KARACHI, April 21: The Sindh Food Department has managed to secure a competitive interest rate for the current quarter of April to June on the loan it sought from the consortia of five big banks for procurement of wheat from the farmers.

Officials disclosed that the consortium of five banks agreed to lower interest rate to 11.35 per cent during the current quarter as against 11.67 per cent in last quarter — January to March 2007

For years, these five banks, which include a nationalised and four privatised banks, operated as a cartel and offered a consensus rate of interest, which had to be accepted by the Sindh government,” the official disclosed.

But the officials have now engaged many other private banks in the negotiations for wheat procurement loans. Like last season, the Sindh Food Department seeks Rs7.5 billion loan to procure 0.7 million tons of wheat.

Officials say that the department has arrangements to stock 0.7 million tons in their silos and godowns. But a high-level meeting chaired by the prime minister in early April has indicated Sindh government to procure one million tons of wheat. The government will consider possibility of purchasing 0.3 million tons more wheat after it has procured 0.7 million tons.

This will require additional bank loans of Rs3 billion and temporary arrangement for stocking 0.3 million tons of wheat.

The need for procurement of one million tons has been felt after the official estimate size of wheat crop comes to be more than 3.1 million tons, which is a record. Normally, the wheat crop size in Sindh is 2.1 to 2.2 million tons when weather is good and water availability is up to the requirement.

The crop size had dipped to 1.6 and 1.7 million tons also in some of the seasons compelling provincial government to seek additional wheat from Punjab.

Almost one million tons of wheat is being obtained from the rich soil of what is called “kutcha area” on either banks of River Indus. This summer, the river swelled because of rains and melting of snow in the North and it breached banks on either sides. The receding waters in winter leaves behind a thick layer of alluvial soil, which is fertile and ideal for sowing.

The wheat production from kutcha area is almost 12 per cent of the total production. But most of the land in kutcha belongs to the government, which is mostly occupied by the powerful landlords, who grab the production also.

In terms of hard cash, it means that these powerful landlords grab as much as Rs10 to 12 billion worth of government wheat without any payment. Most of the landlords have their comfort houses in these dense forests. Fully equipped with all modern amenities, these comfort houses serve as relaxation centres and sanctuaries for criminals and dacoits.

Total wheat production in Sindh, Punjab, Balochistan and NWFP is now being estimated at about 23 to 24 million tons. The government plans to raise a stock of five million tons plus warranting a loan of Rs50 billion plus from the banks.

More than Rs150 billion loans will be needed by the millers and traders who are buying wheat directly from the farmers. The government estimate is that wheat crop will inject at least Rs230 billion in the rural economy.

Anticipating a bumper wheat crop this spring, the State Bank’s advice to the government was to ensure creating a reserve stock and counter the influence of powerful speculators, who can convert a situation of plenty into scarcity and turn an opportunity into a disaster.

But reports suggest that the wheat procurement by the government agencies has not picked up tempo but traders are active in the market to buy wheat from the farmers and are booking export orders. A ship carrying 2,000 tons of wheat for India has already sailed off from Karachi.

Traders report shipment of wheat to many African and Asian countries. The prices of wheat in the open market are still within manageable limits but are slowly creeping up. The wheat rates are low because the crop is pouring in the market. Market analysts fear that if no safeguards were taken, the rates will start going up after May. The country may see a wheat flour scarcity in Ramazan next September and October if no checks were applied to stop outflow of flour.