The Sindh government is poised to start exporting its last year’s wheat stock and empty its grain storages ahead of the procurement of the new crop.

The federal government has allowed the export of 1.2m tonnes of wheat, promising a rebate of $45 per tonne. Sindh has around 0.95m tonnes of the crop, with harvesting less than two months away.

The provincial government has written to the federal government to get the rebate payment for the first tranche of 100,000 tonnes to be sold to exporters. If the federal government decides to give the rebate directly to exporters, it may discourage exports because of the cumbersome procedures involved, Sindh government officials say.

With no duty, around 700,000 tonnes of cheap wheat were imported from Ukraine between July and November. By the time the 20pc duty was imposed at Sindh’s insistence, the bulk of the imports had already arrived in Karachi.

According to a senior Sindh finance department source, someone in the federal government seems to have financially benefitted from the import. “I think some inquiry must be initiated. The mark-up on the loan Sindh obtained for procuring the wheat crop last year is rising due to non-disposal of the crop, and new procurement would require billions in bank borrowing again,” he said.

The Sindh food department spends close to Rs40bn on procurement of wheat, inclusive of transportation and carrying cost. Total borrowing last year, including liabilities of around Rs18bn, stood at Rs58bn, according to a provincial food officer.

With no duty, around 700,000 tonnes of cheap wheat was imported from Ukraine between July and November. By the time a 20pc duty was imposed at Sindh’s insistence, the bulk of the imports had already arrived in Karachi

The promised rebate is expected to be given to exporters on submission of export documents. An exporter would get the Rs4,500 ($45) per tonne rebate for exporting wheat whose likely cost is Rs32,000. The Sindh government is seeking payment in advance to facilitate quick disposal of the stock.

However, there have been reports that the government is likely to increase the rebate by $5 per tonne on the export of 1.2m tonnes of surplus wheat, as the rebate of $55 per tonne for Punjab and $45 per tonne for Sindh has been termed insufficient to attract international buyers.

“It is mindboggling how wheat is imported when our own stocks are in excess of the province’s demand. The imports should have been banned much earlier. The Economic Coordination Committee (ECC) discusses each and every thing minutely. It’s disturbing that the import duty was overlooked,” argues Mahmood Nawaz Shah, vice-president of the Sindh Abadgar Board. He asked who was responsible for wasting precious foreign exchange, and now for export of better quality local wheat that was otherwise meant for domestic consumption.

In the local market last year, wheat’s price remained at par with the food department’s issued price of Rs3,450 per 100kg, and roller flour millers and chakki owners were purchasing it from the market instead of the food department. Thus, wheat remained un-disposed, forcing the chief minister to reduce the issue price by Rs200 to attract buyers until January 15. The date has now been extended until April.

A food department officer says 300,000 tonnes of wheat is likely to be exported to the UK after the finalisation of a pending deal with the Sindh government. Besides, the ECC has allowed 400,000 tonnes of carryover stock.

“Out of the 950,000 tonnes of stock, we will hopefully be able to sell 700,000 tonnes.” He adds that the remaining 250,000 tonnes would be kept in warehouses till April, when procurement would be in full swing.

In view of the surplus stock, the Sindh government did not fix the sowing target for wheat. But agriculture officials believe that slightly over 1.1m hectares of land have been brought under the crop, which exceeds the last season’s target of 1.1m hectares. The federal government had, earlier, proposed a target of 1.15m hectares, but Sindh didn’t accept it.

Meanwhile, the crushing of sugarcane has been delayed, and the land is still largely occupied by the crop. However, this may not have a serious impact on overall wheat sowing and production. Harvesting continues slowly, as many farmers are forced to sell sugarcane at low prices through middlemen to get money to cultivate wheat.

But Nizamani fears there may be a shortfall of 100,000 tonnes of grain if cane-crushing is further delayed.

The new wheat crop is healthy and free of disease. It would start reaching the market in the third week of this month, at least from some parts of Mirpurkhas in lower Sindh.

Published in Dawn, Economic & Business, February 9th, 2015

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