KARACHI, Nov 29: All flour millers and owners of small chakis operating under the food grain licence in Sindh are now free to lift as much wheat from the government stock as they wish on officially fixed issue price of Rs1,112.50 for a 100-kg bag.

The Sindh government holds a stock of about half-a-million tons of wheat in its storages. This wheat was procured from farmers in April and May this year against a bank borrowing of about Rs5 billion. The interest on this loan is 9.5-10 per cent.

Millers’ demand on wheat of the government stock declined considerably after the government allowed a duty-free import of the commodity to Karachi traders. Market sources say traders have booked over 650,000 tons of wheat from Russia and Australia. About 350,000 tons have already arrived in the city, while the remaining quantity will be delivered by the end of next month or early January.

With a population of 15 million and located around 120 miles away from wheat growing areas, Karachi has been suffering wheat flour shortages and witnessing a sharp rise in prices of wheat flour and bakery products for the last several years.

The Sindh government followed a wheat quota allocation policy for about 78 flour mills in the city based on their grinding capacities since it involved subsidy. But as the experience showed, consumers never benefited from this government subsidy, which in certain years amounted to Rs6 billion to Rs7 billion. The real beneficiaries were millers, traders and the food bureaucracy.

Responding to a hue and cry of the people and presence of a strong Sindh urban-based political party in federal and provincial governments, Islamabad took a drastic decision of allowing duty free import of wheat and a number of other edible items. For the first time, Ramazan witnessed a relatively easy month as far as supply and prices of wheat and other essential items are concerned.

But this comfort of Karachi people put the Sindh government in a discomfort. The duty-free import of wheat has reduced millers’ demand on wheat of the government stock. It means that Sindh will carry a financial liability of Rs5 billion, with about 10 per cent interest rate, and that the next wheat procurement from farmers in April 2006 will be very difficult if not an impossible task.

The federal government, therefore, advised the Sindh government to go for a liberal wheat distribution policy that would ensure a quick disposal of government stocks in the next three months. This policy has also been hailed by millers.

The liberal wheat distribution policy comes in the wake of market reports that flour prices have started crawling up in Karachi and parts of Punjab. The millers enjoy bank credit facilities and are expected to go for a big shopping from the government stock to keep the wheels of their factories moving in January, February and March which are lean months.

Sindh government officials say the Balochistan government is also seeking 100,000 tons of wheat. A team of officials from Islamabad is due in Karachi in a day or two to sign a memorandum of understanding with the food department for the purchase of 46,000 tons of wheat for the earthquake-affected people against a US pledge of $12 million under a World Food Programme.