THE federal ministry of national food security has suggested disposing of the unsold wheat stock by offering it to customers at subsidised rates at the country’s utility stores.

The lingering wheat crisis has kept the government ministers, bureaucrats and exporters on the toes for a long time. If the staple commodity can’t be exported profitably, its is now felt the country’s poor population can benefit from the subsidised sales.

The government has tried various options to wriggle out of this predicament, but has failed. It has been extending the period for export, increasing the subsidy on exports, raising the regulatory duty on imports, but the country is still stuck with has around 6m tonnes of surplus wheat, which cannot be exported because of unacceptable prices in the international market.

The ministry is keeping the option of export open while looking for ways to minimise the wheat glut. It has now asked the ECC to extend the export subsidy deadline, which expired July 31

Since this stock cannot be stored in state-run warehouses because of lack of space, the authorities run the risk of sizable stock kept in open space, being destroyed by bad weather. This is what Sindh CM says. But it has to be avoided.

The food security ministry has sent its proposal to the provinces. If they accept it, then the ministry will put it in the next meeting of the Economic Coordination Committee (ECC) of the Cabinet. After its approval, the provincial governments will implement the plan. The food security ministry had taken a similar step, though on a lower scale, during Ramazan by providing 700,000 tonnes of wheat to utility stores for sale at subsidised rates under a relief package.

Earlier, the ministry had suggested to the provinces to provide wheat instead of cash to the beneficiaries of Benazir Income Support Programme (BISP) but it was not agreed to on grounds that with cash the recipients buy many household items including wheat.

However, the ministry is keeping the option of export open while looking for ways to minimise the wheat glut. It has now asked the ECC to extend the subsidy deadline which ended on July 31. The previous deadline was May 15. Both the deadlines had failed to produce results. So far, only 220,000 tonnes wheat has been exported against the target of 1.2m tonnes set in January 2015.

The subsidy on export has also been raised to $90 per tonne, revised upward from $55 for Punjab and $45 for Sindh but the measure has not worked. Lower global prices since December 2014 is the major reason behind slow exports. FAO, a UN agency, expects this price trend in prices in the international market to continue for some more time in case of agricultural commodities. One may note that wheat exports in 2014-15 were reduced to mere half of what they were a year before.

Later, in a bid to get rid of excess wheat, the federal government granted provincial governments the power to directly export their surplus stock. But this also had little impact on export volume. The ministry of national food security, according to its secretary, has been negotiating with different countries for export of the surplus stock and the only outcome was a contract with Tajikistan signed for export of 5,000 metric tonnes of the commodity.

The price of wheat in the global market which was $269 per tonne in December 2014 dropped to $209 in June 2015. Now it has come down to $200 per tonne. To discourage imports, the government had increased import duty on wheat from 20 to 40pc. Besides, 5pc income tax is also charged.

According to officials of the flour mills association, despite these taxes the imported wheat will still cost less than the local wheat whose price is Rs3,250 per 100kg bag or over $300 a tonne. Since the price of wheat in the global market is $200 a tonne, there is little sense in going for export of the commodity, say millers.

The surplus stock also includes about 700,000 tonnes of wheat imported by the private sector last year from Ukraine, Russia and Moldova which was found of doubtful quality after the customs detained one consignment of 40 containers containing fungus. The department of plant protection (DPP) declared the wheat unfit for human consumption. A sub-committee of the NA standing committee on food security was set up to look into the whole episode of import of substandard wheat at a time when there was excess of the commodity in Sindh.

In its interim report to the NA committee last month, the sub-committee has recommended blacklisting of two flour mills for having imported substandard wheat on cheaper rates and that they should be banned from importing any agro-commodity in future. The sub-committee recommended that the ministry of commerce and the department of plant protection (DDP) should not allow re-export of the wheat in question or any other food items found unfit for human consumption.

Published in Dawn, Economic & Business, August 17th, 2015

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