Pakistan Institute of Development Economics

Minimum Support Price (MSP) of Wheat and Inflation
P & R Vol.2 Issue 4
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Minimum Support Price (MSP) of Wheat and Inflation (P & R Vol.2 Issue 4)

Publication Year : 2021

Wheat is one of the most strategic crops globally, which has always been a big challenge for many governments. Over the last few months, Pakistan’s government is struggling to fix wheat prices in the country due to weak governance and mismanagement. For the current price of PKR. 1,400/-, the market price of wheat was PKR. 2,256 per 40 kg in the first week of October. To ensure a smooth supply of wheat and incentivize farmers to produce more, the Pakistan Agricultural Storage and Services Corporation (PASSCO) procure wheat on a minimum support price (MSP). This price is determined based on the excess and shortage of wheat supply in Pakistan. Through the MSP, farmers will receive a fair amount of price for their upcoming crops to invest in agricultural commodities production. The Ministry of National Food Security and Research suggested that wheat’s support price should be increased to motivate farmers to increase wheat production in the future. The Economic Coordination Committee (ECC) consulted Ministers and Special aides to conclude whether the support price should be increased by 25%, i.e., from Rs1400 per 40 kg to Rs1745. Food prices are climbing fast in recent months, posing a possible threat to the poor livelihood. Furthermore, food inflation remains the major contributor to the various inflation episodes over the last ten years