Pakistan. Export of 0.9 million tons of wheat: government to extend Rs 11.3 billion rebate

01.08.2016

The government will extend export rebate of Rs 11.3 billion to the private sector on export of 0.9 million tons of wheat in the regional and international markets to be equally shared by the federal and provincial government, well informed sources in Ministry of National Food Security and Research told Business Recorder.

Giving the background of development, the sources said, Economic Co-ordination Committee (ECC) of the Cabinet, in its meeting held on January 23, 2015 decided to allow export of 8,00,000 tons wheat by the Government of Punjab at a transport rebate of $55 per ton and 4,00,000 tons by the Government of Sindh at a rebate of $45 per ton. Additionally, Governments of Punjab and Sindh also contributed $35 and $45 per ton as their share in export which enhanced the total rebate to $90 per ton.

The ECC allowed extension in export of wheat several times on same terms and conditions. The ECC, in its meeting held on March 18, 2015, had allowed the extension in export period of wheat up to June 16, 2016 and the export process continued till July 15, 2016. Due to substantial decrease in wheat prices in the international market, Governments of Punjab and Sindh through the private sector could only export 235,000 tons and 164,000 tons respectively.

The sources said this year wheat production target was fixed at 26 million tons with an area of 9.23 million hectares. Against this target, as per second estimates by the provincial governments, wheat production for (2015-16) is estimated at 25.45 million tons with an area of 9.250 million hectares. The ECC, in its meeting on April 4, 2016 approved public sector wheat procurement target to the tune of 7.05 million tons from 2015-16 wheat crop.

According to the Ministry of National Food Security and Research, the current year''s production of 5.802 million tons added to last year''s carry over stock of around 4.117 million tons, would substantially enhance the wheat stocks in the country far above domestic 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.

The Ministry further argued that this situation calls for extraordinary 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. The international wheat export prices as of July 22, 2016 was at $200 per tons whereas the average FOB (Gulf) price has been worked out by API at $213 per ton for 2015-16. It was suggested that based on the average release price of the provinces at $325 per ton by chipping in a rebate at $120 per ton in the export of wheat, the government can stir the export market for Pakistani wheat.

Ministry of National Food Security and Research shared the rebate schemes with the Ministry of Finance and Governments of Punjab and Sindh. The Government of Punjab argued that they support the proposal of additional export rebate of $30 per ton on the basis of 61:39 ratio as federal and provincial share whereas the Government of Sindh supported the federal and provincial share at the ratio of 60:40 respectively. The Government of Punjab has also proposed to export a quantity of 2 million tons of wheat / wheat flour (Aata) in four tranches of 500,000 tons each by Trading Corporation of Pakistan (TCP) through open bidding which will be taken up separately.

Ministry of Finance 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. Ministry of Commerce also supported 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 and Research recommended to allow additional export rebate of $30 per ton on export of wheat and wheat flour to be shared by the federal and provincial governments by approving one of the following two options: (i) the additional of $30 per ton to be shared at 50:50 by the federal and provincial governments; and (ii) the additional rebate of $30 per ton to be shared at 60:40 ratio by the federal and provincial governments respectively.

The rebate would be over and above the rebate already approved by the ECC at $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 was proposed to be 600,000 tons and 300,000 tons for Punjab and Sindh respectively. The export will be allowed by November 30, 2016 and export process to be completed till January 31, 2017.

The Ministry of National Food Security and Research has recommended two options to the government to continue wheat export. In case of option 1, the financial implication for the federal and provincial governments would be $60 and 48 million respectively whereas in option 2, it would be $62.70 million and $45.30 million respectively.

The ECC, in its meeting on July 26, 2016 approved the option according to which the additional export rebate would be shared @ 50:50 by the federal and provincial governments which implies that the financial impact of this decision will be $108 million or Rs 11.3 billion.



brecorder

Readers choice: TOP-5 articles of the month by UkrAgroConsult