ISLAMABAD:
After bidders submitted 34% less than the stipulated minimum price to sell 500,000 tonnes of old wheat, the government on Tuesday cut the price further to clear the stocks that will cost taxpayers Rs24 billion.
Compared to Rs 6,425 per 40 kg price of the imported wheat, the Economic Coordination Committee (ECC) of the Cabinet set the new price at just Rs 3,800 to relieve the commodity in the market.
The new price of the imported wheat is 41% less than the price at which the government had imported it. Finance Minister Muhammad Aurangzeb presided over the ECC meeting.
Earlier, ECC had set Rs4,070 per 40 kg price to clear four-year-old 300,000 tons of imported wheat. However, the bidders offered the maximum price of Rs 2,695 per 40 kg for the imported wheat, which was 41% less than the actual.
Likewise, the ECC also set the new selling price for the local wheat stock at Rs 4,150. per 40 kg, which is 12.5% less than its cost.
Earlier, the ECC had fixed the minimum price at Rs 4,400, but the bidders offered a maximum price of Rs 3,300.
The Pakistan Agriculture Storage and Services Corporation maintains these warehouses, but the government is in the process of closing down the unit. The ECC considered a proposal from the Ministry of National Food Security and Research to dispose of 500,000 tons of wheat stock held by PASSCO through competitive bidding, according to the Treasury handout.
The committee was informed that an earlier attempt to sell the wheat at previously approved reserve prices could not be completed due to lower bids received, it added.
“In view of the existing stock position and associated costs, the ECC approved the sale of 500,000 metric tonnes of wheat through competitive bidding on First-In-First-Out (FIFO) basis at revised reserve prices of Rs4,150 per 40 kg for local wheat and Rs3,800 for imported 40 kg finance.
The decision would cost taxpayers a staggering Rs 23.6 billion. The Ministry of Food had recommended ECC to park the losses in a holding company that is being set up to settle the outstanding liabilities of Passco.
However, as in the case of Pakistan International Airlines, these losses will be borne by the taxpayers. The government was winding down Passco and the market knew it had 2.1 million tonnes of stock to unload, said Rana Tanveer Hussain, the federal minister for national food security and research. He said the prices have been reduced to make it attractive to the bidders.
ECC’s decision to sell the wheat at a loss highlights the federal government’s poor economic and commercial planning. Expensive wheat was imported in the past and will now be sold well below the cost of procurement and storage.
The 294,994 tons of imported wheat, brought in 2022.
Earlier, the finance division had proposed to fix a reserve price equal to the PASSCO cost of Rs 4,742. 40 kg for local wheat and Rs.6,425. The ECC was informed that the estimated economic loss for disposal of 500,000 tonnes of wheat, based on these prices, ranges from Rs 23.6 billion.
