ISLAMABAD:
After bidders submitted 34% less than the minimum price set to sell 500,000 tonnes of old wheat, the government further reduced the price on Tuesday to clear the stock that will cost taxpayers Rs 24,000 crore.
Compared to the price of Rs 6,425 for 40 kg of imported wheat, the Cabinet’s Economic Coordination Committee (ECC) fixed the new price at just Rs 3,800 to unload the commodity in the market.
The new price of imported wheat is 41% lower than the cost at which the government had imported it. Finance Minister Muhammad Aurangzeb chaired the ECC meeting.
Earlier, the ECC had fixed the price of Rs 4,070 per 40 kg to clear 300,000 metric tonnes of four-year-old imported wheat. However, bidders offered the maximum price of Rs 2,695 per 40 kg for imported wheat, 41% less than the actual price.
Likewise, the ECC also fixed the new selling price for local wheat stocks at Rs 4,150 per 40 kg, 12.5% less than its carrying cost.
Earlier, the ECC had set the minimum price at Rs 4,400, but bidders offered a maximum price of Rs 3,300.
The Pakistan Agricultural Storage and Services Corporation maintains these stocks, but the government is in the process of closing the entity. The ECC considered a proposal from the Ministry of National Food Security and Research on the disposal of 500,000 metric tonnes of wheat stocks held by PASSCO through open bidding, according to the Finance Ministry’s brochure.
The committee was informed that an earlier attempt to sell wheat at previously approved reserve prices could not be realized due to lower offers received, he added.
“In view of the current stock situation and associated carrying costs, the ECC has approved the sale of 500,000 metric tonnes of wheat through competitive bidding on first-in-first-out (FIFO) basis at revised reserve prices of Rs 4,150 per 40 kg for local wheat and Rs 3,800 per 40 kg for imported wheat,” the Finance Ministry said.
The decision would cost taxpayers a staggering sum of Rs 23.6 billion. The Food Ministry had recommended the ECC deposit the losses in a holding company that is being created to settle Passco’s outstanding obligations.
However, as in the case of Pakistan International Airlines, these losses will be borne by taxpayers. The government was in the process of liquidating Passco and the market knew it had 2.1 million metric tonnes of stock to dispose of, said Rana Tanveer Hussain, federal minister for national food security and research. He said prices have been reduced to make it attractive to bidders.
The ECC’s decision to sell wheat at a loss highlights the poor economic and trade planning of the federal government. Expensive wheat was previously imported and now it will be sold well below the cost of purchase and storage.
The 294,994 metric tons of imported wheat, imported in 2022.
Earlier, the Finance Division had proposed to fix the reserve price equal to PASSCO’s cost of Rs 4,742 per 40 kg for local wheat and Rs 6,425 per 40 kg for imported wheat. The ECC was informed that based on these prices, the estimated financial loss on the sale of 500,000 metric tonnes of wheat ranges between Rs 23.6 billion.
