The federal government is to extend $ 77.5 million (Rs 8.572 billion) subsidy to Pakistan Agriculture Storage and Services Corporation (PASSCO) for export of 0.5 million tons of wheat, including 0.2 million tons to Bangladeshi private sector, well-informed sources told Business Recorder. The decision was taken by the Economic Coordination Committee (ECC) of the Cabinet in its recent meeting presided over by Prime Minister Shahid Khaqan Abbasi.
According to sources, on November 28, 2017, the ECC had authorised PASSCO to offload 0.5 million tons of wheat in the local market at subsidized rates. In pursuance of ECC''s decision, PASSCO has since successfully completed offloading the allocated quantity of wheat.
However, despite offloading the allocated quantity of 0.5 million tons of wheat, PASSCO was still carrying a surplus stock of wheat from the preceding procurement seasons. Besides, local sale by PASSCO, the initiative for export of surplus wheat by the provincial governments has received a discernibly positive response from exporters. Therefore, on the lines of the permission granted to the provincial governments of Punjab and Sindh, it was proposed that PASSCO may also be allowed to export 0.5 million tons of wheat through sea route.
The cost analysis based on the price of soft red winter wheat in the international market was $ 223 per ton as on March 8, 2018 at the exchange rate of $ 1= 110.50 (PKR) which was as follows: (i) stock proposed to be disposed off - 0.5 million tons at a cost of Rs 32,500 per ton or $ 294.12; and (ii) incidental charges of Rs 6,748.68 per ton or $ 61.074, amounting to a total of $ 355.192 per ton. The international rate of SRW wheat as on March 8, 2018 was $ 223 per ton, incidental charges $ 23 per ton, difference or subsidy required ($355-223+23($ 155 per ton) and subsidy required for 0.5 million tons $ 77.5 million .
The sources further stated that at the time of processing of the proposals of provincial food departments of Punjab and Sindh for export of surplus, Finance Division through U.O. No 1(10) of April 10, 2017, in principle, had agreed to pick up the carrying cost of PASSCO, in case of inclusion of PASSCO, in the export scheme.
In response to a query received from Pakistan High Commission in Bangladesh for import of 0.2 million tons of wheat from Pakistan by a private sector Bangladeshi firm, PASSCO has shown its willingness to supply wheat and provided the requisite working. It has been estimated that the total financial implication (in terms of export rebate) for export of 0.2 million tons of wheat is projected at $ 41.972 million or Rs 4.642 billion.
Keeping in view the situation, Ministry of National Food Security and Research proposed that PASSCO may be allowed to export 0.5 million tons of wheat at a rebate of $ 155 per ton through sea route. The financial implications for export of 0.5 million tons would be $ 77.50 million or Rs 8.572 billion to be picked up by the federal government on the basis of actually lifted quantity.
The sources said, Ministry of National Food Security and Research proposed that the quantity of 0.2 million tons demanded by Bangladeshi private sector may be considered on priority, subject to the settlement of terms and conditions as per the prevalent international prices/norms.
The Ministry submitted the following proposals to the ECC: (i) export of wheat and wheat products (flour, Maida and Suji) may be completed before June 30, 2018 while the export process may be completed up to July 31, 2018 in order to facilitate the exporters after completing their codal formalities; and (ii) in this context Ministry of Maritime Affairs may advise the concerned authorities to reserve exclusive berthing at all the sea ports especially at Port Qasim for speedy export of the wheat till the export period allowed by the ECC; and (iii) according to the modalities approved by the ECC, PASSCO will export wheat either through direct export on the basis of international tendering or contract with individual private exporters, on the pattern of procedures/modalities being followed by the provincial governments.
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