December 30, 2011

Pakistan's Punjab cuts old stock wheat price to US$10.56


The Punjab government of Pakistan has lowered the issue rate of wheat by PKR50 (US$0.56) per 40kg from the earlier rate of PKR1000 (US$11.12) per maund to PKR950 (US$10.56).

However, this is applicable only to the stock of 2008-09 and 2009-10 and the summary in this regard has been approved.

According to industry sources, the government, while taking action on the news published in The Nation, has called a meeting to review the issue price of grains. The meeting decided to cut the rate of wheat for the stock of 2008-09 and 2009-10 so that the old stock could be disposed off and forwarded the summary to Punjab Chief Minister Shahbaz Sharif. The CM on Wednesday (Dec 28) approved the summary, permitting to reduce the wheat's issuing rate by PKR50 (US$0.56), but this would be implemented on the old stock.

It is to be noted here that representative of the flour milling industry opposed the federal government decision of increasing wheat support price, stating that this step will increase inflation in the country. They had urged Punjab CM Shahbaz Sharif to reduce the rate of wheat by PKR50-100 (US$0.56-$1.11) per maund in the province so that the additional stock of the wheat could be disposed off timely to make the way for the upcoming wheat crop in the province.

Flour millers said that this is the partial decision, as it would not affect the rate of flour in the market because the food department was releasing only 20% old stock. This old stock is located in Bahawalnagar, Chishtian and Faisalabad and no flour mill from Lahore will pick this grain stock due to transportation reasons. The provincial food department will now release the old stock of wheat on subsidised rates to flour mills and chakkies. It may be noted here that provincial food department had procured wheat at official support price of PKR950 (US$10.56) per 40 kg from farmers, which increased to over PKR1,000 (US$11.12) after transportation and storage cost.

The country has some seven million tonnes of wheat stocks available against the national requirement of 4.5 million tonnes. Food departments' godowns still hold 2009's wheat crop grains on which the government has paid millions of rupees on account of bank mark-up and incidental charges. Even after fulfilling national requirement, the country will have some 3.5 million tonnes of surplus wheat. The estimated value - at the rate of PKR950 (US$10.56) per maund - of available wheat stock is PKR230 billion (US$2.56 billion), which was borrowed from commercial banks by federal and provincial governments. As per experts, the government has paid around PKR750 million (US$8.34 million) on accounts of incidental charges at the rate of PKR100 (US$1.11) per maund. In addition, government has paid over PKR100 billion (US$1.11 billion) to various banks on account of mark-up against borrowed money.

The federal government said that the latest increase in wheat support price has increased its price even from international markets, which will not only stop wheat products exports but also discourage smuggling. Industry experts indicate that flour consumption has already shrunk by 20% as bakery and confectionary products consumption has dropped remarkably, during recent years.

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