KARACHI: The government’s decision of allowing surplus wheat exports with an additional rebate of $30 a tonne is unlikely to boost exports because of subdued global prices, traders and millers say.
“The subsidy is not going to make any fluctuation in the price of flour,” said Anis Majeed, chairman of the Karachi Wholesalers Grocers Association. However, flour prices may go up in case of higher exports, he said.
Mr Majeed recalled that low prices on the world market failed government’s efforts last year to achieve 1.2 million exports target.
The international price of wheat hovers at $160-170 a tonne and the additional rebate may not give a push to country’s ailing wheat exports unless international prices rise, he added.
Even if Pakistan’s imports wheat at $160-170 a tonne coupled with 40 per cent regulatory duty on imports, the landed cost comes to around Rs3,000 per 100-kilogram bag. In contrast, locally produced wheat is available at Rs3,250 per 100 kg in the open market, he said.
Due to depressed wheat flour demand, millers have cut the prices as per their choice. Saman Man, chairman of the Pakistan Flour Mills Association’s (PFMA) Sindh zone, claimed that the landed cost of imported wheat comes to Rs2,400 per 100kg based on lower wheat price in the global market.
The millers on Wednesday reduced the flour No. 2.5 rate to Rs36 per kg from Rs36.50-Rs37 due to reduction in wheat rate to Rs3,250 from Rs3,350 per 100kg bag a week ago.
As the Sindh government has not come out with any issue price of wheat for the current season, it should sell wheat at Rs3,000 per 100kg bag which could reduce prices and benefit consumers, he said. From the last year’s crop, the government issued 100kg bag to millers at Rs3,340 and fixed procurement price at Rs1,350 per 40kg.
“Facilitating exports will not work. The government should give some benefit to consumers instead,” he said, adding that the Sindh government had stocks of 1.6m tonnes — including 1.1m of new wheat crop and 500,000 tonnes of last year’s crop. However, the millers are procuring wheat from the open market.
The PFMA’s provincial chairman said limited exports of wheat looked feasible from up-country to Afghanistan, but from Karachi the additional rebate was unlikely to boost exports.
Another miller said the price of flour No. 2.5 has dropped to Rs1,765 per 50kg from 1,800 due to reduction in wheat prices in the open market and slow demand.
He said the world market rate of wheat was $164 a tonne in December 2015, $156 in June 2016 and $160 at present.
In January last year, the federal government set wheat export target of 1.2m tonnes. Punjab was allowed to export 800,000 tonnes with a transport rebate of $55 a tonne while Sindh was tasked 400,000 tonnes with a rebate of $45.
Besides, the Punjab and Sindh governments also contributed a rebate of $35 and $45 a tonne from their own accounts. However, very low quantity of Pakistani wheat found way into the world market.
On Tuesday, the Economic Coordination Committee (ECC) of the Cabinet allowed wheat exports till Nov 30 with a deadline of Jan 31, 2017 to complete the export process. The ECC granted approval to the proposal on the condition that the additional rebate of $30 per tonne will be shared equally by the federal and provincial governments.
According to the Pakistan Bureau of Statistics, wheat exports fell sharply to 1,145 tonnes in the fiscal year 2015-16 fetching $335,000 as compared to 8,286 tonnes ($2.86m) in the preceding year.
The ECC allowed Punjab and Sindh to export through the private sector only 236,000 tonnes and 164,000 tonnes, respectively.