Wheat procurement: government agencies' dues stand at Rs 189 billion

As the new wheat procurement season is set to kick off, the government owned procurement agencies still have Rs 189 billion outstanding under the head of wheat advances. Sources in banking sector told Business Recorder on Friday that the overall commodity loans fell by Rs 124 billion during July-March of current fiscal year, of which major retirement of advances is for wheat procurement.
It shows that wheat financing is the largest component of the commodity advances. Sources said stocks of wheat, procured in 2009-10, was not timely offloaded in the domestic market due to low price. Theses stocks were lying as strategic reserves in the stores of Pakistan Storage and Supply Corporation (Passco) and provincial food departments for last two years.
In order to offload stored wheat and to procure new stocks from current crop, the Cabinet in January this year had lifted two-and-half-year ban on wheat export and allowed private sector to export the commodity without subsidy. The Cabinet decision to allow wheat exports facilitated this retirement and a contraction in wheat advances can be expected to continue for next few weeks.
"After lifting of ban on wheat export, bulk of the retirement has been made on account of wheat advances by government procurement agencies including provincial departments and Passco, however still the outstanding advances against wheat stood at a higher level of Rs 189 billion as on April 1, 2011," sources said.
They revealed that Punjab food department has the highest outstanding amount of Rs 119.622 billion, Passco Rs 45.554 billion and Sindh food department Rs 11.481 billion at end of March 2011. These advances were obtained from banks during last two years for the procurement of wheat under the government guarantee. Generally, Trading Corporation of Pakistan (TCP) does not procure wheat from local market, however it obtains financing to import wheat for local consumption. Out of total financing, so far, TCP has not retired Rs 12.399 billion. The food departments of Khyber Pakhtunkhwa and Balochistan have zero outstanding on account of wheat advances.
Sources said the federal government's decision to export excess wheat has provided a safe passage to the procurement agencies to offload their wheat stocks at a better price and retire financing obtained from banks. However, the retirement of advances against wheat should be focused to avoid any problem, as these departments will need more financing from last week of April to procure new wheat stocks.
The government has planned to procure 6.5 million tons of wheat in the current wheat season and the delay in the retirement of already obtained loans may create any hurdle. Therefore, the food department of Punjab and Passco need to focus offloading of wheat stocks to ensure timely retirement of wheat financing. Overall, advances of commodity operation stand at Rs 289.76 billion ie wheat advances of Rs 189 billion, sugar Rs 44 .883 billion, urea Rs 37.747 billion, rice Rs 14.832 billion, fertiliser Rs 40.929 and other commodities Rs 64 million as on March 18, 2011.