Wheat export: proposal to impose regulatory duty rejected
January 14, 2013
Federal government has rejected a proposal of Ministry of National Food Security and Research regarding imposition of regulatory duty on export of wheat to contain the current increase in flour prices across the country, official sources told Business Recorder.
However, the government has approved release of one million tons of wheat from the stocks of Pakistan Agriculture Storage & Services Corporation Limited (Passco) immediately to the provinces and flour mills.
“We have decided to give 0.1 million tons of wheat to each province and 5000 tons to each flour mill on first come first serve basis aimed at dealing with current price hike trend,” said Ahmad Bukhish Lehri, Secretary Ministry of National Food Security and Research.
The sources said the government would extend up to Rs 350 per ton as incidental charges for wheat. Total amount to be spent on this account would be about Rs 350 million.
Official documents reveal that the Economic Coordination Committee (ECC) of the Cabinet was informed on January 10, 2013 that in the recent past unusual hike in the price of wheat and wheat flour has been witnessed. The analysis shows that the following are factors contributing to this price increase: (i) announcement of increase in support price of wheat from Rs1,050 to Rs1,200 per 40 kg;(ii) increase in wheat sale price by the Punjab Government from the existing Rs1,075 to Rs1,125 per 40 kg and restrictions imposed by that government on release of wheat to flour mills; (iii) export to Afghanistan and other destinations; and (iv) hoarding and speculation.
The ECC was further informed that as on January 4, 2013 stocks of wheat in the country stood at 5.788 million tones, out of which 2.128 million tons were held by Passco. The stocks with the Government of Punjab stood at 2.6 million tons and there would be a surplus of 0.8 million tons in April 2013, when the new crop would come while stocks of wheat with Khyber Pakhtunkhwa and Sindh would also be sufficient till April 2013 but Balochistan would be in deficit by 0.05 million tons in April 2013, it was told.
Passco would have a surplus stock of 1.770 million tons of wheat in April 2013. Despite availability of sufficient stocks, wheat flour is being sold at Rs 34.60 per kg in Punjab, while in other provinces at Rs 39.50 per kg.
In order to check the rising trend of prices of wheat flour, the Ministry of National Food Security and Research made the following recommendations: (i) out of 1.7 million tons of surplus stock held by Passco, at least one million ton may be immediately released to local traders/ flour mills;(ii) there may not be any ban on export of wheat or its products as it may create false alarm. Instead a regulatory custom duty of Rs 1.0 per kg on wheat products exported may be imposed;(iii) price of wheat ex-Passco may be fixed as follows ( a) crop year 2009/10 (quantity 22,000 M. Tons): Rs 1050/40 kg;(b) crop year 2011/12: Rs 1100/40 kg ;(iii) cost differential/incidentals of Rs 446.50 may be picked up by Ministry of Finance (@ Rs 248.25 per 40 kg and Rs 198.25 per 40 kg respectively); and (iv) to avert any such situation in future as a policy Passco be allowed to release its surplus/ commercial stocks to stabilize the market and cost differential be picked up by Ministry of Finance.
During ensuing discussion, a view was expressed that monitoring the prices of various commodities is not the function of the federal government; rather it is the responsibility of the provinces. As such, the market forces may be allowed to play their role and determine the prices without intervention by the federal government.
Another view was that under the Constitution, the State of Pakistan is responsible for price stabilization in the country. It was also stated that when sufficient wheat would be available in the market, its price would correspondingly reduce, thereby decreasing the price of wheat flour.
The rising price of the staple food item would also have political ramifications and as such the federal government needed to play its role. It was also proposed that the wheat stock be released to Utility Stores Corporation (USC), which might benefit lower segment of the country. However, apprehensions were expressed about the capacity of USC to handle this gigantic task single-handedly.