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| July 8, 2005 | Friday | Jumadi-ul-Awwal 30, 1426 |
Decision on wheat yet to make impact
LAHORE, July 7: The federal government’s decision to allow a duty-free import of wheat and flour has yet to ease the situation of the market, which continues to be volatile throughout the Punjab. According to wheat trade stakeholders, the official decision is a ‘psychological ploy’ to force the private sector to release its stocks under threat of free import and declining profits. But it has so far failed to achieve the desired results mainly because of a statement by the federal wheat commissioner that “the government neither needs nor it plans to import any wheat.”
They say the government has only hoarders to keep their stocks intact and wait for flour price to rise further.
According to estimates provided by the State Bank of Pakistan to official agencies, the private sector is holding around 2.2 million tons of wheat against 2.4 million tons of the Punjab Food Department — almost a 50-50 situation.
The department normally starts releasing its stocks by October and the private sector provides wheat to millers during these four months — from July to October. So the period is of crucial importance for the private sector to manipulate market to its advantage, they claim.
The government is entering a crucial period during which its planning to keep a check on flour prices will be tested and so will be the private sector’s propensity to maximize its profits.
Khaliq Arshad of the Pakistan Flour Mills Association says the government should opt for import of wheat right now. The only way to keep the market stable is to make the private sector keep releasing its stocks, which it would not do unless the government keeps threatening it to flood market with wheat and have sufficient stocks.
With the current level of stocks, it is in no position to even hurl such a threat. The private sector now knows that the official stocks will exhaust even if the government dares to do so. It gives hoarders a manipulative edge and the price would keep rising, Mr Arshad says.
He denies official charges of cartelization, claiming that the flour mills have three times grinding capacity than the country requires. “Every miller wants to grind more to keep his overhead expenditure down. In these circumstances, one can hardly expect any mill to be a part of a cartel at the cost of its own profits. Open market mechanism works on profits, not on cartelizations,” he explains.
Mr Majid Abdullah of the PFMA thinks that allowing import of flour will not have any major impact on the market. World trade in flour is hardly 10 to 15 per cent because of its short shelf-life. It may benefit Pakistan if flour comes from India through land routes, he says, adding the Indian crop this season was not very good and it may not be profitable for Pakistanis to import high-priced flour from India. Import from any other country will entail huge cost of transportation, depriving it of its profitability, he claims.
The best option for Pakistan remained import of wheat right now. The massive US crop has just arrived in the international market and price is really down right now. The C&F price being quoted by the international bidders is $160 for Karachi. It will spiral to at least $180 to $190 in the next two months and cost the nation much more, he adds.
The Ministry of Food, Agriculture and Livestock officials, however, maintains that there is no need for immediate import of wheat.
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