Confusion in wheat market

A peculiar proclivity of the present dispensation in the country is the midstream attempts, often aimed at bringing about changes or adaptations, almost as an afterthought, in policies that have been finalised and approved at the highest level. This type of indecision often spawns confusion about what the correct procedure should be.
The officials concerned often being themselves in the dark as to which policy direction to pursue. According to a Recorder Report, wheat exporters are currently in a quandary as their domestic wheat transactions of over one billion rupees are in jeopardy because customs authorities have not yet received an official intimation about government decision allowing export of an additional 500,000 tonnes of wheat from the open market.
Even one week after Prime minister Shaukat Aziz's formal approval to 500,000 tonnes of wheat to neighbouring countries, including India and Afghanistan, the government has yet to clarify its wheat export policy. Many wheat exporters are of the view that once the government has decided to allow export shipments, it should issue a notification, and in the event of any change or changes in its decision these too should be announced immediately, so that there is no confusion.
Wheat traders have purchased one million tonnes of wheat worth about Rs 1 billion from the open market for export, but due to delay in the issuance of official notification they are facing the prospect of a huge financial loss. Private sector traders are reported to have already booked wheat export orders of for 200,000 to 300,000 tonnes from different countries, including India, while an official notification in this regard is yet to be issued by the federal government.
Exporters allege that Minfal and Commerce Ministry officials are not properly providing information to them. In a related development, the Trading Corporation of Pakistan (TCP) has been disallowed to export wheat as the government has to provide subsidy to TCP, while it does not have to provide any subsidy to private sector exporters.
The Economic Co-ordination Committee of the Cabinet had in December last year allowed private sector traders to export 500,000 tonnes of wheat in anticipation of a bumper crop this season. Later the quantity of the commodity meant for export was enhanced to 800,000 tonnes.
For more than three months the exporters have managed to procure orders for over 125,000 tonnes of wheat, mainly from the African and Gulf region. Meanwhile, a wheat production shortfall in India -- the world's second largest producer of wheat -- has opened a new market for Pakistani wheat.
(Several confidence-building measures that the two governments have taken over the past two years contributed to an increase in Pakistan-India trade.) Pakistan had banned wheat exports in May 2003 on higher domestic demand. Last year, the Indian authorities had suggested that their sugar could be bartered for Pakistani wheat. But the proposal was not pursued.
In 2006, India had imported over 5.5 million tonnes of wheat from various countries because its local procurement had fallen short of its requirements. Many analysts believe that such trends are likely to continue, as India's consumption would grow with each passing year, which offers higher scope for Pakistani wheat exports.
Pakistan has already allowed export of 800,000 tonnes of wheat by private sector traders and has also removed 15 percent duty on exports. So far deals of up to 400,000 tonnes have been finalised while a large quantity has been sold to local flourmills.
An expected bumper crop harvest of 23 million tonnes this crop year (2006-07) allowed Pakistan in January to lift export ban to protect domestic suppliers. Meanwhile, the government is moving carefully with export projections so that domestic wheat and flour prices are not increased artificially by black marketers.
The country's total wheat production is expected to exceed 23 million tonnes, surpassing the current target of 22.5 million tonnes. Pakistan produced 21.7 million tonnes of wheat last year. Our domestic wheat consumption stands at a little over 22 million tonnes, and we have carry-over stocks of about 1.5-2 million tonnes since last year. Hence, increases in wheat and flour prices in the local market are quite a puzzling phenomenon.
That Pakistan has now entered an era of free market economy in which profitability is held supreme, the government is required to ensure that the local consumers' interests too are adequately protected. Viewed in hindsight, the government's decision to allow duty-free import of wheat in the harvesting season of 2005-06 was an ill-conceived move that unfairly deprived the growers of a reasonable price.
Now the delay in issuing notification about export of 500,000 tonnes of wheat, authorised by the Prime Minister in reversal of the earlier ban, has needlessly created uncertainty in the wheat market. The real problem lies with the government's propensity to make midstream changes in policies, and this applies to all sectors of the economy.
Secondly, the government should ensure that once a policy decision has been taken, it should stick to it. There should be no midway changes. We urge the government to come out with firm policy guidelines on wheat export to end this confused situation currently prevailing in the market.