By Qamar Bashir
There has been significant controversy and public outcry over the continued import of wheat in May 2024, despite the government’s target to halt imports in February 2024. This decision comes at a time when the country’s own wheat crop has flooded the market. The middlemen, flour mills, and hoarders are more inclined to store and hoard imported wheat compared to domestic wheat due to the price
difference.
The average landed price of imported wheat is around US$290/mt (AU$450/mt), significantly lower than the government’s domestic intervention price of
approximately US$350/mt (AU$545/mt). As a result, the burden of purchasing and
storing wheat has fallen on the government, which lacks the financial resources
and capacity for adequate maintenance and management of warehouses. Moreover,
with the government's warehouses already full of wheat and farmers expecting to
sell no more than 50 percent of their crop, losses are estimated to be nearly 380
billion rupees ($1.4 billion).
Various reasons and theories have been proposed to explain this glut, but no one
has been able to provide credible data to support these claims. This lack of
transparency may be due to either naivety or an attempt to conceal certain facts.
According to credible data from the United States Department of Agriculture, there
was no wheat import from 2015 to 2019. However, there was a staggering
361,600% increase in 2020. This increase coincided with the weakening of the
USA's hold on Afghanistan and the rise to power of the Taliban. During this time,
some ambitious elements began to consider Afghanistan as part of Pakistan's
sphere of influence, leading to more fluid borders that facilitated smuggling of
essential commodities to Afghanistan to earn goodwill and strengthen relations
with the new government there.
More interestingly, this import and its smuggling was made at the expense of our
national exchequer which had to pay for import of wheat in foreign exchange,
which heavily burdened our meager foreign exchange resources when the domestic
production of wheat was sufficient to meet the domestic demand.
The data on wheat production in Pakistan is indeed intriguing. There has been a
consistent increase in wheat production since the inception of Pakistan. For
example, the total wheat production in 1960 was 3,909 (thousand metric tons).
This increased to 10,857 (thousand metric tons) in 1980, 21,079 (thousand metric
tons) in 2000. This upward trend continued, reaching 25,247 (thousand metric
tons) in 2020 and 26,801 (thousand metric tons) in 2023. The projected production
for 2024 is expected to be around 32,100 (thousand metric tons).
Let's compare this production with our domestic consumption for the same years.
For example, the total wheat consumption in 1960 was 5,454 (thousand metric
tons). This increased to 11,200 (thousand metric tons) in 1980, 22,500 (thousand
metric tons) in 2000. This increase continued, reaching 26,300 (thousand metric
tons) in 2020 and 29,600 (thousand metric tons) in 2023. According to fair
estimates, wheat production in 2024 is expected to be around 32,000 (thousand
metric tons), sufficient to meet the entire year's domestic requirement.
Additionally, if we factor in the over 2 million metric tons of wheat exported to
Afghanistan, the production outweighs the domestic consumption.
In 2024, the sowing of wheat was a popular choice for farmers due to higher flour
prices and perceived shortages. As a result, almost 40 percent of the cultivated
area, or 9.12 million hectares, was dedicated to wheat in October, November, and
December of the previous year for the 2024 harvest. This was an increase from the
8.86 million hectares planted in 2022 for the 2023 harvest and slightly higher than
the 9 million-hectare crop a year earlier.
All was going well. There was equilibrium between supply and demand. The
surplus of wheat and flour of around 1.8 million tons according to US government
estimates was smuggled to Afghanistan, and any forecast of wheat, as a rule of
thumb was reached after including the domestic demand of Afghanistan.
This practice required inflating the demand figures while avoiding direct mention
of Afghanistan, as most exports to Afghanistan were facilitated through state-aided
smuggling. Smuggling to Afghanistan was further incentivized as smugglers were
doubling their money with each transaction, evading taxes, and being paid in U.S.
dollars. Moreover, the depreciating rupee also motivated smuggling, as the
exchange rate reached a record low with the PKR plummeting to 287.29 against
the U.S. dollar, while 86.3 afghanis fetched a dollar.
However, the situation changed when the government made a sudden policy U-
turn in July 2023 to repatriate Afghan undocumented and illegal aliens, and to curb
smuggling and hoarding of wheat as a punitive measure against Afghanistan for
failing to stop cross-border terrorist attacks into Pakistan.
The then caretaker Prime Minister, Anwaar-ul-Haq Kakar, defended the July 2023
policy, stating that Pakistan has adopted a "zero tolerance" approach towards
smuggled goods and foreign currency to Afghanistan.
In response, the Frontier Corps intensified vehicle checks and seized multiple large
consignments of wheat flour attempting to cross illegally. The government also
began monitoring wheat supply movements from Punjab to Khyber Pakhtunkhwa,
requiring official documentation for wheat transportation and establishing
additional checkposts to control food item smuggling. It tightened control over the
Afghan Transit Trade. These stringent measures and crackdowns had a significant
impact on curbing illegal wheat smuggling to Afghanistan.
However, in his hasty, thoughtless, and knee-jerk policy U-turn, the government
utterly failed to comprehend the long-term impact of this skewed policy decision.
It also failed to put in place adequate checks and balances to protect Pakistani
farmers and consumers from the consequences of this short-sighted policy.
As PML(N)’s leader, Mr. Nawaz Sharif, known for his confrontational stance with
the establishment, is determined to identify those responsible for the wheat import
crisis, he may soon realize that the elements behind this crisis are beyond the
