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ISLAMABAD: Sitting over a huge surplus wheat stock and having increased support price to encourage more production and votes, Pakistan has found an opportunity to export one million tons of wheat to Iran, and that too under a barter trade deal.
The two sides agreed on Friday during a meeting between Water and Power Minister Syed Naveed Qamar and visiting Iranian Deputy Commerce Minister Abbas Ghohadi that Tehran would import not only one million tons of wheat but also 200,000 tons of rice to promote barter trade relations. Tehran is also expected to import sugar from Islamabad.
In return, Pakistan will import fertiliser and iron ore for state-run Pakistan Steel Mills, which is suffering from huge financial losses because of extreme shortage of raw material and other problems. Despite rains and floods for two consecutive years, Pakistan’s major crops — wheat, sugarcane and rice — have yielded a bumper output and now supply exceeds demand. Pakistan has been looking for export avenues to offload surplus stocks to reduce maintenance cost and pay off interest to the central bank, but with limited success owing extremely low international prices.
The decision came in the wake of the meeting last week between President Asif Ali Zardari and President Mahmoud Ahmadinejad in Islamabad in which the two leaders decided to raise bilateral trade to $10 billion a year through the barter trade. Pakistan had assured the Iranian side that it would also fast track implementation of gas and electricity import projects from Iran.
Mr Naveed Qamar was assisted by the chairman of Trading Corporation of Pakistan (TCP) and the Managing Director of Pakistan Agricultural Storage and Services Corporation (Passco). They were directed to hold separate talks with the Iranian deputy minister and his aides to work out modalities for the export of rice and wheat and import of fertiliser and iron ore.
Pakistan has faced a big fertiliser shortage during outgoing crop season and was forced to import more than half of its domestic requirement mainly because of massive gas shortfalls. The Pakistan Steel Mills’s production capacity had also plummeted to less than 20 per cent in recent months mainly because of shortage of iron ore and other raw materials as international prices have increased.
Mr Qamar and Mr Abbas Ghohadi also agreed that Passco would present samples of wheat and negotiate the price for its exports. Passco would also be responsible for export of wheat and sugar while TCP would deal with import or fertiliser and iron ore.
The two sides expressed the hope that export of wheat would start within two months.
According to a press release, Mr Abbas Ghohadi said that Pakistani rice was very popular in Iran and it was used during every festival and on special occasions. He said the delegation wanted to visit the storage facilities of wheat in the country to examine its quality and specifications and assured of facilitating wheat exports through simplified administrative procedures for better trade relations.
Officials said that more than five million tons of wheat was currently lying in official stores and open places mostly in Punjab and with Passco. The recent increase in support price for wheat by about 10 per cent to Rs1050 per ton announced by the federal government to win over farmers ahead of elections was also expected to yield higher output even though Punjab would financially suffer because of huge involvement of subsidy and central bank overdraft.
Punjab’s attempts to offload its surplus stock to pay off banking loans had been badly affected due to substantial sales by Russia and Australia at much lower rates as compared with Pakistan prices. Two recent deals by Russia with Egypt and Iran had brought down prices to less than $225 per ton compared with $350 per ton at which Islamabad exported about 1.7 million tons of wheat and 1.3 million tons of wheat products.
Over the last three years, Pakistan has become a net wheat exporter after decades of relying on wheat imports, mainly because of increase in support prices from about Rs650 in 2008 to Rs1050 per ton this season. Even though Islamabad’s wheat prices are still higher than those in the international market, both Iran and Pakistan would benefit from the deal through lower transportation cost.
The government hopes to harvest more than 25 million tons of wheat this season while domestic consumption stood at 22 million tons. Mainly because of support price, the government was forced last year to inject over Rs400 billion into commodity operations.
