KARACHI, March 7: The country may suffer a colossal loss of Rs394 million on wheat export sales of 0.3 million tons being carried out by the Pakistan Agriculture Supplies and Storage Corporation (Passco) at officially controlled rates.
The corporation invited bids in the last week of February for export sale of wheat under the government policy for disposing of wheat stocks held by various federal and provincial departments.
Initially, a target of 0.5 million tons was fixed for export with Passco to dispose off 0.3 million tons, the Punjab and Sindh food departments with 0.150 million tons and 50,000 tons, respectively.
Despite the fact that the Punjab and Sindh food departments were unable to dispose of their stocks on getting a poor bid price offer from private exporters with the former only managed to sell a very small quantity. However it seemed now that Passco got nod from Islamabad to go ahead with export sales even on low price incurring huge losses.
The wheat procurement price fixed by the government for all the departments, including Passco had been Rs10,375 per ton. However, the food departments of Sindh and Punjab were unable to dispose off their stocks as bid prices offered by private sector was too low to even cover their basic incidentals cost.
Nevertheless, Passco, which entered the bidding process for export sale of wheat, somehow managed to dispose of large stocks but not without sustaining a huge loss of around Rs1,315 per ton, wheat traders and exporters told Dawn.
Unlike Punjab and Sindh food departments, which depend on provincial governments for bearing their establishment cost, the Passco has to bear its own establishment cost such as salaries, transportation and other perks of officials of the corporation. Consequently, this gives a leap jump to its incidental costs on handling and storage of agriculture produce.
With a variable on incidental cost the Passco tends to lose the most when compared to Sindh and Punjab food departments. On an average these provincial departments incur around Rs1,600 to Rs1,800 towards incidental costs, which may include loading and unloading, transportation, fumigation etc.
However, mark-up on bank loans is the biggest component of the incidentals for all the departments.
Since the wheat procurement price is the same at Rs10,375 per ton for all the players in handling and storage of wheat, therefore, the impact on size of loss fully depends on the amount and cost of incidentals, and for that matter the Passco has the highest as it has also to generate its establishment cost.
On adding incidental cost of Rs2,200 for Passco with the government fixed procurement price of Rs10,375, the total cost incurred by the corporation for handling wheat would come to Rs12,575 per ton. Against this both the provincial food departments’ total handing cost would come at around Rs11,975 to Rs12,175, respectively.
As a result of this the Passco would be suffering a loss of Rs1,315 per ton because it has started disposing of wheat stocks at government controlled price of Rs11,260 per ton. Wheat traders told Dawn that almost all the stocks had been disposed of after the corporation sold the last 50,000 tons balance on Monday, out of the total stocks of 0.3 million tons offered for sale.
The Passco’s heavily subsidised export sales would incur huge loss of Rs394 million to the national exchequer and the benefit would either be taken away by the traders or by foreign buyers depending upon the world wheat prices.
The provincial food departments were reported to have raised objection over the matter as they were disallowed to dispose of their stocks at the subsidised rates.
These panic sales of wheat were being made on the plea that new bumper wheat crop, of which harvesting will begin by the end of this month or early next month, would need storage space. But private sector traders argue that since the rice crop had been short by up to 20 per cent, therefore, there would be a lot of room to store surplus wheat from new crop.
If the government is ready to dispose of wheat stocks at the controlled price under which all flour mills get their supply, then as to why there was a need to incur huge losses on exports. It would have been better if these wheat stocks were used to launch a ‘Sasti Roti’ scheme for the poor masses, who are hard pressed with ever rising cost of essential commodities.