ISLAMABAD: Amid 10.2 million tonnes of surplus stocks, the government on Tuesday allowed subsidised export of 0.5m tonnes of wheat.

This would cost $50m, or Rs6.5bn, to the national exchequer, a senior government official told Dawn. He explained the original proposal involved $305m subsidy or Rs40.5bn on proposed export of 3.1m tonnes of wheat or its products.

The decision was taken at the Economic Coordination Committee (ECC) of the Cabinet meeting, presided over by Finance Minister Asad Umar, deferring all other summaries due to the concluding round of talks with the IMF and departure of Umar to Malaysia.

Informed sources said the Ministry of National Food Security and Research (MNFSR) had proposed export of 3.1m tonnes of wheat on the request of Punjab, Sindh and Pakistan Agricultural Storage and Services Corporation (Passco), to reduce storage and maintenance costs.

It was proposed that Punjab be allowed to export 2m tonnes of wheat and wheat products followed by 0.6m and 0.5m tonnes by Sindh and Passco.

Rejects requests of freight support from provinces

The provinces had demanded that the subsidy on exports should be equally shared by the centre and the provinces. The finance minister rejected all such demands and approved export of only 0.5m tonnes, while ordered the MNFSR to settle shares of three parties, in consultation with ministries of commerce and finance.

He also decided that that any financial support for freight etc requested for export will be provided by the respective provincial governments. “The federal government will pick up such costs in the case of Passco only”, he said.

Further, a committee comprising senior officials from the ministries of commerce, finance and food security will review the situation in two weeks’ time and make recommendation for further exports, if required.

The provincial food departments of Punjab and Sindh had requested permission to offload their surplus wheat stocks to the tune of 2.5m tonnes and 0.5m tonnes, respectively, by providing freight support of the federal government. Passco also made similar request for export of 0.6 million tonnes with freight support of $115 per tonne.

Overall, a quantity of 3.1m tonnes of wheat and wheat products had been proposed by Punjab, Sindh and Passco, with freight support to be shared equally between the federal and provincial governments.

The working goup on Wheat Export Freight Support Programme, led by the secretary of MNFSR evaluated these proposals in wake of World Trade Organisation’s requirements.

It was agreed that Punjab, Sindh and Passco have procured wheat stocks of 3.623m tonnes , 1.4m tones and 0.900m tonnes, respectively, this year.

With the addition of carry-over stocks of 3.596m tonnes with Punjab, 0.456m tonnes with Sindh and 1.623m tonnes with Passco, the overall available stocks at the start of the food year in May stood at 11.931m tonnes.

It was reported that after a negligible release of wheat, so far, current wheat stocks stood at 10.178m tonnes.

Slow releases of wheat from public stocks and heavy mark-up have encouraged the provincial governments to submit their requests for immediate export of their stocks, as procurement cost with addition of incidental charges reached Rs42,000 per tonne in Punjab, Rs39,206 in Sindh and Rs39,079 for Passco.

Considering the benchmark of Passco’s incidentals of Rs6,579 per tonne, the total cost of wheat was evaluated at Rs39,079 per tonne of local wheat, equivalent to $292.7 per tonne, at the rate of Rs133.5 to a dollar, as compared to international wheat prices of $218 per tonne, necessitating $75-80 per tonne. After adding $30 per tonne transportation cost and exporters’ margin, the total difference worked out at $105 per tonne.

The MNFSR proposed that 70pc of 3.1m tonnes of wheat and its products should be exported through sea route, with $105 per tonne and remaining 30pc be exported through land route at the rate of $75-80 per tonne from Punjab and Sindh respectively.

The ministry also proposed that export of wheat and wheat products should be completed before April 30, 2019, while the export process should be completed upto June 30, 2019, in order to facilitate the exporters for completing their codal formalities.

Umar also directed that for further exports, the matter should be taken up afresh after two weeks.

Published in Dawn, November 21st, 2018