The commodity (wheat, sugar, rice and urea) debt is expected to swell to Rs 526 billion, which at present stands at Rs 364 billion, officials at Ministry of Food, Agriculture and Livestock (Minfal) told Business Recorder here on Friday. Sources said that the government has set public-sector wheat procurement target for the current year at 6.5 million tons and this would increase the commodity debt by Rs 162.5 billion.
In 2009 total commodity debt was Rs 336.2 billion which in 2010 reached Rs 414.6 billion and in the first quarter of current fiscal year it declined to Rs 387.1 billion. In second quarter commodity debt further declined to Rs 364.3 billion. The current debt stock of Rs 364.3 billion is booked in lieu of commodity operations, largely used to buy wheat and import sugar.
Minfal officials said the Punjab government would require Rs 90 billion to purchase 3.5 million tons of wheat, Pakistan Agriculture Services and Storage Corporation (Passco) and Sindh government would each require Rs 30.8 billion to purchase 1.3 million tons of wheat.
Officials added that the government of Khyber Pakhtunkhwa (KPK) would require nearly Rs 10 billion to procure 0.4 million tons, while Balochistan will procure 70,000 tons of wheat this year and would require Rs 1.66 billion. Much of the debt is borrowed by the government either from the State Bank at high rates or through the National Investment schemes, where depositors are paid interest higher than the usual market instruments for social reasons, which makes it more expensive, sources added.
The public sector organisations including Punjab Food Department, Passco, Sindh Food Department and KPK Food Department last year spent nearly Rs 180 billion on the purchase of 7.5 million tons of wheat, out of which 4 million tons was procured by Punjab, 1.5 million tons by Sindh, 1.5 million tons by Passco, 0.3 million tons by KPK and around 80,000 tons by Balochistan. If 140,000 tons of rice stocks are added, Passco's debt swells by Rs 17 billion with daily interest payment of Rs 7 million (Rs 210 million a month).
Passco took a loan of Rs 6 billion in 2008, which increased to Rs 17 billion by 2010 because of its inability to pay interest. There is no way this debt can be retired without clearing the stocks. "Of the total Rs 364 billion commodity debt, the wheat debt alone stands at around Rs 300 billion and the cost of debt makes it unaffordable for the state to pay back Rs 125 million per day ie Rs 3.75 billion a month and Rs 45 billion a year," sources added.
Sources also revealed that the Punjab Food Department still has over 4 million tons of wheat stock and the loan liability against the stock required to be paid to the banks has risen to about Rs 100 billion of which Rs 50 billion is liable to be paid by the federal government against the cost of strategic wheat reserve, leaving a daily mark-up liability of approximately Rs 52.9 million for the Punjab government.
Talking about the huge commodity stocks and its consequences sources said that the political preferences of the current governments at both federal and provincial level in wheat related decisions had made the situation worse. Passco carried around 812,000 tons into the current year along with Rs 40 billion loans. Passco got Rs 22 billion additional loans for wheat procurement of 1.3 million tons in 2009-10, and has only been able to clear Rs 6 billion so far and is servicing Rs 56 billion debt estimated at Rs 24 million a day or Rs 8.7 billion a year.
Similarly, the Sindh Food Department is holding 1.5 million tons of grain stocks and Rs 31 billion loan, which compels it to make daily interest payment of over Rs 13 million. The food departments of Khyber Pakhtunkhawa and Balochistan also jointly hold around one million tons at a cost of Rs 24 billion per annum. In addition to the domestic factors, international commodity prices shock of 2008 and 2010 also increased the external debt burden.
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