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Mills suggest import of 1m tons of wheat

September 13, 2007

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KARACHI, Sept 12: Traders and millers are now questioning the claim of the government committee of wheat crop estimation of harvesting 23.5 million tons this spring to justify a new price peak at Rs14.50 a kg in the open market on Wednesday. They are also lobbying for immediate import of one million tons of wheat to offset the coming crisis.

“We are left with no option but to import one million tons of wheat at the rate of $400 a ton,’’ said Chowdhry Unsar Javed, chairman of Sindh circle of Pakistan Flour Mills Association at a press conference on Wednesday at the Karachi Press Club.

On the basis of wrong estimation of harvesting a record bumper crop, the leader of millers said that the government allowed a hasty export of half a million tons of wheat at the rate of $170 a ton and will now import twice the quantity at $400 a ton.

With wheat price at Rs14.50 a kg for the mills, the consumers are now getting flour at Rs19 to Rs20 a kg and the bread at Rs5 to Rs6 with a much diminished size. There is a fear that the supply and prices of wheat, flour and bread will go even higher in Ramazan for the consumers if the government fails to take some corrective measures.

Reading between the lines of the written statement given by Unsar Javed, one concludes that the traders are obliquely blaming the government of allowing traders to make a quick buck by giving an over estimation of the crop sometimes in March and April this year.

The government’s decision for a hasty export of wheat was made despite a firm warning by the State Bank in its annual report for 2005-06 issued in December 2006. In its report the State Bank anticipated a bumper harvest of wheat in spring but advised the government to build up adequate strategic reserves before allowing export so that hoarders, speculators and profiteers did not dominate the market.

“It went exactly the way State Bank predicted and speculators went on a wild wheat purchasing spree from the farmers that impacted government’s official procurement programme,’’ a market analyst remarked.

He recalled that it was sometime in late May that the government got panicky and imposed an abrupt ban on wheat export. By then the exporters had invested enough money in purchase and stocking of wheat and were having in their hands orders for shipment of 0.7 million tons.

These traders and exporters, many of whom are millers from powerful political families of Punjab, the wheat market watchers say, took over the control on supply of wheat in the open market and manipulated to push the prices from Rs12.50 a kg to Rs14.50 kg on Wednesday.

In his press conference on Wednesday, Unsar Javed blamed Punjab for maintaining a supply of wheat and flour to Afghanistan through overland route even after federal government had banned export of flour and maida by sea.

He apprehended that a Punjab government would seek a ban on inter - provincial wheat movement in the coming days to ensure adequate supply within the province. “People of Pakistan have a bigger right on wheat supply than those in Afghanistan,’’ he declared.

Traders and millers are not ready to give their estimates of wheat crop but blame the government of over estimating size of the crop to justify the new peak of prices just before Ramzan.

The government is convinced that about two to three million tons of wheat is being stocked by the hoarders, speculators and profiteers, who are manipulating the supply in the open market.

The federal finance secretary in a press briefing in Karachi about two weeks ago had warned of conducting raids on wheat hoarders as according to him the federal government had a list of all such speculators, hoarders and profiteers obtained from Punjab and Sindh governments.

No such raid was ever carried out and there was no respite for consumers as wheat, flour and bread prices maintained upward trend and touched new peaks. On Wednesday media reported a long list of the names of indicated hoarders in Punjab against whom raids can be conducted.

“We also have a list of about a dozen such hoarders in Karachi and an equal number in the rural areas on whom raids can be carried out in a day or two to recover stocked wheat,’’ an official in Karachi said on Wednesday.

The government has more than five million tons stocks with Punjab and Sindh governments and also with Passco but decided to release wheat from September 7 only after wheat and flour prices started crawling up and touched Rs1,360 for 100 kg last Friday. Since then prices of flour and bread for consumers in Karachi also started crawling up.

Consumers fear that the flour price will touch Rs22 to Rs23 a kg and price of bread Rs10 during month of Ramazan.

Market analysts consider expansion of Utility Stores Corporation’s network, subsidy package for Ramazan and empowering magistrates to fine profiteers as mere cosmetic measures that will have no effect on supply and prices. “Instead of providing subsidy, the government should consider withdrawing sales tax on import and marketing of all edible items.” This is one solution offered by a market analyst.

The back of speculators can be broken by maintaining an uninterrupted supply of all essential food items in the market.

Leaders of consumers network and market analysts do not mince words to point towards “hardly a dozen stock brokers’’ who now control stocks and supply of wheat, sugar, cement, real estate, import and export of essential items and what not in the market.

“They have a free hand to manipulate and rig the market their own way,’’ one of the leaders of a consumer body said.