Wheat mishandling costs kitty Rs105 billion
A majority of ECC members feared that any increase in wheat flour prices could provide fuel to the opposition parties which had already made inflation a big issue. PHOTO: REUTERS
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