The federal government on Wednesday approved the import of 330,000 tons of wheat at a cost of $278.5 per ton and also set up a committee to negotiate the price with Russia for import of over 1.1 million tons of wheat under a government deal.
The Economic Coordination Committee (ECC) of the cabinet took these decisions despite concern expressed by committee members over “flooding the country with imported wheat”, as the Ministry of National Food Security and Research lacked authentic data of wheat import and its requirement.
The ECC also allowed the recovery of Rs74 billion in arrears from imported gas consumers of Punjab and Khyber-Pakhtunkhwa (K-P).
It authorised Sui Northern Gas Pipelines Limited (SNGPL) “to manage the load of domestic and commercial sectors by diversion of RLNG (re-gasified liquefied natural gas) in the approaching winter season,” according to a statement issued by the finance ministry. SNGPL will face a shortfall of roughly 600 to 900 million cubic feet per day (mmcfd) in the coming winter.
In the meeting chaired by Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh, ECC members raised questions about the mishandling of wheat import by the food security ministry.
The ministry had requested the ECC to approve the lowest bid of Aston Industrial Agro, Russia, which quoted $278.5 per ton, for import of 330,000 tons of wheat and allow distribution of the commodity among Pakistan Agricultural Storage and Services Corporation (Passco), Punjab and K-P. Sources said ECC members believed that Pakistan could have secured a better deal with Russia, had the food ministry handled the matter efficiently.
The ministry also sought a “formal approval to appoint Trading Corporation of Pakistan (TCP) as the focal agency for the concessionary deal offered by the Russian Federation for 750,000 tons and 420,000 tons so that the remaining quantity of import could be made available by January 2021.” The food ministry again did not distribute the summary among ministries and it was not signed by the food secretary as well. In his place, the additional food secretary signed the summary.
The ECC constituted a three-member committee consisting of finance secretary, commerce secretary and food security secretary to negotiate the price of wheat with the Russian government for further purchases, said the Ministry of Finance.
The federal cabinet has allowed TCP to import 1.5 million tons of wheat on behalf of Passco, Punjab and K-P governments by waiving duties and taxes. Owing to the government’s mismanagement, prices of wheat and its products are constantly rising. Prime Minister Imran Khan also chaired a meeting on Tuesday to review the wheat supply situation. He directed that 1.5 million tons of wheat should be imported at all cost, said the sources.
However, the TCP chairman maintained that ports were congested and he was facing problems in securing berths for vessels carrying imported wheat. The finance ministry statement said besides setting up a negotiation committee, the ECC also approved that “330,000 tons of wheat, when imported by TCP, shall be distributed equally among three recipients ie Passco, Punjab and K-P (110,000 tons each)”.
The price of $278.5 per ton was higher than the previous tender for import of 170,000 tons, which attracted an offer of $274 per ton, but was cancelled. Wheat price in Karachi would be Rs49.44 per kg or Rs1,977.9 per 40 kg. The bid price was Rs46.2 per kg and the import and handling cost stood at Rs3.2 per kg.
TCP had floated four tenders, out of which it has so far finalised only one for import of 330,000 tons at $233.8 per ton. It cancelled the September 9 tender for 170,000 tons after bidders quoted a price of $274 per ton. Again, it cancelled the September 23 tender for 300,000 tons due to a higher price of $280.9 per ton.
The fourth tender was floated on September 26 for purchase of 300,000 tons and it was opened on October 5. Eight parties participated and the lowest bid was of $278.5 per ton quoted by Aston Industrial Agro, Russia. In addition to the four tenders, the ECC has already allowed import of 180,000 tons of wheat from Russia under a government deal, which would be struck without following a competitive bidding process.
So far, TCP has ensured import of 660,000 tons out of the total of 1.65 million tons and the remaining 990,000 tons are to be imported till January next year, according to the food ministry summary.
On Friday last week, the ECC formally approved the import of 180,000 tons of wheat from Russia on a government-to-government basis at $279 per ton. “The deal is in final stage,” said the food ministry.
The ministry informed the ECC that the “Russian government has offered a further concessionary deal for 750,000 tons to TCP and 420,000 tons to Passco”. Prodintorg, which earlier offered 180,000 tons of wheat at $279 per ton and gave only 24 hours to respond, has now offered 420,000 tons at the “most competitive rate” and the offer is valid till October 18.
But the negotiation committee will not have room to manoeuvre as Pakistan has already accepted $279 per ton offer of Prodintorg.
The relevant ministry withdrew a summary that it had moved to increase prices of wheat flour, sugar, rice, edible oil and pulses at the utility stores. The ECC allowed the Oil and Gas Regulatory Authority to issue new CNG licences to RLNG-based CNG stations with the provision that the licensee would neither receive indigenous gas nor can claim for its conversion to indigenous gas.
Published in The Express Tribune, October 8th, 2020.
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