Government Considering Shutting Down PASSCO: Impact on Wheat Procurement and Sugar Policy

November 14, 2024 Mahi Bukhari

Introduction

The government is contemplating significant changes in the agricultural sector, specifically regarding the Pakistan Agricultural Storage and Services Corporation (PASSCO). With the potential establishment of a free wheat market, PASSCO’s role in wheat procurement might become redundant. Additionally, there are plans to formulate a new policy on sugarcane crushing and sugar exports. This article delves into the implications of these changes, the government’s strategy, and the possible outcomes for stakeholders.

PASSCO’s Role in Wheat Procurement

PASSCO is a pivotal institution in Pakistan’s agricultural landscape, responsible for procuring wheat and other essential crops. It implements the government’s support price policy for various commodities including wheat, paddy, gram, potato, and onion. However, recent developments suggest a shift towards deregulating wheat procurement, which could render PASSCO obsolete.

Government’s Plan to Wind Up PASSCO

In a recent meeting of the Economic Coordination Committee (ECC), it was proposed that the Ministry of National Food Security and Research draft a wheat policy that includes shutting down PASSCO. This proposal stems from the inefficiencies observed in wheat procurement during 2021 and 2022, where provinces and agencies, including Khyber-Pakhtunkhwa (K-P), Pakistan Navy, and Gilgit-Baltistan, refused to lift the imported wheat, resulting in a liability of Rs87 billion for the federal government.

Sugarcane Crushing and Sugar Exports Policy

The ECC has also directed the Ministry of National Food Security to create a comprehensive policy on sugarcane crushing and sugar exports. This initiative aims to address the concerns of various stakeholders and streamline the export process.

Issues with Sugar Export Quotas

The export of 150,000 metric tons of sugar was approved by the ECC, with the cabinet ratifying the decision. However, implementation issues arose, particularly in K-P, where the provincial cane commissioner did not distribute the export quota. This led to legal disputes and a writ petition in the Peshawar High Court, which ultimately called for the ECC to reconsider the issue.

Challenges and Considerations

Wheat Procurement Challenges

The primary challenge in winding up PASSCO lies in managing the transition to a deregulated wheat market. Ensuring a smooth shift without disrupting supply chains or causing price volatility is crucial. Additionally, maintaining the support price for farmers to safeguard their interests remains a priority.

Sugar Export Concerns

For sugar exports, the key concern is balancing the surplus production in certain provinces with the deficits in others. K-P’s apprehension about potential shortages due to sugar exports needs careful consideration. The ECC’s decision must ensure that internal supply is not compromised while capitalizing on export opportunities.

Proposed Structural Reforms

Enhancing Efficiency in Wheat and Sugar Sectors

The proposed reforms include the division of port charges into local and foreign costs to save on handling expenses. This strategy could significantly reduce costs for exporters and importers, thereby enhancing overall efficiency.

Strengthening Accountability and Monitoring

Strict monitoring and accountability measures for the utilization of resources like tugs, pilot boats, and dredgers are essential. This will help reduce maintenance costs and improve operational efficiency at ports, indirectly benefiting the agricultural supply chain.

Impact on Stakeholders

Farmers and Local Markets

Farmers may benefit from a free market if it leads to better prices and reduced bureaucratic hurdles. However, there is also the risk of price instability, which could affect their income.

Consumers and Importers

Consumers might experience price fluctuations during the transition period. Importers could benefit from reduced handling costs and more streamlined processes.

Government and Policy Makers

For the government, the challenge lies in implementing these changes without disrupting the market. Effective policy-making and stakeholder engagement will be crucial in achieving a smooth transition.

FAQs

1. What is PASSCO’s current role in the agricultural sector? PASSCO is responsible for procuring wheat and other crops, implementing the government’s support price policy, and ensuring food security.

2. Why is the government considering winding up PASSCO? The government is considering this due to inefficiencies in wheat procurement and the potential establishment of a deregulated wheat market.

3. What are the proposed changes in sugarcane crushing and sugar export policies? The government aims to create a comprehensive policy to streamline sugarcane crushing and sugar exports, addressing stakeholder concerns and ensuring balanced supply.

4. How will these changes affect farmers? Farmers might benefit from better prices and reduced bureaucratic hurdles, but there is a risk of price instability affecting their income.

5. What measures are proposed to enhance efficiency in the agricultural supply chain? Proposed measures include dividing port charges into local and foreign costs, strict monitoring of resources, and enhancing overall efficiency at ports.

Conclusion

The potential shutdown of PASSCO and the formulation of new policies on wheat procurement and sugar exports signify major shifts in Pakistan’s agricultural sector. These changes aim to enhance efficiency, reduce costs, and ensure a balanced supply chain. However, careful implementation and stakeholder engagement are crucial to mitigate risks and achieve the desired outcomes.