ISLAMABAD: Pakistan is unlikely to strike a Government to Government (G2G) “wheat import deal" with Russia for a longer period, arguing that Moscow’s proposal was not viable option for the country, well-informed sources told Business Recorder.
The decision was taken at a recent meeting of the Economic Coordination Committee (ECC) of the Cabinet, presided over by Finance Advisor Dr Abdul Hafeez Shaikh.
"State owned company of Russia had shown its interest towards supply of wheat to Pakistan on G2G basis with the condition that an agreement would be made in this regard for five years, which was not a viable option," the sources added.
The ECC has also rejected a proposal of Ministry of National Food Security and Research about reduction of Withholding Tax on imported wheat.
Sharing the details, sources said, ECC in its meeting held on July 15, 2020 considered a summary on periodic report on wheat issues and implementation status of the ECC decisions, submitted by the Ministry of National Food Security and Research and decided to allow provincial governments, Passco and Trading Corporation of Pakistan to invite tenders/ bids immediately for import of wheat in the country in addition to the private sector.
In compliance of the ECC's decision, Ministry of National Food Security and Research started consultative meetings from July 24, 2002 with all stakeholders, in order to ensure implementation of the ECC's decisions.
The issues which were resolved amongst the stakeholders are as follows: (i) reaffirmed decision of the ECC regarding unlimited import of wheat circulated amongst the stakeholders;(ii) Punjab government announced the release price of wheat @ Rs 1475 per 40/kg and so far released a quantity of 411,650 tons to the flour mills of the province. The initial price of Atta is fixed @ Rs 860 for 20 kg/ bag;(iii) Government of Khyber Pakhtunkhwa (KP) signed MoU with Passco for provision of 200,000 tons of wheat and so far, lifted a quantity of 81,797 tons;(iv) imported wheat is exempted from the Provincial Anti-Hoarding Act;(v) on the issue of Government to Government (GTG) import of wheat, the Russian Federation has been contacted at the Minister's level for immediate arrangement of 200,000 tons of wheat( minimum) to replenish public sector's strategic reserves;(vi) private sector has also been facilitated to import wheat without any restriction. In this context, all duties and taxes have been waived off by the FBR;(vii) TCP has been allowed to import 1.5 MMT wheat through international bidding process;(viii) endorsement from Punjab for 0.70 MMT, KP for 0.30 MMT and Passco for 0.50 MT has been received and ;(ix) DPP has so far issued import permit to 359 importers for 1,475,296 MT.
Overall availability of wheat is reported to the tune of 26.059 million tons including production of 25.457 million tons and carry forward stock of 0.602 million tons reflecting a shortfall of 1.141 MMT. Public sector wheat stocks are reported at 6.32 MMT as compared to 7.65 MMT during the corresponding period of last year.
On average wheat and wheat flour prices are reported at the level of Rs 1867/ 40 kg and Rs 1067/ 20 kg respectively. Accordingly, Pakistan Bureau of Statistics (PBS) has reported wheat and wheat flour prices at the level of 2026/ 40 kg and Rs 1004/ 20 kg respectively.
Private sector has stated that LCs for quantity of 200,000 tons of wheat have been opened which is expected to arrive during the last week of August 2020. Further booking of 565,000 MT of wheat from Black Sea region has already been made and it is expected that its arrival will start in October, 2002.
The federal cabinet, in its meeting held on August 4, 2020 has allowed TCP to import 1.50 MT by waiving off all duties and taxes on the import specifications of wheat, notified in the Gazette of Pakistan on November 14, 2008. The TCP has estimated the financial cost of the imported wheat @ Rs 2,000/ 40 kg or Rs 75 billion for 1.5 MMT wheat. On the request of TCP, provincial governments were contacted to provide their endowment for the requisite quantity of wheat in their respective provinces. Passco and provincial governments of Punjab and KP have endorsed quantity of wheat to be imported by TCP@ 0.50 MMT, 0.70 MMT and 0.30 MMT respectively. However, Punjab has demanded imported wheat @ Rs 1400/ 40 kg.
In order to facilitate the public as well as private sector and to meet the domestic requirements of wheat and to replenish the strategic reserves, Ministry of National Food Security and Research has recommended following immediate interventions of the federal government to resolve pending matters:(i) fixation of reasonable wheat release price @(i) Rs 1,600/40-kg or (ii) Rs, 1,700/40-kg. This initiative will not only narrow the price differential in the local market, it will discourage hoarding and also make imported wheat compatible during the import period; (a) endorsement of Passco for provision of imported wheat for 0.50 MMT, Punjab for 0.70 MT and KP for 0.30 MMT. Sindh has not responded; (b) imported wheat may be supplied on the basis of the entire cost sharing by the provinces and Finance Division ( in case of Passco) or it may be subsidized by picking the price differential options worked out as follows; (i) Rs 600/40-kg(with financial impact of Rs 22.50 billion), on the basis of Minimum Support Price (MSP); (ii) Rs 400/40-kg (with financial impact of Rs 15.00 billion), in case approval is granted for Rs 1,600/40-kg and; (iii) Rs 300/40-kg (with financial impact of Rs 11.25 billion), impact approval granted for Rs 1,700/40-kg.
The sources said, TCP has worked out estimated cost of imported wheat @ Rs 2,000/40-kg or Rs 50,000 tons.
The Ministry wanted that the government of Sindh may be asked at the highest level to waive off excise and taxation charges @ 1.25 per cent on the import value of wheat. Provinces should notify exemption of Anti-Hoarding Act on imported wheat. Provincial governments should ensure free movement of imported wheat at all costs without let or hindrance otherwise it will be construed as compromising essential food security and all possible measures will be taken by federal government to ensure its safe transport and delivery.
The FBR issued SRO on July 21, 2020 and waived off Withholding Tax(WHT) to the extent of 1.50 MMT. However, Ministry has proposed that FBR may be directed to issue new SRO for reduction in WHT @ 0.25 per cent as full and final settlement on the import value of wheat during the FY21.
Ministry of National Food Security and Research has already approached Ministry of Maritime Affairs for the provision of multiple port facilities, priority berthing and provision of free storage facility during the shortage period of wheat. Ministry of National Food Security and Research has proposed that ECC may intervene and direct the port and shipping authorities to do the needful.
During the ensuing discussion, the meeting was informed that 500,000 MT of wheat was also being imported by the private sector and their first shipment would reach Pakistan in last week of August, 2020. It was observed that imported wheat would be helpful not only in bringing price stability but it would also overcome any possible future shortage of wheat in the country.
It was suggested that 200,000 MT of wheat may be imported in a staggered manner to fetch best possible price of imported wheat. The ECC agreed to the proposal. The ECC also directed Minister for Economic Affairs and Secretary, Ministry of National Food Security & Research to contact provincial governments ascertaining their interest in importing wheat through TCP at the rates offered by the international wheat suppliers to TCP.
After detailed discussion the ECC on a summary submitted by the Ministry of National Food Security and Research regarding report on current issues of wheat pertaining to its availability, price and import directed Trading Corporation of Pakistan (TCP) to import 200,000 MT of wheat, in a staggered manner, for Passco.
The ECC also directed Minister for Economic Affairs and Secretary, Ministry of National Food Security & Research to contact provincial governments for ascertaining their interest in importing wheat through TCP at the rates offered by the international wheat suppliers to TCP.
Reduction in withholding tax @ 0.25 per cent full and final settlement proposed in the summary was not agreed by the ECC.
Copyright Business Recorder, 2020
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