KARACHI, Feb 21: The Punjab government may suffer a loss to the tune of Rs71 million on export sale of 125,000 tons of wheat being dished out from last year’s stocks.

Despite the fact that the Punjab food department has, so far, entered into deals for 35,000 tons, the bids offered by the private exporters range between Rs11,600 and Rs11,700 per ton.

The Economic Coordination Committee (ECC) of the Cabinet had allowed export of 0.5 million tons of wheat through private sector on Dec 27. The decision was taken in the light of availability of higher wheat stocks in the country i.e. 4.3 million tons as against 3.6 million tons a year ago.

According to plans, the Punjab government was told to export 150,000 tons, Pakistan Agriculture Storage and Supplies Corporation (PASSCO) 0.3 million tons and Sindh was given a target of 50,000 tons of wheat export. However, the Punjab food department, which presently holds around 2.6 million tons of wheat stocks, received the highest bid at the rate of Rs11,700 per ton.

Though the Punjab food department sources were reluctant to disclose facts about the incidental costs incurred on wheat stocks, independent sources told Dawn that on average, it comes to around Rs1,800 per ton.

The only comments given by a high official of the department on telephone from Lahore were that exports are being made to avoid high mark-up rates being paid on wheat stocks.

According to business circles, the incidental cost, in general, includes mark-up, fumigation, transportation and storage.

Unlike the Sindh food department, whose establishment cost is born by the provincial government, the Punjab food department’s cost is covered by the department itself, thereby, making its incidental costs even higher.

Therefore, after adding the procurement price of Rs10,375 per ton with Rs1,800 incidental cost per ton, the total cost of wheat would come to around Rs12,175 per ton in Sindh and Punjab. And if establishment cost of the Punjab food department is further added, it would go even higher to around Rs2,000 per ton.

According to the Punjab food department, the bids offered by private sector exporters ranged between Rs11,600 and Rs11,700, whereas the total cost being incurred by the department comes to around Rs12,175 per ton, which means a loss of Rs575 per ton or Rs475.

Similarly, the Sindh food department received bids at Rs11,425 per ton, but its actual cost comes to around Rs12,175 per ton, which means there would a loss of Rs750 per ton in case wheat is exported.

The Sindh government has called bids afresh for export of 50,000 tons of wheat and has fixed minimum quantity at 5000 tons. The date for opening of tenders is Feb 26.

Punjab has already delivered around 35,000 tons to private exporters, and if it moves forward by exporting the remaining quantity, out of exportable quantity of 125,000 tons, there would be a total loss of Rs71 million. This would also mean that the country is providing subsidy to exporters which will directly benefit foreign buyers.

It would have been in the national interest, if the government, instead of providing subsidy to exporters and incurring a huge financial loss to the national exchequer, would have distributed the surplus quantity of wheat to poor masses by launching a scheme which could have directly benefited the needy people.

By doing so, the government would have succeeded in its poverty-elevation programme as people receiving wheat at subsidised rates may consume it or even sell part of it in the open market which again would have helped keep wheat prices under control in the domestic market.