AT a time when the government is in a fix over how to clear the current wheat glut, the Economic Coordination Committee of the Cabinet has allowed import of wheat products by imposing a regulatory duty.

The ECC lifted the complete ban, imposed a couple of months ago, on import of wheat products on March 19, and instead raised the regulatory duty from 20 to 25pc on the import of both wheat and wheat products with immediate effect. The regulatory duty has been enhanced to protect local farmers at the expense of local consumers against falling international prices.

The ECC also extended the period for export of 1.2m tonnes of wheat for Punjab up to May 15 and for Sindh up to April 30. It set a target of 6.6m tonnes of wheat procurement by the provinces and Passco for wheat crop 2014-15 at a cost of Rs222bn.

The WTO’s Agreement on Agriculture says no country can impose a ban on import of wheat or wheat products

The ban was, however, lifted to comply with the WTO rules under which import of food items cannot be denied. The WTO wing of the commerce ministry is meanwhile looking into the status of a regulatory duty on the import of wheat products. The WTO’s Agreement on Agriculture says no country can impose a ban on import of wheat or wheat products whereas the GATT says that ban can be imposed by using exceptions. For instance, Pakistan being an Islamic country has imposed a ban on the import of alcohol and also restricts import of certain products from time to time.

The wheat products which include wheat flour, maida and semolina (suji) are used by the local industry. Only specific items which have a direct bearing on local wheat market need to be regulated. The ban may have created problems for those who import biscuits and other wheat by-products. Similarly, Federal Board of Revenue (FBR) thought that import of biscuits, broken wheat (Dalya), cat food, etc, are also banned. Some companies approached the commerce ministry to seek clarifications and were told that the decision is related to flour (Atta), Maida and Suji and not any other wheat by-products.

The decision to allow import raises concerns that the traders, lured by the falling prices, may import large stocks of wheat products to compete with local produce and thus add to the existing glut. Some imports, contracted on cheaper prices, may turn out to be substandard or contaminated and thus may not be allowed to be marketed. This is what happened last year. And that is why the Sindh government had recommended a 50pc regulatory duty on the import of wheat products to discourage imports and to serve as a deterrent. Pakistan had imported 686,852 tonnes of wheat from Black Sea region costing $185m at the rate of $269 per tonne during July-February 2014-2015 period which was twice of the previous year’s imports.

In November, 2014 about 70 containers of wheat imported from Ukraine which was found to be substandard were confiscated by the authorities concerned to ensure that the commodity, declared unfit for human consumption, does not reach flour mills and was instead used as poultry feed. The Sindh government had held the federal government responsible for the ugly situation because the latter allowed import of wheat without taking it into confidence at a time when the province held a huge stock of local wheat.

Meanwhile, the unsold surplus stock remains at the heart of the unprecedented crisis in the agriculture sector. The provinces have asked the centre to come up with a mechanism, without much delay, to clear the glut and create space for the fresh produce so that farmers’ stakes along with wheat support price of Rs1300 per 40kg do not become a victim of this glut. The glut is preventing the provincial authorities and the Pakistan Agriculture Storage and Services Corporation (Passco) from purchasing the new crop.

Since January hardly 100,000 tonnes of wheat has been exported due to lower international prices. However, there are reports that some shipments from Pakistan in recent months have fetched better prices. In February, average wheat price was $237 per tonne as compared to $269 in December and $248 in January. In contrast, wheat exports from Pakistan in February rose to 3,501 tonnes at the rate of $296 per tonne as compared to $329 in December. However in January, exports stood at 176 tonnes, at the rate of $341 per tonne.

Pakistan Flour Mills Association (PFMA) chairman, in a recent meeting, asked Trade Development Autho­rity of Pakistan chief to engage professionals and experts and use their skills to explore export markets for the surplus wheat. He feared the piled up stocks be damaged for lack of storage facilities. His assessment was that this year the country may have at least 5m tonnes excess production and after adding the existing stocks, the surplus after meeting the domestic demand would be 10m tonnes.

Published in Dawn, Economic & Business, April 6th, 2015

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