PESHAWAR: The Pakistan Agriculture Storage and Services Corporation (Passco) has asked Khyber Pakhtunkhwa’s food department to pay arrears with markup amounting to Rs649.685 million on account of sale of wheat.

“Passco would like to draw your kind attention towards its receivables amounting to Rs64 crore 97 lacs (principal amount Rs142.831 million and markup Rs506.854 million) on account of wheat sale to the KP Food Department,” said a letter written by the general manager of the corporation, Islamabad to the provincial food secretary.

The letter said the corporation didn’t receive any budget from the government and its entire business was based on funds borrowed from different commercial banks, which was causing accumulation of the heavy markup particularly when loans were not returned in time.

It said the delay in payment of outstanding dues had put the corporation in hot water and the dispute over payment had been lingering on since 2002.

“Situation is increasingly becoming unsustainable for the corporation,” said the letter of the Passco, which has the mandate to ensure provision of food security at national level by maintaining strategic reserves of wheat and other specified commodities.The sources said the issue over clearance of dues between the Passco and provincial food department dated back to 2002. The Passco procures food items for Khyber Pakhtunkhwa, which is severely deficient in wheat production.

The province’s own wheat production is approximately one million metric tons while its total annual requirement is about four million metric tons annually.

Over two million registered and unregistered Afghan nationals in the province have also been depending on the local market for purchasing wheat flour.

The officials said the food department had to store about half million metric tons strategic stock of wheat for emergency situation in the province and the Passco procured wheat for the government.

Millers and wholesale dealers obtain wheat flour from the open market.

A senior official in the food department told Dawn that payment to the corporation had been kept pending in the light of recommendations of the provincial assembly Public Accounts Committee (PAC).

He said the principal amount, which was Rs132.831 million, had been mentioned as Rs142.831 million in the letter erroneously.

The official said on the basis of the audit observations over procurement of wheat in 2009 and 2010, the previous PAC had observed that the Passco had charged Rs28,000 per metric ton wheat though the price was Rs18,000 for it.

“The committee had directed food department to recover principal amount (Rs132.831 million) from the corporation before settling accounts with the Passco,” he said.

The official said the food department had sought the opinion of the law department on the matter and got the opinion that the government was bound to act upon the PAC recommendations.

Another official of the department said the department and the Passco had a dispute over payment of markup.

He said the corporation claimed Rs506.854 million markup besides payment of the principal amount but the provincial government didn’t accept it.

The official claimed under the memorandum of understanding for wheat supply/procurement, the food department was not bound to pay markup to the Passco.

Published in Dawn, September 18th, 2014