ROBUST support prices offered to the wheat farmers that were even higher than the international market have led to successive bumper crops. This has achieved one of the three basic targets of food security — abundance availability.

Two other elements of food security viz affordability and nutritiousness, however still remain aloof. Despite surplus stocks at various stages of storage and supply chain, the domestic price of wheat/flour has remained virtually unchanged for almost three years now.

Domestic consumers did not benefit in terms of prices from surplus stocks, except for a limited section of society. Interestingly, this year again, the government is providing $120/tonne subsidy out of taxpayers’ money to export wheat when international prices are around $156-160/tonne. Simply put, taxpayers would subsidise international consumers at the rate of $120/tonne to earn $36-40/tonne.

A better option for the government could be to divert wheat and ghee supplies to the poorest of the poor under Benazir Income Support Programme through Utility Stores (instead of cash transfers) to enhance affordability along with higher nutrition intake

In the process, we have lost a guaranteed Afghan market of around 0.8-1m tonnes. Ironically, the wheat stocks are now being damaged but consumers have not benefited while substantial liquidity of the central bank is tied up in the stored commodity.

The Ministry of National Food Security and Research (MNFSR) has a different case, however. It reported to the Economic Coordination Committee (ECC) of the Cabinet last week that it had decided in January 2015 to allow the export of 800,000 tonnes of wheat by Punjab at the transport rebate of $55/tonne and 4,00,000 tonnes by Sindh at a transport rebate of $45/tonne.

On top of this federal rebate, Punjab and Sindh also contributed $35-45/tonne as their share in export rebate respectively which enhanced the total rebate to $90/tonne. The ECC allowed extension in export of wheat four times on same terms and conditions.

Again on March 18, 2016, the ECC extended export period of wheat up to June 15 with the condition that the export process should continue till July 15, 2016. Due to sharp fall in wheat prices in the international market, the government of Punjab and Sindh through private sector could only export a quantity of 236,000 tonnes and 164,000 tonnes, respectively.

Wheat production targets were fixed at 26m tonnes with an area of 9.23m hectares for 2015-16. Against this target, as per second estimates by the provincial governments wheat production is estimated at 25.45m tonnes with an area of 9.260m hectares. Based on these estimates, the ECC approved on April 4, 2016 public sector wheat procurement target of 7.05m tonnes.

The MNFSR argued that the current season’s procurement of 5.802m tonnes, added with the last year’s carry forward stock of around 4.117m tonnes, would substantially enhance the wheat stocks in the country far above domestic requirement. With limited storage space and logistics, the surplus wheat is likely to be damaged and can become unfit for human consumption if immediate steps for its disposal are not taken.

Therefore, it proposed that this peculiar situation called for ‘extraordinary steps to release pressure on the public sector stocks’ by extending additional support to enable private sector to export wheat in the regional and international markets.

According to a wheat export parity analysis by the Agriculture Policy Institute (API), the international wheat export prices on July 22 stood at $200/tonne. It worked out the average FOB (Gulf) price at $213/tonne for the year 2015-16. Based on the average release price of the provinces at $325/tonne, the MNFSR believed the government could stir the export market for Pakistani wheat by chipping in a rebate of $120/tonne.

When the provincial governments were approached for rebate sharing, Punjab supported the additional export rebate of $30/tonne (putting the total at $120/tonne) but wanted the centre to bear 61pc cost and offered to finance 39pc share. Sindh also agreed to finance 40pc share if the centre took care of 60pc.

The Punjab government also proposed the export of 2m tonnes of wheat or wheat flour in four equal tranches of 500,000 tonnes each by the Trading Corporation of Pakistan. No decision was made on this proposal. The ministry of finance proposed that existing rebate sharing between the centre and provinces should be maintained and additional rebate of $30/tonne should be contributed by the provinces themselves as was the past practice.

Based on the views of the provinces and his ministry and the fluctuations in the international wheat market, Finance Minister Ishaq Dar as chairman of the ECC allowed an additional export rebate of $30/tonne on the export of wheat and wheat flour to be shared by the federal and provincial governments on 50-50pc basis.

The quantity allowed to be exported was put at 600,000 tonnes for Punjab and and 300,000 tonnes for Sindh. The export has been allowed till November 30 and export process to be completed till January 31, 2017.

The total cost of rebate has been worked out at $108m or about Rs11bn. On top of this, substantial surplus quantities are still lying with the Pakistan Agricultural Services and Storage Corporation (Passco) — a federal entity — that would need separate arrangements for offloading through exports.

The finance ministry has allocated a total of Rs14bn in the current year budget to subsidise overall wheat business against last year’s allocation of Rs10bn.

The current year allocations involved Rs7bn for general wheat operations primarily meant for procurement and another Rs7bn for settling its reserved stocks. The two heads together take care of requirements for exports, central bank’s liquidity needs and support to farmers.

A better option for the government could be to divert wheat and ghee supplies to the poorest of the poor under Benazir Income Support Programme through the Utility Stores — instead of cash transfers — to enhance affordability and higher nutrition intake — the two remaining elements of the food security.

Published in Dawn, Business & Finance weekly, August 1st, 2016