KARACHI, Jan 9: The Pakistan People’s Party-led coalition government is set to confront another big challenge of how well it manages, harvests, procures, stocks and ensures round the year supply of a record bumper wheat crop next spring now being expected at 23.5 million tons to 24 million tons.

The challenge before the government is to build a reserve stock of at least six to seven million tons of wheat at more than Rs1,000 per 40kgs that will involve anywhere from Rs90 to Rs100 billion cost with a subsidy component that may touch Rs35 to Rs40 billion.

With landed gentry in rural areas on the driving seat of the government and claiming a big share of cake, the urban-based millers and traders are also demanding an ounce of flesh from this cash-strapped government by way of a reduction in credit margin, generous bank loans at discount rates, subsidy on wheat export in future.

“We are convening a meeting of all stakeholders of wheat trade next Friday (Jan 16) in Islamabad,’’ disclosed a well-placed source in the federal government. This meeting, he said, is a regular annual feature which would be chaired by Federal Food and Agriculture Minister Nazar Mohammad Gondal.

Attending this meeting, would be all provincial food ministers, top bureaucrats of federal and provincial food establishment, representatives of millers and traders.

In the name of food security, the PPP government is set to bring reconciliation between the conflicting interests of the powerful socio-economic and political groups who are well entrenched in the government and opposition parties and in the assemblies. “No wonder, if wheat flour would be sold at Rs45 to Rs50 a kg next year to consumers in Karachi,’’ is a cynical comment from a market analyst who is convinced that big and mighty landlords, millers and traders would share a whooping profit of at least Rs40 billion among themselves next wheat season.

The meeting is being held amid reports of winter rains having done wonders to the crop in Punjab and has more than compensated for shortfall of irrigation waters this rabi.

“A third spell of winter showers can push up crop harvest to 25 million tons,’’ the well-placed source in Islamabad said.

He mentioned three positive features that contributed to improving wheat crop. First, the area under wheat crop has increased by seven to eight per cent mainly because of Rs950 per 40 kg price. Second is the use of graded and quality seeds and third are timely rains during winter.

Shortfall in irrigation water and application of fertiliser are negative factors which have, however, been offset largely by positive factors. Harvesting this season would be a bit delayed because of late sowing which is being considered a blessing in disguise.

Officials say that international wheat prices are now creeping upwards and by early and mid March next “we hope domestic prices of wheat would not be far off from international prices.” “Our problem is to ensure enough liquidity in the market so that farmers are offered at least Rs950 for 40kgs,’’ he said. But this problem is to be addressed by State Bank of Pakistan.

An in-house committee is expected to bring officials of the finance ministry, State Bank of Pakistan and Food and Agricultural Ministry to work out a plan that is within the framework of the agreement signed with the International Monetary Fund.

“We will not allow any ship to unload imported wheat at our ports after Feb 28,’’ disclosed the official who hinted that this would force traders to lodge their letters of credit for wheat import by Feb 1. Private traders were allowed half a million tons import out of which about 120,000 is said to have been shipped or is in the process of shipment.

The government is importing another 0.6 million tons of wheat while the Trading Corporation of Pakistan is opening tenders for import of 275,000 tons of US wheat under GSM.

Private sector has imported wheat at $180 to 190 a ton while the government’s average price on import is said to be somewhere near $220 a ton. No analysis is available for this marked difference in prices and there is no information as to how it relates to quality and to origin of wheat.

The fear is that the private sector would import three to four lakh tons of wheat at much reduced international prices now and stock it for the next few months to bring it in the market when domestic wheat would be at the minimum rate of Rs950 for 40kgs. “Even at 20 per cent interest rate on bank loans, the traders are set to get a big profit on hoarding and marketing of imported wheat,’’ an analyst said.

It is now for the PPP government to set up proper barriers to protect consumers in urban areas and small growers in rural areas.