ISLAMABAD:
After bidders quoted a price 34% lower than the minimum price set for the sale of 500,000 tonnes of old wheat, the government further reduced the price on Tuesday to clear the stocks, costing taxpayers Rs24 billion.
Compared to the price of Rs 6,425 for 40 kg of imported wheat, the Economic Coordination Committee (ECC) of the cabinet has 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 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 dispose of 300,000 metric tonnes of four-year-old imported wheat. However, bidders quoted the maximum price of Rs2,695 per 40 kg for imported wheat, which was 41% lower than the actual price.
Similarly, the ECC also fixed the new selling price of local wheat stock at Rs 4,150 per 40 kg, which is 12.5 per cent lower than its carrying cost.
Earlier, the ECC had fixed the minimum price at Rs4,400 but the 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 shutting down the entity. The ECC considered a proposal from the Ministry of National Food Security and Research for the disposal of 500,000 tonnes of wheat stocks held by PASSCO through a competitive tender, according to the Finance Ministry document.
The committee was informed that an earlier attempt to sell wheat at the previously approved reserve prices could not be finalized due to lower offers received, it added.
“Taking into account the existing stock situation and associated storage costs, the ECC has approved the sale of 500,000 tonnes of wheat through tender 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 Ministry of Food had recommended the ECC to place the losses in a holding company being set up to settle Passco’s outstanding debts.
However, as in the case of Pakistan International Airlines, these losses will be borne by taxpayers. The government was liquidating Passco and the market knew it had 2.1 million tonnes of stocks to dispose of, said Rana Tanveer Hussain, federal minister for national food security and research. He said the prices were lowered to make it attractive to bidders.
The ECC’s decision to sell wheat at a loss highlights the federal government’s poor economic and business planning. Expensive wheat was imported earlier and now it will be sold well below the cost of purchase and storage.
The 294,994 tonnes of imported wheat, brought in 2022.
Earlier, the Finance Division had proposed to fix the reserve price equal to PASSCO 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 for disposal of 500,000 tonnes of wheat is Rs 23.6 billion.
