Wheat procurement Punjab and Sindh seek loans for millers
By Sabihuddin Ghausi
KARACHI, April 4: The two provincial governments — Sindh and Punjab — want resumption of bank loan facilities for flour millers before it is given to the wheat traders and that too some times late May or in June but the Asian Development Bank (ADB) is insisting on a level-playing field for all the players in wheat trade in accordance with the principles of the market economy.
The conflict between the two provincial governments and the ADB emerged amidst reports that open market rate of the harvested wheat is now lower than the officially fixed price of Rs1,060 for 100-kg bag. “Wheat is being sold at less than Rs1,000 for a 100-kg bag in the open market,” a government officer confided.
He attributed this lowering of open market wheat price to the psychological effect of a report according to which the federal government assesses size of current crop in Sindh at 2.8 million tons. The Sindh government expects a harvest of 2.2 to 2.3 million tons.
As harvesting is about to begin in Punjab and there is no restriction on inter-provincial or inter-district movement, the wheat brokers expect Punjab wheat to flow in Sindh market particularly in Karachi very soon in a big quantity. It will further push down the wheat rate in the open market.
As a precautionary measure, the two provincial governments want the banks to hold resumption of loaning facility to
the traders at least till end of May or by mid June when their procurement operations are completed.
This season, the Sindh government plans to purchase directly from farmers half a million tons, Punjab 3.5 million tons and the PASSCO one million tons. By keeping traders starved of bank credits, the food bureaucracy of the two governments feel that it can keep them away from wheat business till the procurement targets are achieved. However, these two governments believe that millers by given bank credits late May to enable them buy wheat for their mills.
“There would be 15 million tons plus wheat available on completion of 5 million tons procurement and harvesting of the crop,” an official said and pointed out millers should be allowed to buy wheat from the open market for crushing. He said that wheat from government stocks would be released to the millers in small quantities by August or September. Traders can join wheat business late June.
Since 1997, the ADB is pressurising Pakistan government to observe open market economy principles in the wheat business. Phase out subsidy in wheat trade, wind up provincial food departments and eliminate
government’s role is the
ADB’s command attached to its loan.
The governments of Sindh, Balochistan and NWFP agreed to wind up their respective food departments and phase out
the subsidy but the Punjab
government decided the other way. The status quo therefore prevails. The food bureaucracy in connivance with the traders, millers and the wheat brokers share the subsidy amounting somewhere between Rs14 to Rs16 billion a year and continue to fleece the consumers.
The Sindh government’s subsidy in wheat business this year is reported to have exceeded Rs5 billion for two reasons. The import of one million tons out of which 0.5 million tons was given to Sindh raised the subsidy level. The second reason is that the Finance Department has delayed payment to Food Department which failed to clear the bank loan in time, hence the increase in financial charges.
For procurement of half a million tons of wheat this season, the Sindh government has
borrowed Rs8 billion on an
interest rate that include KIBOR plus 1.5 per cent premium.
In the third quarter (Jan-March) of the current fiscal year the banks charged 5.24 per
