Surplus wheat stocks likely to hamper wheat procurement

Left with a huge surplus of three million tons of wheat stocks in government godowns from the last year, there is likelihood of financial difficulties in wheat procurement during the current year.

An official source said that 26 million tons of bumper wheat production was estimated during the current year. However, the procurement plans are yet to be finalised as provincial food departments and PASSCO have three millions of surplus wheat stocks. The government usually procures close to five million tons of wheat every year to stabilise domestic prices as well as to build strategic reserves. The supply from government stocks for milling starts from September onwards.

Due to bumper wheat production for the last three successive years, the private flour mills have ample stocks and they don’t procure from government godowns. Pakistan has failed to export it surplus wheat production, ranging between one to three million tons per annum, for the last few years. The high cost of production as compared to international competitors is the main reason for poor exports.

Last year, the government had provided subsidy to enhance exports of the commodity but only 2,30,000 tons of wheat was exported till February 29. Pakistan wheat is expensive by $ 100 per ton from the international market. The government has provided a rebate of equal amount to boost exports but it did not yield desired results as neighbouring Afghanistan preferred to procure wheat and flour from central Asian states.

The wheat procurement requires close to Rs 400 billion financing from the banks. In the presence of huge stocks from last year, the banks would be reluctant to provide financing for this year’s procurement target, the source said. Punjab has fixed 4.5 million tons of wheat procurement target for this year. However, it will have surplus stocks of 1.3 million tons at the start of the wheat harvest in April. Due to similar reasons, last year, Punjab procured 3.2 million tons against a procurement target of 4 million tons of wheat.

The state owned PASSCO had also surplus stocks of 1.3 million tons from its last year’s procurement of 1.8 million tons. PASSCO wants the government to enter into long-term wheat supply deals with the Gulf and Middle East states. However, the proposal is under consideration and no final decision is made yet, the source said.