The government is likely to allow export of 3 million tons of wheat at a rebate of $50 per ton totalling Rs 15 billion, well informed sources told Business Recorder. Giving the background, the sources said, Chief Minister Sindh in a letter has requested the PM to allow export of 0.50 million tons of wheat at a discount of $50 per ton. A similar request has been received from the Food Department of Punjab.
Earlier, a meeting was also convened in the Ministry of National Food Security and Research on December 23, 2014 in which provinces as well as Passco requested to be allowed to export 3 million tons of wheat at the discount rate. This year Punjab and Sindh procured 3.74 million tons of wheat. Both provinces started the year 2014-15 with stocks of 3.88 and 1.28 million tons, respectively. Flour Mills also procured wheat directly from the growers. Meanwhile, PFMA also imported 611,000 MT of wheat from Russia at cheap rates. This was, however, stalled by imposing a 20 percent Regulatory Duty (RD).
Ministry of National Food Security and Research has prepared a summary on the proposals from Sindh and Punjab government. The sources said in the last Federal Committees on Agriculture”s (FCA) meeting held on October 14, 2014, the provinces projected a size of wheat crop of 26 million M/tons for next year. It is, therefore, evident that unless, the Government releases wheat from its reserves at a very fast pace, very little physical and fiscal space will be available for procurement of next year”s crop.
The procurement cost of provinces and PASSCO is as follows :- (i) Punjab, Rs 37, 075 per M/ton; (ii) Sindh, Rs 38,720 per M/ton and; (iii) Passco, Rs 36,012 per M/ton. According to sources, as against procurement cost of around $380 per M/ton, the provinces want to export their stocks rebate $50 per M/ton. The proposal of the provincial governments has been considered in the M/o NSF&R and it has been observed that the prices of wheat in the international market have come down significantly.
Comparable quality wheat to Pakistan”s, ie, Australian Soft Wheat, is being sold in the international market $270 per M/ton (FOB). The financial cost of carry-over stocks is huge. For instance, only annual mark-up of one million M/tons has been calculated at Rs 3.264 billion. The timely disposal of wheat stocks will give the provincial governments both storage and fiscal space to procure next year”s wheat crop. The amount of subsidy for three million M/tons would be around Rs 15 billion.
“The subsidy the government wants to provide as per the summary is $50/ ton. The purchase price according to the summary is $380/ton. Food security is asking for 15 billion rupees summary; however, Australian wheat is at $270/ton. Even with the subsidy the price would be $330/ton and the question arises as to how exporters would sell this wheat in the international market when prices are at $270 and the subsidised price would be $330/ton,” the exporters queried. Secretary Ministry of National Food Security and Research could not be reached for their comments.
(Source – http://www.blackseagrain.net/novosti/pakistan-export-of-wheat-may-be-allowed)