Pakistan snubs Russian wheat to save $1.4m
Pakistan on Friday rejected Russia’s offer to supply 120,000 metric tons of wheat at a price of $399.50, demanding further reduction of 2.4% in the rate due to the falling global commodity prices.
The decision was taken by the Economic Coordination Committee (ECC) of the Cabinet after consulting with Prime Minister Shehbaz Sharif. It was presided over by Finance Minister Miftah Ismail.
Russia had made the final offer to supply the wheat at $399.50 per metric ton under the government-to-government deal. It was observed in the ECC meeting that there was a declining trend in the price of wheat which may further reduce in the coming days, according to a statement issued by the finance ministry.
"The ECC decided that the Russian side may be offered the price of $390 and the offer may be cancelled if they (Russians) do not accept the offer,” it added.
Some members of the ECC were against the decision to reject the Russian offer because of the relatively thin position of the wheat stocks.
The government’s proposed price of $390 per ton is $9.5 or 2.4% less than the final Russian offer.
This would have translated into a saving of $1.4 million at the total offered quantity of 120,000 metric tons. The validity period to accept the Russian offer was Friday 6pm, Moscow time.
Pakistan had decided to import three million metric tons of wheat this year to meet its consumption and strategic reserves requirements.
The government has already procured 986,000 metric tons of wheat through three different international competitive bidding deals.
Last week, Pakistan had finalised the 200,000 metric tons of wheat import deal at $407.49 per metric ton.
The Russian final offer was $8 or 2% cheaper than the last open tender. Usually, government-to-government deals are expensive due to restricted arrangements.
The ECC was informed that Prodintorg, a state-owned Russian company, was offering the rate of $399.50 per ton for the supply of 120,000 metric tons of milling wheat through the government-to-government arrangements.
The Trading Corporation of Pakistan (TCP) had initiated the process of importing wheat from the Russian government on a government-to-government basis.
A memorandum of understanding had also been signed between the Russian entity and the TCP in June this year, which included fine details of shipments.
Initially, the government of Russia had offered the wheat price at $410 per metric ton, which it subsequently lowered by 2.6%. The prime minister had formed a committee under Tariq Fatemi, his special asssistant without a portfolio, to negotiate with the Russian Embassy on the price of the wheat.
Sources said some of the ECC members strongly encouraged the finance minister not to turn down the Russian offer.
The PML-N led coalition government has already decided to reduce the wheat strategic reserves requirements from two million tons to one million ton in a meeting held last month. With the reduction in the reserves requirement, the overall wheat import requirement has also been reduced to 1.6 million metric tons.
The country had already signed deals for the import of nearly one million tons.
According to the food and national security ministry, Pakistan has around 7.7 million metric tons of wheat that is sufficient for 168 days' of consumption.
The decision to reduce the strategic wheat reserve requirements by half was made due to thinning foreign exchange reserves and high global commodity prices.
The ECC was informed on Friday that the International Grants Council, London, had reported the price of Black Sea wheat at the level of $354 per metric ton and the prices were on the downward trajectory after a deal between Russia and Ukraine.
However, the ECC was also informed that the wheat prices had increased on Friday by $4 on fears of supply disruptions due to increasing tensions between China and Taiwan in the Taiwan Strait.