ISLAMABAD:
After the bidders submitted 34% less than the minimum price set for selling 500,000 tons of old wheat, the government on Tuesday further reduced the price to clear the stocks that will cost the taxpayers Rs24 billion.
Compared to Rs6,425 per 40kg price of the imported wheat, the Economic Coordination Committee (ECC) of the cabinet set the new price at mere Rs3,800 to off load the commodity in the market.
The new price for the imported wheat is 41% less than the cost at which the government had imported it. Finance Minister Muhammad Aurangzeb chaired the ECC meeting.
Earlier, the ECC had set the Rs4,070 per 40kg price to clear four-year old 300,000 metric tons of imported wheat. However, the bidders offered the maximum price of Rs2,695 per 40kg for the imported wheat, which was 41% less than its actual.
Likewise, the ECC also set the new sale price for the local wheat stock at Rs4,150 per 40kg, which is 12.5% less than its carrying cost.
Earlier, the ECC had fixed the minimum price at Rs4,400 but the bidders offered a maximum price of Rs3,300.
The Pakistan Agriculture Storage and Services Corporation is maintaining these stocks but the government is in the process of shutting down the entity. The ECC considered a proposal of the Ministry of National Food Security & Research regarding the disposal of 500,000 metric tons of wheat stock held by PASSCO through competitive bidding, according to the Finance Ministry handout.
The committee was informed that an earlier attempt to sell the wheat at previously approved reserve prices could not be finalized due to lower bids received, it added.
“In view of the existing stock position and associated carrying costs, the ECC approved the sale of 500,000 metric tons of wheat through competitive bidding on a First-In-First-Out (FIFO) basis at revised reserve prices of Rs4,150 per 40kg for local wheat and Rs3,800 per 40kg for imported wheat, said the finance ministry.
The decision would cost the taxpayers a staggering sum of Rs23.6 billion. The food ministry had recommended the ECC to park the losses in a holding company that is being setup to settle the outstanding liabilities of the Passco.
However, like in the case of Pakistan International Airlines, these losses will be borne by the taxpayers. The government was in the process of winding up Passco and the market knew that it had 2.1 million metric tons of stock to offload, said Rana Tanveer Hussain, the federal minister for National Food Security and Research. He said that the prices have been lowered to make it attractive for the bidders.
The ECC’s decision to sell the wheat at a loss highlights the federal government’s poor economic and commercial planning. Expensive wheat was imported earlier, and it will now be sold well below the cost of purchase and storage.
The 294,994 metric tons of imported wheat, brought in 2022.
Earlier, the Finance Division had proposed fixing the reserve price equal to PASSCO cost of Rs4,742 per 40 kg for local wheat and Rs6,425 per 40 kg for imported wheat. The ECC was informed that the based on these prices, the estimated financial loss for the disposal of 500,000 metric tons of wheat ranges from Rs23.6 billion.
