Procurement policy faces reality

Two years ago, the Punjab government decided, in principle, to discontinue direct wheat procurement from farmers. This decision was driven by the mounting financial burden of outstanding debt — incurred for wheat procurement but compounded by delayed repayments — which had surged to Rs680 billion by June 2023. Consequently, annual interest payments alone reached approximately Rs110bn in 2023–24. This raised serious concerns about the sustainability of the government-led procurement system. Aiming to improve the situation, the government last year placed significant emphasis on introducing the Electronic Warehouse Receipt (EWR) system. However, it failed to deliver the intended outcomes. As a result, a new private-sector-led procurement system has been introduced this year. The initiative seeks to achieve three key objectives: maintaining strategic reserves of three million tonnes, stabilising the wheat market, and ensuring farmers receive Rs3,500 per 40 kg — close to import parity prices, though not fully aligned with rising production costs. However, this marks a clear contrast with last year, when farmers were compelled to sell at Rs2,000–2,200. Nevertheless, the newly designed system — built around a few selected private companies — failed to take off in time. Even by mid-April — when roughly 40 per cent of the crop was harvested, market arrivals peaked, and prices fell to around Rs3,000 per 40 kg — farmers remained exposed, forcing many into distress sales. As prices recover and farmers begin to receive better returns, the government is resorting to measures that run counter to market economy and deregulation principles In fact, the government overlooked the changing dynamics of wheat harvesting. With the increasing use of combine harvesters and the growing risk of erratic rainfall in March and April, farmers now rush to complete harvesting as early as possible. As a result, the harvesting window in any given district has narrowed to barely a month. This leads t