Wheat export decision hangs in the balance

Published: June 30, 2010

ECC postpones decision on LNG import contract; KPT to get loan for berths reconstruction

ISLAMABAD: The federal government on Tuesday remained indecisive on whether or not to provide Rs27 billion subsidy on the export of 2 million tons of wheat, as the move could be construed as subsidising foreign consumers at the cost of local taxpayers.

The economic coordination committee (ECC) of the cabinet, which met here with Finance Minister Hafeez Shaikh in the chair, constituted a panel of secretaries to find a way out that may also serve the interests of the Punjab government, the largest wheat producing province, said a source. The committee consists of federal secretaries of finance, commerce, and food and agriculture.

The sources quoted the finance minister as saying that instead of subsidising foreign consumers it would be better to give subsidy and provide cheap wheat to the lowest strata of the country. In the domestic market, per mound wheat costs Rs950 but the international prices are much lower.

The ministry of food and agriculture had informed to the ECC that in order to export two million tons of wheat approximately Rs27 billion in subsidy would be required, as the international wheat prices were lower than the domestic market.

Because of bumper wheat crop last year and limited storage capacity the government had decided to export the commodity. Other factors forcing the government hand was the requirement to pay back central bank’s commodity loans to the tune of Rs190 billion and reduce the wheat handling cost. The federal government paid Rs8 billion to the Punjab government on account of wheat storage cost alone.

The sources said that the ECC also discussed providing wheat to the lowest income group through the Benazir Income Support Programme instead of hard cash; however, the ministers belonging to the PPP opposed the proposal.

The ECC approved the recommendations of the ministerial committee constituted by the prime minister to settle the issue of compensation and resettlement of the affectees of the Diamer-Basha Dam. It was also decided that the scheme would be revised and sent to the executive committee of national economic council (Ecnec) for final consideration.

The government decided to re-lend a World Bank loan to the Karachi Port Trust for reconstruction of its damaged berths. The KPT would pay 8.2 per cent interest and return it in 30 years. The ECC also formed a committee under the chair of federal minister for industries to ensure availability of essential items during the holy month of Ramadan. The committee is directed to submit recommendations in four days.

The ECC deferred the summary of the petroleum ministry, proposing to allow oil refineries to charge 7.5 per cent deemed duty on locally produced diesel and kerosene, similar to the customs duty permissible to marketing companies on imported products.

The government had allowed the deemed duty on the imported items on the pretext that the companies would lower a particular substance in oil, which they failed to do so and instead earned windfall profit of billions of rupees.

The ECC also deferred the summary to give a multi-billion-dollar import contract of liquefied natural gas (LNG) to a French company, GDF Suez. The project may be awarded again to GDG Suez and 4Gas for the import of 3.5 million tons LNG.

The government had awarded the contract to GDF Suez to supply 3.5 million tons per annum of LNG for a period of 20 years. However, because of alleged corruption the court took a suo moto notice and referred the case back to the government for a review.

Published in The Express Tribune, June 30th, 2010.

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