Wheat mishandling costs kitty Rs105 billion

ISLAMABAD:

The mismanagement of wheat operations would cost the national exchequer around Rs105 billion, which the Ministry of National Food Security has proposed to be paid in subsidies by the federal and provincial governments.

The Economic Coordination Committee (ECC) of the Cabinet, which met here on Monday to discuss a singlepoint agenda of wheat demand and supply situation, approved the constitution of a subcommittee to finalise the subsidy figures, the finance ministry said after the meeting.

However, the constitution of the subcommittee is a mere procedural formality as the figures have already been finalised by the food ministry and vetted by Special Assistant to Prime Minister on  Revenue Dr Waqar Masood Khan.

“In light of the recommen-dations  of  the  meeting  of  the Coordination Committee of the ECC on wheat, held on November  8,  2020,  it  was  decided  that a subcommit-tee  under  the  guidance  of  the SAPM on revenue would be constituted in consulta-tion with the ministries of finance, national  food  security and research and the provincial  governments  to  work  out  the  total  volume  of  subsidy  involved  on  im-ported and local wheat,” the finance ministry stated.

After  coming  to  power  in  2018, the PTI allowed export of 5.5 million metric tonnes of  wheat  and  its  products,  which  not only  caused  a  shortage in the market but also pushed the prices up by at least 75%.

Now, the government  is  not  only  buying  the  wheat  at  higher  rates  from  the  local  market but  also  importing  2.2  million metric tonnes of wheat.The national food security ministry  on  Monday  pre-sented the subsidy estimates to  the  ECC  on  the basis  of  nine  million  metric-tonne  stocks,  including  the  1.8  million  tonnes  imported  wheat for which tenders had been issued.

At  nine  million  tonnes,  the wheat subsidy cost is es-timated at Rs90 billion and after  additional  import  of  400,000 metric tonnes, the subsidy will jump to Rs104 billion to Rs107 billion, an ECC member told The Express Tribune.

For the current season, the minimum  wheat  support  price is Rs1,400 per 40 kilo-grammes but the actual per 40kg  cost  of procurement,  handling  and  transporta-tion  is  Rs1,931  in  Punjab,  according to the government officials. Against Rs1,931, the wheat is being released to the mills at just Rs1,475.

This involves Rs456   per   40kg   subsidy   in  Punjab,  he  added.  The  imported  wheat  also  costs  over  Rs2,000  per  40kg and  the  contracts  are  signed  at  prices,  ranging  from  $233  to  $284  per  metric  tonne,  excluding local transportation cost.

The  federal  government  would pick the subsidy only to  the  extent  of  Pakistan  Agriculture   Storage   and   Services     Corporation (Passco),  which  is  roughly  Rs11  billion,  said  a  senior  finance  ministry  official,  adding  that  the  provinces would  pay  their  own  sub-sidies,  with  Punjab  taking  the maximum hit of around Rs70 billion.

The current domestic  wheat stocks are estimated at 7.2 million tonnes, which cost  the  federal  and  pro-vincial  governments  Rs331  billion.  However,  the  esti-mated  sale  proceeds  of  the  domestic  stocks  are  Rs265  billion,  which  will  require  Rs66 billion subsidy by the federal  and  provincial  gov-ernments, said the officials.

The imported wheat is esti-mated at 1.8 million tonnes, which will cost Rs90 billion. But the sale proceeds of the imported wheat  are  esti-mated at Rs66 billion, need-ing Rs24 billion subsidy.

The  ECC  has  already  approved  an  increase  in  the import quota to 2.2 million tonnes  and  the  wheat  pro-curement and subsidy costs are  not  part  of  the  overall  Rs90  billion  subsidy  estimates.  After  including  the  cost of import, the subsidy will jump to Rs105 billion.

The  Punjab  government  has  procured  4.3  million  tonnes  of  wheat  at  Rs209  billion  but  its  estimated  sale proceeds are Rs160 billion, requiring Rs49 billion subsidy  on  the  domestic  stock. The provincial government is also getting 700,000 metric  tonnes  from  the  imported  wheat  which  will  cost  Rs34  billion.  

But  the  sale proceeds are estimated at Rs25 billion, resulting in a subsidy of Rs8 billion.In  total,  the  Punjab  gov-ernment will  spend  Rs243  billion   on   procurement   of  domestic  and  imported  wheat but it will earn Rs185 billion  and  need  Rs58 billion subsidy, excluding the impact of additional import.The Sindh government has 1.4 million metric tonnes of wheat stocks worth Rs55 billion.  

The  province  expects  Rs46  billion  sale  proceeds,  hence it will need to pay Rs9 billion subsidy. The PPP-led provincial government  is  also getting 170,000 metric tonnes  from  the  imported  wheat  at  Rs8  billion.  Its  sale proceeds are estimated at  Rs6  billion  and  requires  Rs2 billion subsidy.

In total, Sindh is spending Rs64 bil-lion  on  local  and  imported  wheat  but  will  earn  Rs53  billion,  resulting  in  a  hole  of Rs11 billion.The Khyber-Pakhtunkhwa (K-P) government is spending  Rs30  billion  on  wheat  procurement   from   local   and foreign  sources  but  it  will  earn Rs20  billion.  The  provincial  government  is  paying Rs10 billion subsidy, mainly  on  the imported  wheat.The  Balochistan  government’s wheat procurement requirements are estimated at  only   80,000   metric   tonnes,  which  will  need  just Rs100 million subsidy.

The federal government-run Passco will have two million metric  tonnes  of  local  and  imported  wheat  in  stocks  and  it needs  Rs11  billion  subsidy.The   finance   ministry   stated  that  the  ECC  discussed the issues related to demand and supply of wheat in the country.

It added that the  national  food  security  ministry  reported  that  the  wheat  imported  under the  government-to-government arrangement  from  Russia  will   reach the country within this month and there would be no shortage of the commodity in the country.It   was   also   decided to form a logistics committee in order to resolve the day-to-day  issues  of  the  wheat import,  said  the  finance  ministry.  

The  committee  will deal with day-to-day in-teragency issues and matters related to priority berthing, axle  load,  lifting  of  cargo  and any other ancillary matter, it added