PASSCO seeks more credit than wheat cost

Finance ministry raises objections to cash credit limit for wheat purchase

ISLAMABAD:

The Ministry of Finance has raised objections to the cash credit limit sought by Pakistan Agricultural Storage and Services Corporation (Passco), which is higher than the cost of wheat to be procured from farmers.

The Economic Coordination Committee (ECC) has recently approved a cash credit limit of Rs169 billion for Passco and has set its wheat procurement target on the basis of a price of Rs3,900 per 40 kg.

Sources said that the finance ministry pointed out that the cost of wheat purchase by Passco would be around Rs136 billion. It noted that the cash credit limit proposed for the corporation was more than the estimated cost of wheat purchase.

In this regard, it sought clarification from the Ministry of National Food Security and Research. Officials familiar with the development said that there had been a higher mark-up projection at Rs23.8 billion on the cash credit of Rs169 billion. Incidental charges have been estimated at Rs2 billion.

The food security ministry, in a recent ECC meeting, recommended that Passco may be assigned wheat procurement target of 1.40 million metric tons with a tentative cash credit limit of Rs169 billion at the support price of Rs3,900/40 kg.

It proposed that Sindh government may be assigned wheat purchase target of one million metric tons with tentative cash credit limit of Rs100 billion and support price of Rs4,000 per 40 kg.

The food ministry said that the government of Balochistan may be assigned procurement target of 0.050 million metric tons with cash credit limit of Rs5.70 billion and support price of Rs4,300/40 kg.

It said that incidental charges amounting to Rs2 billion would be borne by the respective provincial governments. The centre, however, was concerned about the different support prices set by the provinces.

The ECC, in its meeting held on December 20, 2023, had kept the support price of wheat unchanged at Rs3,900/40 kg, which was set for the previous year, and extended it for the crop of 2023-24.

However, the government of Balochistan unilaterally revised the price upwards to Rs4,300/40 kg. Similarly, the government of Sindh revised the support price to Rs4,000/40 kg.

In response, the minister of national food security sent a letter on February 22, 2024 to chief ministers of the two provinces, expressing the ministry’s reservations and requesting their cabinets to amend notifications and fix a uniform wheat price for the crop year of 2023-24 to avoid market distortion.

However, responses from the governments of Sindh and Balochistan were awaited. As of April 1, 2024, the public sector reported wheat stocks of 4.68 million metric tons, including 1.29 million tons with Passco, 2.34 million tons with Punjab, 0.51 million tons with Sindh, 0.13 million tons with Khyber-Pakhtunkhwa and 0.089 million tons with Balochistan.

Additionally, the private sector reported stocks of 0.32 million metric tons. After estimated release of 1.12 million tons by the end of the current food year (April 30, 2024), it is projected that there will be carry-forward stocks of 3.25 million tons at the start of the new food year on May 1, 2024.

Already, provincial crop reporting services have announced that wheat had been planted over an area of 23.69 million acres against the target of 22.22 million acres, indicating ample availability of improved seeds, fertilisers, and the effective awareness campaigns run by provinces.

In a consultative meeting held on March 5, 2024 for wheat production estimates, chaired by the food security secretary, there was consensus that this year’s wheat production should range between 28 and 29 million tons.

Public procurement targets, as conveyed by Passco, Sindh and Balochistan, stood at 2.45 million tons, including 1.40 million tons for Passco, one million tons for Sindh and 0.050 million tons for Balochistan. However, the proposed targets for this year appear insufficient to meet provincial requirements despite the availability of carry-forward stocks of 3.25 million tons.

Last year, the federal cabinet had set the public wheat procurement target at 7.80 million tons.

Published in The Express Tribune, April 10^th, 2024.

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