KARACHI, March 19: The State Bank of Pakistan has sought opinion of the Punjab and Sindh government on the possibility of restoring bank loan facility for the wheat traders and flour millers. All wheat traders and millers were asked to pay back their bank loans late in the year 2004 after it was found that this facility was abused in speculative buying and hoarding of the commodity. Earlier, the State Bank had imposed a 50 per cent margin in August 2004 to discourage wheat traders and millers from approaching the banks. But with the reports of an expected harvest of 22 million tons and according to some optimistic assessment 23 million tons, as against official target of 20.8 million tons, the food bureaucracy fears a wheat glut in the open market in May and June. Therefore, the government raised the official procurement price from Rs350 to Rs400 for 40 kg quite early in the wheat year. The Punjab, Sindh and the Passco are expected to purchase a total of five million tons of wheat from the farmers at the rate of Rs1,050 for a ton. There will still be 17 to 18 million tons of wheat with the farmers. The strategy is to provide trader and miller with bank loans, which are now not as cheap as they were last season when traders and millers were reported to have borrowed at 4 and 5 per cent. For private traders and millers, the rate of bank loan may be 8 to 9 per cent. The increase in financial cost plus storage charges and the creeping inflation now touching almost a double digit figure may discourage traders and borrowers to hoard the commodity for a longer period.

“The old crop wheat is being sold at Rs1,160 for a 100 kg bag and that of new crop at Rs 1,115 for bag,” Akhtar Sheikh, a miller and exporter of bakery products, told Dawn on Saturday. He said the price of new crop wheat is higher because it carries moisture whereas the old crop wheat is dry.

But even without bank loans, the traders from Punjab, NWFP and Balochistan are reported to have reached Sindh. Reports suggest that wheat harvested in Johi and Mirpurkhas has reached the farthest corner of the NWFP where the demand is mounting. The Sindh government has started procurement from Tuesday and has managed to procure a meagre quantity.

“We are not employing any coercive methods to purchase wheat from the farmers,”claimed Tanvir Qureshi, director food department. There were allegations of coercion on farmers and a ban was imposed on inter district wheat movement last season. “No such restrictions this time,” the Director made it clear.

Akhtar Sheikh said that the millers has recently raised the issue of getting bank loans for wheat trade with the federal food and agriculture minister who according to him was “sympathetic”.

The governments of the two wheat growing provinces —Punjab and Sindh — have not yet replied to the proposal of granting bank loan facilities to the traders. The Sindh food bureaucracy is however taking pre-emptive measures to check malpractices and abuse of about Rs4 billion annual subsidy on wheat trade.

The department is closely scrutinising the electric consumption bills of last 14 months (from January 2004 to February 2005) of all the 148 flour mills in the province.

The flour mills get wheat at subsidised price from the government stocks. The entire quantity or a big part of this wheat is sold in the open market. The Food department is now checking the electric bills to ascertain the electric consumption and plans to hold meeting with the KESC engineers to double-check and find out if meter tampering has been done.

In fact, the food department in Sindh plans to coordinate with the KESC and the Income tax department to obtain information about tax returns of the millers and the traders. The idea of all this exercise is to ensure that the benefits of subsidy reach the consumers, the genuine functional flour mills get the wheat in right quantity at right time and there is a steady supply of wheat to the millers and uninterrupted flour supply to the retail outlets.