LAHORE, Jan 4: The Punjab food department stated on Tuesday that it has inked agreements with local exporters for sale of 400,000 tons of wheat, and more such agreements for sale of 200,000 tons of wheat are in the pipeline.

According to food departmental officials, they have started receiving orders despite some fall in international wheat price. It came down to $317 per ton in the last one week, with a slide of $5 per ton.

Most of the export orders, they said, were destined for Bangladesh. Since transportation cost is negligible as compared to other far or Middle Eastern states, it has started making financial sense for exporters. Secondly, Bangladesh does not have strict quality standards for imports.

The exporters thus do not have to further purify wheat before export, which costs anything between 10 to 15 per cent of commodity and correspondingly cuts profit margins.

Trouble with Bangladesh is that it is not a big market and cannot take any big quantities. The exporters thus have to look into other areas as well. Some of exports are also meant for African and Far Eastern countries, they said.

The agreements signed so far are worth Rs10 billion while more agreements worth Rs5 billion are being finalised.

This money should help bring loans down to some extent that the Punjab government is finding hard to sustain. Currently, the Punjab government owes over Rs170 billion in wheat loans and is paying around Rs80 million a day in interest payments, they said.

“All agreements so far signed are by exporters from Karachi, especially those who got orders from countries like Bangladesh, where quality issue does not make imports impossible, says Majid Abdullah of Pakistan Flour Mills Association (PFMA).

If they get wheat from Sindh food department, they would save transportation charges. But such exports would be limited and won’t make much dent in huge provincial stocks.

However, if someone gets orders from a far off country and gets wheat from Punjab, it would not be commercially viable. So Punjab government should create some fiscal space for exporters.

It may not be necessarily through subsidy but it can be done through credit and some space on transportation, like releasing wheat from centers located on provincial borders that can save on transportation, he proposed.