ISLAMABAD, April 18: The government is likely to impose 20 per cent regulatory duty on the import of wheat to contain falling domestic prices but an inter-ministerial dispute has delayed a final decision on the matter, it is learnt.
The economic coordination committee (ECC) of the cabinet considered last week a proposal of the ministry of food, agriculture and livestock (Minfal) to impose 20 per cent duty on wheat imports to ensure Rs415 per 40-kg support price to the farmers.
However, concerned by its inflationary impact, the ministry of finance opposed the move until final crop estimates were available by next month. As a result, the prime minister, who presided over the ECC meeting, withheld the decision for the time being, a senior finance ministry official told Dawn on Tuesday.
“The ministry’s argument was self-contradictory,” said the official. On the one hand, the food ministry estimated that wheat production this year would be 20.5 million tons - 1.5 million tons less than the target of 22 million tons - and on the other hand it sought to discourage imports, he said. The country’s annual wheat consumption is about 22 million tons.
The finance ministry took the position that duty on wheat import should not be imposed on the basis of assumptions because this would further add to inflation. Such a decision should be made when final crop output estimates were available next month, argued the finance ministry which is already under criticism for increasing sugar and cement prices.
The ministry, too, caught the finance ministry on the wrong foot.
It said the finance ministry was talking about bumper wheat crop this year but was opposed to levying duty on imports. On these arguments, the prime minister decided to look into the matter personally.
The ministry is worried that unless further imports are discouraged, the growers will not be able to get Rs415 per 40-kg support price fixed by the government and pleads that a helping hand should be extended to the farmers.
The government had allowed last year duty and tax free import of wheat because of low production, a major gap in supplies and a resultant rising prices.
As a result, the private sector has already contracted one million tons of wheat import from various sources, out of which 816,000 tons wheat has already arrived in Karachi.
However, the government in a recent decision has also removed 15 per cent duty levied on export of wheat flour to ensure better return to wheat growers and stabilise wheat flour.
This year, the wheat prices have already collapsed in Sindh to Rs360-370 per 40-kg against a support price of Rs415 and the situation will be no different in Punjab where harvesting is in the initial stage.
The problem is that more than two million tons of wheat stocks are already available in the country.
This means that the total availability would be in excess of 22 million tons even if this year’s crop output remains 20.5 million tons.
According to official data, wheat stocks as of March 1, 2006 stood at 2.779 million tons, over 193 per cent higher than last year’s 0.947 million tons of stocks on the same date.
Wheat sowing area and production have fallen short of target despite timely rains and a continuous increase in the support price of wheat over the last few years to encourage growers to bring more area under cultivation and enhance per acre yield.
