Pakistan. Export of 0.6 million tons of wheat: ECC approves extra rebate of $30 per ton

27.07.2016

The Economic Co-ordination Committee (ECC) of the Cabinet Tuesday approved an additional rebate of $30 per ton for export of 0.6 million tons of wheat and wheat flour with 0.3 million each by Punjab and Sindh government, till November 30, 2016. The meeting presided over by Finance Minister Ishaq Dar considered and approved a proposal of Ministry of National Food, Security and Research on Tuesday.

As per summary submitted to the ECC, copy of which is also available with Business Recorder, it was stated that the ECC meeting on 23-01-2015 decided to allow export of 800,000 tons of wheat by the government of Punjab at the transport rebate of $55 per ton and 400,000 tons wheat by the government of Sindh at a transport rebate of $45 per ton.

Additionally government of Punjab and Sindh also contributed US $35 and US $45 per ton as their share in export rebate respectively, which enhanced the total rebate to $90 per ton, The ECC allowed extension in export of wheat 4 times on same terms and conditions. The ECC in its meeting held on 18-03-2016 allowed the extension in export period of wheat up to June 15, 2016 and the export process continued till July 5, 2016. Due to substantial decrease in wheat prices in the international market, government of Punjab and Sindh through private sector could only export a quantity of 236,000 tons and 164,000 tons, respectively.

This year wheat production targets were fixed at 26 million tons with an area of 923 million hectares and against this target, as per second estimates by the Provincial governments wheat production (2015-16) is estimated at 25.45 million tons with an area of 9.260 million hectares. The ECC of the Cabinet in its meeting held on April 4, 2016 approved public sector wheat procurement target to the tune of 7.05 million tons from 2015-16 wheat Crop. The current year''s procurement of 5.802 million tons, added with the last year''s carry forward stock of around 4.117 million tons, would substantially enhance the wheat stocks in the country far above the country''s requirement. With limited storage space and logistics, the surplus wheat is likely to be damaged and can become unfit for human consumption if immediate steps for its disposal are not taken. This situation calls for extra ordinary steps to release pressure on the public sector stocks by extending additional support to enable private sector to carryout export of wheat in the regional and international markets.

The Agriculture Policy Institute (API) has carried out analysis of wheat export parity analysis. The international wheat export prices as of today is at $200 per ton whereas the average FOB (Gulf) price has been worked out by API is @ $213 per ton for the year 2015-16. Based on the average release price of the provinces @ $325 per ton, by chipping in a rebate of @ $120 per ton in the export of wheat, the Government can stir the export market for Pakistani wheat. The ECC was informed that the Ministry of National Food Security & Research shared the rebate scheme with the Ministry of Finance and governments of the Punjab and Sindh.

The provincial government of Punjab was of the view that they support the proposal of additional export rebate of $30 per ton on the basis of 61:39 ratios as federal and provincial share whereas the government of Sindh mentioned a federal and provincial share of 60:40 respectively. The government of Punjab has also proposed to export a quantity of 2 million tons of wheat/wheat flour (Atta) in four tranches of 500,000 tons each by Trading Corporation of Pakistan (TCP) through open bidding. The issue will be taken up, separately.

Ministry of Finance has examined the Summary and supported the proposal with a view that export rebate as previously approved by the ECC may be maintained and additional rebate may be contributed by the provincial governments themselves as per past practice. The comments of Finance Division regarding off loading excess wheat of PASSCO will be taken up in a separate Summary for the ECC after appropriate analysis. The comments of Ministry of Commerce were supporting the proposal.

Considering the fluctuations in the international wheat market, and comments of the provinces, Ministries of Finance and Commerce, the Ministry of National Food Security & Research recommends to allow additional export rebate of $30 per ton on export of wheat and wheat flour (Atta) to be shared by the Federal and Provincial governments by approving one of the following two options; (i) the additional rebate of $30 per ton to be shared @ 50:50 by the Federal and provincial governments; (ii) the additional rebate of $30 per ton to be shared @ 60:40 by the federal and provincial governments respectively.

This rebate would be over and above the rebate already approved by ECC @ $55 per ton for Punjab and $45 per ton for Sindh respectively. In addition to this rebate, as in past, additional rebate of $35 and $45 per ton would be provided by the government of Punjab and Sindh respectively, this addition will enhance the total rebate to $120 per ton The quantity allowed to be exported is proposed to be 600,000 tons and 300,000 tons for Punjab and Sindh respectively. The export shall be allowed till November 30, 2016 and export process would be completed till January 31, 2017.

The ECC was also informed that in case of option-I, the financial implication for the federal and provincial governments would be $60 and 48 million respectively, whereas for option-ii, it would be $62.70 and 45.30 million, respectively. On a proposal from Finance Division, the ECC approved the remittance of AED 100 million equivalent to $27.2 million on account of planned opening of wholesale Branch of Bank Alfalah Limited in UAE. According to the proposal, this investment will help create employment opportunities for Pakistani nationals in UAE which is also keenly desired by the government of Pakistan. The ECC granted approval to the proposal on the condition that the additional rebate @ $30 shall be shared equally by the federal and provincial governments.


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