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Govt may ban new flour mills

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Provinces fully support the proposal

Special Correspondent, Islamabad
Sep 27 - Oct 03, 1999

During the last few years flour milling industry in the country has spread rapidly and all the provincial food departments have come under great pressure for release of wheat over and above the consumption requirement of the population. The mushroom growth of flour mills in almost every province has virtually jeopardized the viability of vital agro based industry. PAGE through its sources in the Ministry of Food, Agriculture and Livestock has learnt that there is over capacity of flour mills in all the provinces that the government may clamp ban on establishment of new flour mills in the country.

In view of the fact that due to sensitiveness of the matter, the flour milling industry is over protected because they get raw material i.e. wheat from the public sector godowns at a subsidized rate and after grinding and adding reasonable profit margin, the wheat flour is not only sold in the market but also sent to other deficit provinces due to price variation. Presently, the provincial food departments are bearing subsidy in the shape of incidentals, borne on indigenous/imported wheat. In addition the Government of Punjab last year decided to further subsidize wheat by Rs 1 per kg to the flour mills. This not only created disparity in prices of wheat flour among the provinces but also attracted the traders/millers to sell wheat products to provinces, other than Punjab, to get maximum profit.

Punjab's view

Punjab Food Department is of the view that further setting up of flour mills should be banned and surplus ranging between 30-40 per cent should be rationalized according to the existing requirements of the Punjab province. Punjab Food Department has agreed with the proposal of free inter-provincial movement of wheat under apprehension that it will result in wheat crisis and non availability of atta in the province. Punjab government procures wheat at the rate of Rs 6000 PMT which comes to Rs 7515 PMT after adding incidentals and transportation etc. Wheat is sold to millers at the rate of Rs 6500 MT. The difference of Rs 1015 PMT is borne by the provincial government. Resultantly, Government of Punjab provides subsidy around Rs 2.85 billion per annum. The purpose of subsidy is to provide wheat/atta at reasonable prices to deficit areas of the provinces throughout the year.

The Government of Punjab is also facing problems to meet the demand of all the flour mills due to rapid increase in the flour mills. As a result, the grinding hours of wheat are reduced which leads to shortage of Atta sometimes in some areas. In Islamabad Capital territory there are about 30 flour mills whereas only one or two flour mills are sufficient to cater to the requirement of the population of the city.

NWFP's view

Against their 1.5 million MT of wheat requirement per annum, only 1.5 million MT of quota is provided to NWFP by Food Ministry as such atta is available at Rs 12-15 per kg. The flour mills can be set up with a capital of Rs 70 lacs to Rs 1 crore. Against the 25 per cent required capacity of flour mills, 75 per cent of the existing is in excess in their province. Full wheat quota cannot be provided to all the flour mills in view of limited quantity. The NWFP government has strongly supported the imposition of ban on setting up of new flour mills, free inter provincial movement of wheat and complete elimination of subsidy on wheat. Further, the province has said that if free inter provincial movement is not allowed then NWFP government should be allowed to import wheat. The NWFP government has also said that the private sector should be allowed to import wheat which may be provided to the NWFP as well as across the border on local trade basis as it will encourage export of wheat/atta in legal way to Afghanistan. It will help the NWFP government top overcome wheat atta crisis well in time, ensure availability of atta at cheaper rates.

Pakistan Flour Mills Association

Pakistan Flour Mills Association is of the view that ban on further setting up of flour mills may be imposed for at least 10 years. Current subsidy on wheat may be eliminated. It will help market forces to play their part and result in lower prices and adequate supply. It will also discourage even eliminate the inefficient mills and their further expansion. The Association has emphasized on giving grace period at the time of imposing ban to the mills that are under construction. The Ministry of Law is of the view that inter provincial trade cannot be restricted unless Parliament by law imposes such restrictions on the freedom of trade between one province and another or within any part of Pakistan as may be required in the public interest.

It is learnt that Punjab, NWFP and Balochistan food departments fully support the ban on flour mills. Sindh Food Department has also admitted rapid growth of flour mills in Karachi, Hyderabad, Kotri and Sukkur. They have no objection on the proposal of banning new flour mills provided that said policy is not applied on the Districts of Umer Kot, Mithi, Nowshero Feroze, Khairpur and Larkana because there is no flour mill in Ummer Kot, Mithi and having one mill each in districts of Nowshera Feroze, Khairpur and Larkana.