Ghulam Abbas
ISLAMABAD: A brewing crisis in wheat import and supply in order to meet shortfall for the year 2023-2024 has surfaced, attributed to a malafide, corruption and inappropriate policy by the caretaker government. Documents reveal that the decision to allow regulatory duty free imports of wheat by the private sector, coupled with an absence of restrictions on import volume and timelines, has exacerbated the situation, causing significant losses to both farmers, badly affected procurement drive of the province food departments and the national exchequer.
According to documents obtained by this publication, a summary initiated by the Ministry of National Food Security and Research (MoNFS&R), subsequently approved by the Economic Coordination Committee (ECC) and the Federal Government, permitted unlimited import of wheat in the country with waiver of regulatory duty and taxes even after bringing in estimated shortfall quantity of 2.4 million metric tons first time ever in the history of Pakistan under the garb of escalating prices of wheat due to shortfall. This move allowed private entities to flood the market with additional wheat stocks available at much less prices internationally than the reserved domestic wheat stock, comprising of politically motivated support price, marks up of banks, storage cost as incidental charges.
Despite an estimated shortfall of 2.4 million metric tons by Ministry of National Food Security and Research, Pakistan reportedly imported around 3.6 million metric tons of wheat, resulting in import of surplus wheat of 1.2 million metric tons without duty and taxes also. This continuous arrival and surplus stock of wheat after shortfall without RD kept halting release and maintaining the procured strategic reserves of provinces and PASSCO being procured at higher prices than the import. As per past practice, the provinces complete maximum releases by March of each year to procure new crop but this time, due to coincidence of wheat import with the peak domestic wheat season and leftover stock of wheat compelled the provinces to drop their strategic wheat procurement targets that sparked indignation among the farmers country wide and give rise to this wheat crises.
M/o National Food Security and Research in the past has been proposing to the federal government for imposing of regulatory duty on import of agricultural goods particularly wheat, maize, sugar, etc., when they are produced in surplus in the country for bringing price of the imported produce at par with the domestic produce to regulate import and protect domestic industry. It suggests the Federal Government for exemption of RD to allow import of agricultural products which are insufficient and in great demand the country to meet shortfall and ensure food security. As RD is linked with the availability of the agricultural merchandises in the country, so, it necessitates constant and regular review by Ministry of National Food Security and Research ensuing convenience of goods.
According to Import Policy Order (IPO), wheat is not classified under banned items for import in Pakistan. However, it has been classified under restricted commodities for import in Pakistan and can be imported in Pakistan from any country approved by Department of Plant Protection (DPP) and Ministry of National Food Security and Research (MNFSR) with certain sanitary and phytosanitary measures.
DPP prepares and establishes phytosanitary import conditions for import of agricultural commodities in Pakistan. These are issued to the importers in term of import permit. These phytosanitary requirements are needed to have been complied in the country of origin to mitigate pests associated with the import possessions. If on arrival of consignment, if the any condition is not fulfilled in the country of origin or insects are detected in the consignment, DPP issues Emergency Disinfestation Notification to the importers and after disinfestation, it gives biosecurity clearance and plant protection release order. These measures are taken with an objective to prevent entry of invasive biosecurity risks i.e., insects, plant pathogens, weeds, contaminants in the country and safeguard domestic agriculture, natural resources and public health like other countries under guidelines of International Plant Protection.
Currently, neither Pakistan Plant Quarantine Rules, 2019 (PPQR, 2019) nor IPO nor any other SRO or law nor the Federal Government has stipulated any quota or caping on import of wheat in Pakistan. It is MNFS&R that decides quantity and timeline for import of wheat including other agricultural goods after estimating availability and shortfall of wheat and other goods in Pakistan. It also decides when and to what extent RD will be levied on importable wheat in order to regulate its import in view of Pakistan’s own wheat harvesting season.
Notably, the summary initiated by the former M/o NFS&R Secretary and current Ministry of Information Technology Secretary, Capt. (Retd.) Muhammad Mahmood and endorsed by former Minister, Dr. Kausar Abdullah Malik includes unprecedented proposal for permitting unlimited import of wheat without regulatory duty even beyond arrival of shortfall wheat of 2.4 million metric tons and without fixing and limiting timeline somewhat by February for import of wheat that led to the unprecedent loss to foreign reserves of more than one billion US dollar and inflicted similar loss to farmers abandoning procurement of their produce by the government.
Capt. Retd. Muhammad Mehmood has not earned good repute during his whole civil service career. His career is covered with mega corruption scandals, scores of controversies, and abuse of authorities. He was central character in Rawalpindi Ring Road Corruption Scandal as Commissioner Rawalpindi, in Nandi Pur Power Plant Corruption Scandal as Project Director and now are in headline as principal man to create latest Mega Wheat Corruption Scandal. He has been terminated from his service but being blue eyed of present rulers, he was exonerated in all corruption cases and reinstated against his service.
Furthermore, the absence of caps on import quantities and timelines incentivized importers to continue their operations unabated, even after the arrival of domestic wheat in the market because there was continuous profit for wheat in market till end February.
Crisis:
The crisis has prompted widespread protests from farmers, particularly in Punjab, demanding government procurement of their wheat stocks at approved rates. The government, however, citing the surplus created by imports, has scaled back its procurement targets, exacerbating tensions.
Addressing the Punjab Assembly, Food Minister Bilal Yasin acknowledged the wheat crisis, attributing it to the influx of imported wheat, particularly near the harvesting season. He pledged government support for small farmers but provided no specifics on the nature or timeline of this assistance. A fact-finding probe into the import process has been promised, with the findings to be presented to the assembly.
In its justification for the wheat imports, the Ministry highlighted an estimated shortfall of 2.4 million metric tons against the national requirement for the year 2023-24 and initially recommended importing 1.00 million metric tons of wheat through the Trading Corporation of Pakistan (TCP), aiming to balance strategic reserves with PASSCO while maximizing private sector involvement in wheat imports. However, the ECC deferred this decision in August 2023. Subsequent consultations with both public and private sectors resulted in a revised strategy.
As per the revised summary, Capt. Retd. Muhammad Mehmood, former Secretary, M/o NFS&R recommended the ECC to approve import of 1.00 MMT of wheat through TCP in two phases. Immediate import of 0.50 MMT under G2G arrangements by adopting options like: deferred payments, multi-currency option and arrival on need basis. Revision of import requirement in January 2024.
a) PASSCO will be the recipient agency for TCP to maintain strategic reserves of the country.
b) Private sector will be encouraged to import specified milling wheat to cater the shortfall in the present customs and duties exemption structure., in order to stabilize wheat/Atta prices.
c) Import of specified milling wheat shall be allowed in the country subject to import conditions regarding “Commodity and Specification” as provided under Notification of MinFA dated 14th November 2008 and import requirements under Import Policy Order 2022 (Annex-J (i) & J (ii), for both public and private sector.
d) Monitoring mechanism of private sector will be supervised by the Department of Plant Protection through Import permit and Biosecurity clearance and release order issuance and opening of LC’s in commercial banks.
e) Ministry of Maritime Affairs may be directed to provide priority berthing to imported wheat on arrival at the Sea-Ports.
Mr. Mehmood however, either deliberately or failure to properly understanding and analysis of situation or in overconfidence or malafidely did not cape the import of shortfall quantity without RD and subsequent surplus import quantity with certain RD to bring prices of importable wheat at par with the domestic reserve close to harvesting season to enable releases from the reserves and emptying the granary.
Food Ministry’s summary and justification of imports:
For justifying the import of wheat, the ministry had made following justifications and recommendations:
As per details wheat availability for 2023-24 is estimated at 29.81 MMT, comprising production of 28.18 MMT and public carry-forward stock of 1.63 MMT. Despite a historic bumper wheat crop, still there be net shortfall of 2.40 MMT, against the national requirement of 32.21 MMT for the year 2023-24.
Food Year 2023 starts with the public wheat stock at the level of 7.886 MMT, including strategic stock of 2.85 MMT with PASSCO. Pursuant to the Federal Cabinet decision dated 26-07-2023, 2.73 MMT of wheat was allocated to strategic recipients of PASSCO as per their requirements. Therefore, on 01-04-2024 at culmination of season, PASSCO is expected to have carry-forward stock of 0.11 MT.
Local wheat prices for the week ended on 07-09-2023 are reported at Rs. 4,895/40 Kg, whereas wheat flour prices are at Rs. 2,827/20 Kg. Price of wheat is 20% higher than the support price of wheat fixed at Rs. 3,900/40 Kg. Price escalation factors are hoarding, smuggling, low public procurement and speculation of a shortfall at the national level. Due to these factors, public sector (PASSCO and Provincial Food Departments) could only achieve 75 % assigned target of wheat procurement i.e., 5.87 MMT against 7.80 MMT assigned target.
International Grains Council on 07-09-2023 has reported price of Black Sea Wheat at US$ 246/MT (FOB). With addition of freight charges of US$ 40/MT @ USD and 6% Withholding tax @ US$ 14.76/MT and exchange rate of Rs. 308/USD, the CFR price of wheat is estimated to be Rs. 93,236/MT or Rs. 3,729/40 Kg or Rs. 93.22/Kg at Karachi as compared to the local wheat price of Rs. 122/Kg.
Summary for import of wheat was submitted by MNFS&R to the ECC of the Cabinet on 27-07-2023 with the recommendation of import of 1.00 MMT of wheat through Trading Corporation of Pakistan (TCP). However, the Summary was “Deferred” by the ECC of the Cabinet in its meeting held on 08-08-2023.
MNFS&R conducted consultative meetings with the public as well as private sectors on 06-09-2023 to review wheat availability and shortfall in the country and make arrangements for import of wheat deficient in the country to meet net shortfall through integrated plans of both sectors. MD, PASSCO opined that as minimum as quantity of wheat instead of 1.00 MMT may be imported through TCP to build up strategic reserves with PASSCO and maximum wheat should be imported through private sector by encouraging them to save the public forex.
Private sector reported that 0.66 MMT wheat has so far been booked for import in the country with the prevailing tax structure of FBR due to arrive from September to November, 2023. Additional import of 1.34 MMT was also assured till 15th March, 2024. However, certain observations were shown by the private sector like: availability of forex/retiring of LC’s in time, priority berthing to private sector wheat by the Ministry of Maritime Affairs and non-involvement of TCP in the private business.
In the wake of smaller quantity of carry-forward stock with PASSCO, drought weather forecast and additional demand of provinces, it is imperative to import at least 1.00 MMT of wheat through TCP, instead of 0.50 MMT as mentioned in the earlier summary to the PMO
