million tonnes of wheat in the 2006/07 crop year.

The south Asian country of 160 million people consumes about 22 million tonnes of wheat a year.

For the financial year 2007/08, the government has fixed a wheat output target of 24 million tonnes, but farmers and food ministry officials say that target is impossible to achieve and estimate output will be 21 million to 22 million tonnes.

Industry officials say lower-than-expected output may force the government to import between 1 million and 2 million tonnes for stocks and domestic needs.