KARACHI, Aug 27: The Sindh government is heading towards a major financial crisis involving Rs10 billion plus and may face acute wheat supply problems during December 2002 to March next year.

Constituting more than 10 per cent of the current fiscal year’s budget, the financial crisis stems from Sindh government’s mishandling of the wheat crops of last three years. After October, the future elected government will have to face this huge financial crisis and a possible wheat supply problem in the winter.

Wheat stocks in provincial government storages are estimated at about 950,000 tons. Bulk of this quantity—675,000 tons—pertain to purchases made by the government in 1999-00 and 00-01 while 257,000 tons of wheat was procured from last spring harvest. Against this wheat purchase, the Sindh government has obtained loans of almost Rs10 billion from the banks.

Officials estimate Rs8 billion plus bank loans are stuck up against purchase of wheat from 1999 to 2000 and 01 crops while about Rs2 billion loan was taken from banks last spring to purchase wheat from recent crop. In 1999-2000 the federal government had imposed one million ton of Punjab wheat deal on Sindh, which had cost Rs8 billion. A small part of this left-over deal is a part of the current stocks.

With abundance of wheat supply in the market from last three consecutive crops, about 100 odd millers in Sindh have preferred to ignore wheat purchase from government stocks and have bought it from the traders. This did not, however, deter the government from stockpiling wheat in badly constructed godowns and storages against bank loans during last three years.

It was only last week that Sindh government woke up from deep slumber and a sub-committee of the cabinet decided to cut down wheat issue price by Rs230 a ton. The millers are being offered wheat from the old crops of 99 and 00 years and hence there is no offtake.

Malik Naeem Khan, the Vice Chairman of the Pakistan Flour Mills Association, said that not a single wheat bag has been lifted from the government stocks. “Wheat from old crop has no food value and is damaged,” he said.

With no lifting from the government wheat stocks, the mark up on the bank loans is adding to the financial cost of the Sindh government. Officials have no idea how much interest charge has been accrued in last three years.

Millers and traders fear that rains that lashed Sindh plains on Monday and Tuesday is bound to cause huge damage to the wheat stocks. The official storages are in bad shape and wheat stocks are exposed to weather vagaries. Officials blame millers of trying to take advantage of the situation and are eying on the wheat of last crop.

Traders have bought about 1.2 million tons wheat from the growers last spring. There is not enough capacity in the flour mills to stock this quantity and according to Malik Naeem a sizeable quantity is stored in the ginneries, which remain close till September.

Now that many ginneries in Sindh have started their operations or are about to start their business with cotton picking beginning late August or September, the wheat has started flowing out in the market.

Traders fear that a part of this wheat may slip out to Balochistan and NWFP on way to Iran and Afghanistan where demand for staple food is mounting with every passing day.

With a stock of five million plus tons in government storages and about six million tons in the market, Punjab remains the main supplier of grains to Sindh even now from where the cost of 100 kg bag comes to Rs850.

With Iran and Afghanistan in the immediate neighbourhood and reports of demand for Pakistan wheat in central Asian countries there is a fear that sharks in grain trade have become active and may create wheat supply problem in Karachi and other parts of Sindh by end-December till March when next crop will be harvested.