The government on Wednesday allowed importing sugar at Rs106 per kilogram and wheat at Rs61 per kg, which are the highest prices to be paid so far on import of both of the essential commodities to meet shortfall and build strategic reserves.
The Economic Coordination Committee (ECC) of the cabinet approved to import 110,000 metric tons to 400,000 metric tons of wheat at $355.9 per metric ton. At Wednesday’s exchange rate, per kilogram price comes to Rs61 per kg including the freight charges.
The fresh tender was 17% or $52 per ton expensive than the last deal amid increasing price of wheat in the international market. The bid was for the import of 110,000 metric ton against a tender of 400,000 metric tons, suggesting suppliers were exploiting domestic shortages to the disadvantage of the government.
The ECC allowed the Trading Corporation of Pakistan to ask the other three responsive bids to match the prices. The fourth highest bidder had offered $379.3 per metric ton price.
Similarly, the ECC also approved to import 200,000 metric tons of sugar at around $637 per metric tons that translates into Rs106 per kilogram. The price was 19% higher than the previous tender.
The government will require $270 million or Rs45 billion to finance import of both the commodities.
On the recommendation of the Ministry of National Food Security & Research, the ECC accorded approval to import 400,000 metric tons of wheat and directed to explore and expedite the option for importing the remaining amount of wheat through government-to-government arrangement, according to the Ministry of Finance.
The ECC emphasised the importance of building strategic reserves in wake of evolving situation in Afghanistan which may affect the prices in the domestic market, it added.
The lowest bid was offered by Falconbridge Resources for quantity of 110,000 metric tons for the shipment window of September 15 to October 21, 2021. The offered rate translates wheat price at the level of Rs61,463.4 per metric tons or Rs2,458.5 per 40 kilogram at Karachi port, according to the Ministry of National Food Security and Research.
The food ministry had requested the ECC to either accept the bid or scrap the tender and issue a new one. The ECC had also been requested to direct the TCP to explore government-to-government wheat import arrangement.
Against the first tender for importing 500,000 metric tons of wheat by TCP, the national trading agency received responsive bids for 220,000 metric tons of imports in August and September, according to the government officials.
The price it received was $244 per metric ton, excluding the freight cost. After adding the freight charges, the landing cost at Karachi port will be $304 per metric ton.
Along with uncertain international market prices, it faced another challenge in the shape of falling value of the rupee. The currency has depreciated by more than Rs10 in just two months and traded over Rs166.2 to a dollar on Wednesday.
In June this year, the cabinet had allowed to import four million metric tons of wheat meet shortfall against the local consumption requirements.
Although the government claims that the country produced bumper crop of 27.3 million metric tons, it still felt the need to import four million metric tons of wheat.
The wheat stocks with federal and four provincial governments stood at 6.13 million metric tons. Though the prevailing stock may cater for around eight months requirements till end April next year, any emergency situation like influx of refugees from Afghanistan or a famine situation in the neighbouring country may develop severe stress in the domestic market and push the prices up.
Sugar
The ECC approved import of 200,000 metric tons of sugar for maintaining strategic reserves. The industries ministry secretary briefed the committee about previous tenders floated for the purchase of sugar in the international market. He also apprised about cancellation of previous tenders due to volatility in the prices of commodities in the international market particularly due to ongoing Covid-19 pandemic, said the finance ministry.
The sources said that the new tender would cost Rs106 per kg price.
The industries secretary said that rising transportation cost and petroleum prices have contributed significantly into international price hike in food commodities.
The finance minister took notice of the price fluctuations in international market of commodities and directed to constitute a sub-committee to work out modalities for placing tenders in international market in a timely manner.
The ECC also directed to workout arrangements for the remaining 300,000 metric tons of sugar through government-to-government mode of procurement at the earliest possible to build strategic reserves and ensure smooth supply of sugar across the country before the arrival of the fresh crop.
The federal government had decided to import 600,000 metric tons of sugar, out of which 100,000 metric tons has already been imported. The industries ministry requested the ECC to approve Rs45 billion worth total supplementary grant for financing the import of remaining 500,000 metric tons of the sugar.
But the ECC decided that instead of taking grant from the budget, the TCP should arrange commercial loans.
The industries ministry opined that the sugar was being imported to build the strategic reserves and cannot be immediately off loaded in the market.
The ECC approved supplementary grant amounting to Rs24.6 billion or $150 million for National Disaster Management Authority (NDMA) for procurement of vaccine for Covid-19 including transportation and handling charges in order to meet the target of 85 million population to be vaccinated by the end of year 2021.
Published in The Express Tribune, August 26th, 2021.
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