Taking an important initiative, Prime Minister Imran Khan has formed a 4-member committee to probe the root cause of wheat shortage that has gripped the whole country in its claws and clutches in recent days. The notification reads that the committee will comprise of DG FIA (Head), a representative of the Intelligence Bureau (IB), DG Punjab Anti-Corruption Establishment and any other member selected by the Head Mr. Wajid Zia (DG FIA).
The committee has been instructed to submit its findings in the form of a report by February 6, in connection with the causes of the shortage and the circumstances that led to the wheat/ flour related controversy. In addition it will also work on the assessment of the future stock that led to wheat export and subsequent imposition of ban on exports.
The committee will also analyze the coordination and management of wheat stocks within the centre and provinces
Decision to import wheat
In response to a political debate over the current prevailing wheat and flour crises, PTI Government on Monday, had allowed 300,000 tonnes wheat import free of duty for controlling the price hike. The said decision was taken by ECC (Economic Coordination Committee) of the cabinet in a meeting presided by Dr Abdul Hafeez sheikh.
ECC was told by the National food scrutiny & research ministry about availability of 4.2 million tonnes wheat stock. It was briefed that the stock is still sufficient for 2 months domestic consumption i.e. 2.1 tonnes per month. In middle of March fresh crop would also start to come in the market.
The flour price per bag of 20kg ranged from Rs. 800 and Rs. 1,200. The price was increased up to Rs. 20 per kg. The fact that the wheat stock at this stage is 4.2 million tones as compared to 7 million tonnes last year also played a psychological effect on the situation. However, ideal situation for black marketer, hoarder and commodity smuggler was created because of thin difference in demand & supply as well as a big difference in international market and domestic prices.
One of the two other factors contributing towards problem included 35% less procurement by the Sindh Government out of the targeted quantity as decided by the ECC and inter provincial committee on food. Second major problem was caused by the strike by transporters in response to charges increased by the agencies. This caused disruption in movement of wheat. The government has allowed imports for comforting the market. Sources say that the action to import 400,000 tonnes wheat was insisted by the Minister for National Food Security Khusro Bakhtyar. However Dr Hafeez decided 300,000 tones to be sufficient enough to grip market confidence.
The first import shipment is expected to reach Karachi by Feb 15
An official statement says, “Under the decision, the wheat will be imported by the private sector by withdrawing regulatory duty to the extent of the approved quantity. The wheat to be imported under the ECC decision would be allowed in the country until 31st March 2020 to ensure that the local wheat to be available from the start of April is picked up at the right price from the market”. The ECC has also instructed for immediate stock release held by Passco and provincial departments. Before July the government had allowed 693,000 tonnes and in last October the wheat export had been 48,000 tonnes to Afghanistan.
Another proposal for reduction in Gas Infrastructure Development Cess (GIDC) for fertilizer manufacturer was approved by ECC. The cess is expected to be reduced to Rs. 5 from Rs. 405 as a benefit for the farmers.
On request of Energy Ministry, ECC has approved raising Rs. 200 billion from Islamic banks through bonds issued by the Power Holding Limited. The energy Sukuk II bonds will be secured against the assets of Discos/ Gencos. The said loan was already approved by ECC six months ago. The hindrance was IMF restriction on government guarantees. The restriction has been relaxed by about Rs. 250 billion as a result of successful review in December 2019.
The consortium issuing loan is led by Meezan Islamic Bank. Other banks included Habib Bank, Bank Alfalah, Bank Islami, Dubai Islamic Bank, Bank Al-Habib, Bank Albaraka, National Bank of Pakistan, United Bank and Faisal Islamic Bank.
The mechanism for grant of sovereign guarantee has been approved by ECC and proposed by the finance ministry. It suggests that all requests will be accompanied with a request by public sector entity. Relevant administrative ministry will be reviewing every request as a must. All application should be accompanied by previous year audited financial statements. A business plan including business model explanation and the financial projections for at least 5 years accompanied by the notes explaining reason for applying short or long term guarantee will also be added to the application.
The ECC has also approved a report on proposed exemption of 5% sales tax on cotton seed cake. The meeting was briefed that in case the exemption was not implemented during the current fiscal year (2019-20), the same would be considered for implementation in the Finance Bill 2020-21.