KARACHI, Jan 17: For the first time, Balochistan and NWFP, along with Sindh, Punjab and Pakistan Agriculture Storage and Services Corporation, are being asked to participate in government’s ambitious 6.5 million tons wheat procurement and stock-building programme next spring and summer.

Total procurement is expected to involve almost Rs200 billion outlay for which banks would provide credit.

In a meeting on Friday, chaired by the federal food and agricultural minister, and attended by ministers and food bureaucracy from all the four provinces, with officials of State Bank of Pakistan, the government has decided to ask the NWFP to procure and build up 0.3 million tons reserves because as an official explained “excellent crop prospects in Dera Ismail Khan.’’

Balochistan too is being asked to procure 0.2 million tons of wheat as crop in Naseerabad is said to be exceptionally good. Punjab will procure 3.5 million tons, Passco 1.5 million tons and Sindh one million tons.

The overall wheat procurement programme by the government agencies next spring would involve a financing of about Rs200 billion for which State Bank has been asked to take up the matter with banks for disbursement of credits.

The federal and provincial governments are said to have expressed their strong reservations on 19 per cent mark-up on loans.

Provincial governments and Passco get credits from banks on sovereign guarantee and hence demand substantial discount on interest rate.

Officials say that banks are now demanding 400 basic point over and above kibor which is not at all justified.

State Bank is expected to finalise credit disbursement arrangement with banks in the coming weeks.

Punjab is said to be asking Rs90 billion, Passco Rs40 billion, Sindh Rs25 billion and about Rs15 billion by NWFP and Balochistan for wheat procurement financing.

“Wheat procurement in Sindh is expected to commence in March, and in Punjab from April,’’ an official in Islamabad said who pointed out that provincial governments in Peshawar and Quetta would decide their dates and modalities to go ahead with the procurement.

Wheat procurement and stocking is said to be a key component of government’s food security programme. Official now believe that disparity between government’s fixed price of Rs950 for 40kgs and that of international wheat price is being shrunk rapidly.

“During last week or 10 days, international wheat prices have gone up by $20 a ton,’’ disclosed a food ministry official.

He revealed that the government had already given a subsidy of Rs20 billion in the first half of current fiscal year and is set to give another Rs10 billion in the remaining period of 2008-09.

No firm figures for subsidy next season have been determined but officials are prepared to give even Rs40 billion because “food security is a top priority.’’

The Friday’s meeting also decided to reduce cash margin on wheat procurement credit from 25 to 10 per cent only. Maturity period for loans will be extended to Jan 31 instead of December 31.

All these measures are being taken to ensure quick and swift purchase of wheat so that farmers get an early return on their produce.

Officials, traders and millers expect a bumper harvest this spring as second winter showers this month is said to have added to the crop output.

“We are looking for a harvest of 24 million tons,’’ said an official. He said if there would be a third shower in February, the harvest can go up to 25 million tons.

Optimists estimate a harvest of 20 million tons in Punjab, three million tons plus in Sindh and more than half a million tons in Balochistan and NWFP.