Public sector's failure to build up strategic reserve to the target of 0.9 million tons wheat and Punjab government's 'desire' forced the federal government to allow duty- and tax-free import of wheat, sources in Finance Ministry told Business Recorder.
The Ministry of Food, Agriculture and Livestock (Minfal) which was previously praised by the Economic Co-ordination Committee (ECC) of the Cabinet for handling the wheat situation excellently, this time admitted that it failed to implement the wheat policy as per expectations.
Sources said that Minfal, in its summary had said that a distinction between the guaranteed price and procurement price-variable and dependent on market conditions was to be used to build up the stocks. The market price was in line with or above the guaranteed minimum price, but the public sector did not offer higher variable price in accordance with the market trend, sources added.
The ministry further said that a clear distinction was to be maintained between operational and strategic reserve. Operational reserve would be released to flour mills on as needed basis, whereas strategic reserve was to be used selectively to intervene in the market by provinces and Passco to stabilise the price.
The government had set total procurement target of 4.73 million tons, of which 3.830 million tons was operation reserve and 0.9 million tons as strategic reserve.
Minfal informed the ECC that procurement target of operational reserve had been exceeded by 0.1 million tons, but strategic reserve could not be procured in desired quantity due to the public sector's failure to offer market based price.
The private sector, sources said, participated aggressively in the market to procure wheat, and borrowed Rs 11 billion from the State Bank of Pakistan (SBP) for two million tons by flour mills and traders as compared to 1.31 million tons purchased last year against the borrowing of Rs 10.26 billion.
They said that the private sector also procured a substantial additional quantity of wheat from own sources.
Keeping in view the situation, Minfal admitted that the public sector had failed to build up strategic reserve of 0.9 million tons. The Punjab government had also desired that the strategic reserve be built up, for which it suggested that import of wheat could be a viable option.
Minfal, sources said, was of the view that it be allowed to arrange local purchase or/and import of 0.8 million tons wheat of the specifications to be prescribed by the ministry at appropriate time through TCP, with the difference between import price and issue price to be picked by the federal government.
They said that Minfal also suggested that private sector be allowed to import wheat, subject to the specifications to be prescribed by the concerned ministry and conditions relating to SPS, quarantine inspection and tests.
Minfal had also proposed that private sector should be exempted from 6 percent withholding tax on import of wheat as was granted to the TCP for this purpose.
The ECC accepted all recommendation of Minfal in this regard.