Commodity export: Centre, provinces disagree on sharing wheat subsidy

Former argues both sides should share the subsidy equally

ISLAMABAD: The federal government and provinces have failed to arrive at a consensus on the formula for enhancing the subsidy on wheat export.

The planned increase from the current $100 per ton of wheat to $130 per ton is at the centre of contention as the proportion to be shared between the centre and provinces has yet to be determined.

“The centre and two provinces - Punjab and Sindh - failed in a recent meeting to reach a consensus on sharing the increase in wheat subsidy,” said an official who was part of the meeting.

He said the centre wanted the subsidy to be shared on an equal basis by the provinces and the federal government whereas the provinces suggested that 60% share should be contributed by the federal government and 40% by the provinces.

“This difference of opinion between the two stakeholders is the key hurdle to finalising the new subsidy formula,” said the officer.

Earlier, the federal government had suggested that the wheat export subsidy must be enhanced from the current $100 per ton to $125 per ton to attract buyers in the international market.

It called a meeting with the governments of Sindh and Punjab, where a huge stock of surplus wheat was lying with no demand in the international market.

However, the provinces did not agree on contributing the equal share of subsidy to dispose of the surplus stock.

The officer said the federal government again gave time to the provinces to reconsider their decision and take a step towards resolving one of the most serious issues amidst a global commodity glut.

The officer said the federal government had already prepared a summary on the increase in subsidy for consideration of the Economic Coordination Committee (ECC).

Background

At present, Pakistan has a wheat stock of 9.923 million tons with provinces and Passco stores.

The ECC in its decision in January 2015 had allowed export of 800,000 tons of wheat by the government of Punjab at the transport rebate of $55 per ton and 400,000 tons by the government of Sindh at a rebate of $45 per ton.

Due to a substantial decrease in wheat prices in the international market, Punjab and Sindh could only export 252,650 tons and 164,000 tons, respectively.

In a summary submitted by the Ministry of National Food Security and Research in April 2016, recommendation was made to allow an additional rebate of $30 per ton on exports.

It was proposed that the additional $30 rebate would be shared by both the federal and provincial governments on 50% basis. The proposed quantity allowed to be exported is 600,000 and 300,000 tons for Punjab and Sindh, respectively. The export will be allowed till November 30, 2016.

Published in The Express Tribune, July 20^th, 2016.

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