ISLAMABAD: After a ban stretching more than three years, the government on Tuesday allowed the export of wheat in a bid to pay back central bank debt, a move that could result in a serious food crisis since a World Bank (WB) report has already warned of a five-million-ton drop in production in the next crop.
The Economic Coordination Committee (ECC) of the cabinet, headed by Finance Minister Dr Abdul Hafeez Shaikh, allowed the grain export without imposing any cap on quantity. It is expected that wheat will be exported in massive quantities since Russia, the world’s largest wheat producer, has banned the grain export resulting in price surge in the international market.
The ECC assessed a $300 per ton (Rs1,040 per 40 kilogramme) wheat price in the international market, anticipating a further hike in coming days. Although the government has fixed the wheat price at Rs950 per 40 kg in the domestic market, farmers usually receive an average Rs850.
Pakistan is the third largest wheat producer. The ban on export of wheat was slapped in June 2007 when because of incoherent policies the country first exported the commodity and then had to spend over $1 billion to import the same for domestic consumption.
The ministry of food and agriculture’s summary to the ECC proposed lifting the ban primarily to pay back debt taken from the State Bank of Pakistan (SBP) to buy wheat, make room for next year’s crop storage and capitalise on higher prices in the international market.
Total wheat stocks are estimated at 9.07 million tons, of which 6.1 million tons are in Punjab. “The Punjab government is paying Rs77.5 million per day interest on loans,” obtained for buying wheat, says the summary. The federal government is picking up Rs24.6 million from the amount.
The ministry, in its summary, claimed that this year wheat is being sown on about 22.4 million acres, which will result in production of 25 million tons. The summary failed to take into consideration wheat losses or shortfall in production because of the recent floods.
The production target in the pre-flood scenario was also estimated at 25 million tons.
According to the Damage and Need Assessment Report of the World Bank and the Asian Development Bank, “wheat production may reach only 20 million tons opposed to an average production of almost 23 million tons in the last three years.”
The report goes on to say that there is concern about the possible impact of reduced wheat output in the coming season on food security. Around 78,000 tons of wheat were either destroyed or damaged in Punjab during the recent floods.
The ECC also allowed the export of wheat products. The SBP, Federal Board of Revenue (FBR) and ministry of commerce will monitor the export process.
According to sources, the commerce ministry opposed the idea of fixing export quantity and argued in favour of allowing open-ended export. The idea of allowing exports to pay back debt was also endorsed by the finance ministry.
The ECC has also given a green signal to the natural gas load management programme for this winter. Owing to the 1.2 billion cubic feet per day shortfall of gas, the government will cut supply twice a week for the fertiliser and cement industries, captive power plants and compressed natural gas (CNG) stations.
It also allowed the import of urea up to 225,000 tons. The ECC constituted a sub-committee under the chair of Adviser to Prime Minister on Agriculture and Water Kamal Majidullah to work out modalities of import.
The FBR’s proposal regarding provision of fiscal relief to rehabilitate economic life in Khyber-Pakhtunkhwa, FATA and PATA was also okayed. The decision will allow ghee mill owners to import duty-free palm oil.
Published in The Express Tribune, December 8th, 2010.