November 24, 2014

24/11/2014: Punjab's Food Department in a quandary over wheat

With over one million tonnes of wheat imports easing the supply situation in Sindh, the federal government woke up belatedly to slap an import duty, reports Dawn.com.

However, as earlier feared the Punjab Food Department is in a quandary.; it is now planning to deal with a carry-over of 1.5m tonnes to next season. This huge quantity would not only occupy two-thirds of its indoor storage, but also have a huge financial and administrative cost.
 

http://www.dawn.com/news/1146399/crutches-for-inefficient-flour-mills

Apart from the more than expected imports, the department is also making the situation worse for itself through wheat release policy hiccups. It is sticking to a quota system — 30 bags per unit per day — despite having over 3.6m tonnes of stocks, which it, no way, can release before the arrival of fresh crop in May. Around 1.5m tonnes wheat lying with Pakistan Agriculture Services and Storage Corporation (Passco) is over and above Punjab’s stocks. 


The quota system, which Punjab is sticking to, is designed for shortages or precariously balanced stocks; certainly not in case of trade surpluses when it can bring the price down and reduce its strategic stocks as much as it needs.

In the end of October, the department started releasing wheat to the mills at the rate of 25 bags per grinding unit per day. As releases were very slower than expected, it liberalised releases and told millers to purchase as much commodity as they wanted to. However, within days, as pressure from the millers’ association grew, it fell back to quota system — a third policy decision in as many weeks.


Many inefficient flour mills survive on selling their wheat quota to efficient and successful millers. They make huge money out of it!


Another dimension of the wheat quota system is sustaining grossly 300pc over-installed milling industry, including sick and inefficient units. Many inefficient flour mills survive on selling their quotas to efficient and successful millers. They make huge money out of it.

Last year, when, for the first time, the difference between officially released wheat price and market rates swelled to over Rs200 per 40kg, these millers made windfalls out of their allotted quotas. That is why the Pakistan Flour Mills Association (PFMA) always favours quota system .It must here be conceded that millers in Punjab have also a market in wheat deficit wheat provinces.


Read more HERE.
 

The Global Miller
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