A tale of two commodities
THE much-belated decision by the federal government to sell half a million tonnes of carryover stocks of wheat after it failed to ensure timely exports from the surplus shows how gains in crop outputs are lost to bureaucratic delays.[TOP]
The average wheat output has remained above 25.6m tonnes in the last four years compared to generously estimated national average consumption of 24m tonnes, according to the Economic Survey of Pakistan.
However, our annual wheat exports remained below 25,000 tonnes between 2013-14 and 201617 fiscal year, according to the Pakistan Bureau of Statistics. Surprising, isn`t it? The problem lies in decision-making. By the time authorities finally allows the export of surplus wheat, there is not much demand on the global market and prices are low.
Sometimes, they are not even sure whether or not to allow exports at all despite having been informed that the outlook for the next crop is bright and that the country has more than `strategic reserves` of the grain.
Now leave this here and come to sugar.
The annual sugarcane output has averaged around 74m tonnes in the last four years, according to the economic survey. As a result, the average production of sugar between 2013-14 and 2016-17 remained well above 5.7m tonnes, according to official data of the large-scale manufacturing sector.
After meeting domestic requirements of more than 5m tonnes a year, the country exported a total of about 2m tonnes of the sweetener in the last four fiscal years.
Although delays in fixing sugarcane prices and issues in the repayment of dues to cane growers still weigh on sugar economics in Pakistan, export-related issues of the sugar sector getresolved a bit quicker than any other sector simply because this sector is better organised and most sugar mills are owned, directly or indirectly, by top leaders of major political parties.
Just how powerful the sugar sector hasbecome due to the political ownership of sugar mills can be gauged from the fact that the Sindh government has recently announced a subsidy of Rs9.30 per kg on the export of sugar in addition to a Rs10.70 per kg subsidy already promised bythe federal government. This largely explains the faster disposal of sugar stocks than that of wheat.
In addition to greater political ownership, the sugar sector is far more organised than other commodity-based industry.
There are only about 50 sugar mills in the country, and all of them are in the category of large industries. In contrast, most wheat flour mills are in the small and medium enterprise (SME) sector and their number is far higher about 200 of them are in Sindh alone.
Many wheat mills are SMEs and enjoy much less clout in the corridors of power. They keep working on their own and only bother about getting enough subsidised wheat from provincial food departments.
Flour mills raise alarm bells only when the supply of subsidised wheat is threatened or the open market price of wheat shoots up.
Mounting stocks of surplus wheat remain a concern for wheat growers who know that in the presence of these stocks they wouldn`t be able to get a fair price for their produce, even if the official support price is raised.
Landlords cultivating wheat and enjoying monopoly in a particular district have their own ways of selling wheat at lower prices to growers, even below the support price.
Unfortunately, these landlords manage to convince both provincial and federal authorities to purchase their unsold stocks of wheat for storage.
Surplus wheat stocks keep piling up and the bureaucracy keeps delaying a decision on exports until those exports become an unfeasible commercial activity.
Even the local sales option is exercised halfheartedly and belatedly, often at a time when news of the next bumper crop begins taking rounds and when flour millers already sitting on sufficient inventories decline to lift rotten, poor-quality wheat grains from the carryover stocks of the Pakistan Agricultural Storage and Services Corporation (Passco) and provincial governments.
Industry sources say one reason for stockpiling too much wheat and then dumping them at throwaway prices on the local or foreign market could be the presence of a nexus between corrupt elements in our institutions both provincial and federal and buyers of rotten wheat who use the grains in the animal and poultry feed manufacturing.
Such substandard wheat also used to be smuggled to Afghanistan until a few years ago, but stricter checks have now made it difficult, millers say.
By the end of April, Passco had about 2.5m tonnes of wheat, including 1m tonnes national strategic reserves, around 417,000 tonnes of allocated wheat quotas to recipient agencies and areas and 40,000 tonnes of Saarc food bank reserves, according to media reports.
Net disposable stock stood slightly above 1m tonnes, of which half a million tonnes will now be sold on the domestic market. In addition, Sindh and Punjab together hold carryover stocks of another 2m tonnes.
Officials of the Ministry of National Food Security and Research say the entire system of Passco`s wheat storage would be revamped from the next year, keeping in view the economic and financial cost of limitless stockpiling of wheat, only to be disposed of on the local market at throwaway prices.
`We`re moving on in the right direction. I can only say that things would change for the better from the next year,` a senior official of the ministry told this writer by phone. -Mohiuddin Aazim