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Sugar price goes up after flour

Top Story

January 21, 2020

ISLAMABAD: A serious case of sugar shortage has emerged in Pakistan as the country already stumbles amid a wheat crisis that has jacked up the prices of bread to more than Rs12-15 apiece.

During the incumbent government’s 15 months, sugar prices have shot up to as high as Rs64 a kilo. However, over the past week, the wholesale rate rose from Rs64 to Rs74 per kg and an acute shortage surfaced in the country. Last year, Pakistan produced 600,000 tonnes of sugar. Now, however, the wholesale rate of sugar is expected to reach Rs80 a kilo next week.

Further, if the government does with sugar what it did with wheat-flour and does not halt exporting it, prices could reach up to Rs100 per kg in Pakistan.

During former president Pervez Musharraf’s tenure, sugar prices had skyrocketed to Rs105 per kilo during the month of Ramazan.

It is noteworthy that Pakistan’s flour crisis has become acute, affecting major cities such as Karachi, Hyderabad, and Lahore with prices shooting up to Rs70 a kilo in some areas.

Earlier, Prime Minister Imran Khan took notice of the wheat price hike, ordering a grand operation against hoarders to overcome the crisis.

Meanwhile, the Petroleum Division in its summary for Economic Coordination Committee (ECC) has worked out the increase in gas price for domestic consumers by 5 percent and suggested the hike in meter rent by 300 percent to Rs80 per month from Rs20 per month. The Petroleum Division has argued that meter rent was last established in 1997 at Rs20 per month.

However, the ECC that was held here on Monday twice could not take up the summary of Petroleum Division seeking gas price increase, as the final decision will be made after prime minister has come back from Davos (Switzerland) after attending World Economic Forum. It will now be taken up in ECC meeting after 10 days, a senior official at the Petroleum Division told The News.

The PTI government is bound to increase the gas tariff from January 1, 2020 under the IMF loan programme by meeting the target of the revenue requirement of both gas utilities for financial year 2019-2020 at Rs557.1 billion.

The copy of summary prepared by Petroleum Division for ECC also mentioned the increase in gas tariff by 15 percent for CNG sector and captive power plants (CPPs). However, it has recommended the gas tariff raise by 12 percent for power sector.

The general industry and captive power plants will now pay Rs1,000 per MMBTU for gas which is equal to the tariff of export industry. Petroleum Division has recommended the gas tariff for fertilizer industry at Rs1672 per MMBTU, which is equal to the cost of imported RLNG per MMBTU.

The summary also disclosed that minimum billing volume of domestic and special commercial consumers (Roti Tandoors) is recommended to be revised from 40 cubic meter per month to 50 cubic meter per month for which the bill against gas charges will be Rs220 per month.

However, minimum monthly charges will be determined by Ogra considering consumption of 140 cubic meter per month for bulk domestic, commercial sector, Ice factories and 1000 cubic meters per month for other sectors using average GCV (Gross Calorific Value) of system gas in the country.

The prices approved for consumers of SNGPL and SSGCL will also be made applicable for fertilizer and power sector consumers to whom gas is supplied directly from fields by Mari Petroleum Company Limited (MPCL) and Pakistan Petroleum Limited (PPL). The sale price of gas for Liberty Power Supply by SNGPL and for Uch Power supplied by OGDCL will be determined in accordance with already approved pricing mechanism.

The Ogra in its latest decisions dated December 11, 2019 determined the revised estimated revenue requirement (ERR) for Financial Year 20109-2020 in respect of SNGPL and SSGCL as Rs274.2 billion and Rs282.9 billion respectively, whereas the present sectoral gas sale price could generate total revenue if Rs227.9 and Rs272.4 billion for SNGPL and SSGCL resulting in projected revenue shortfall of Rs30.8 billion and Rs2.9 billion respectively. And to meet the revenue shortfall, the Ogra has recommended increase in gas prices for various categories of consumers in its determination on December 11, 2019.

Ogra also in it’s the December 11, 2019 made determination the cost of gas at Rs706.9 per MMBTU and has also worked out the yearly revenue requirement of the Sui Northern for 2019-2020 at Rs274 billion. For Sui Southern, regulator determined the cost of gas at Rs759 per MMBTU and has also worked out yearly revenue requirement at Rs283 billion. The average gas cost has been determined by the Ogra stands at Rs737 per MMBTU.

The regulator in its December determination proposed the gas increase for domestic consumers from 14 to 192 percent, but the government wants to keep gas increase in single digit by 7-9 percent.

For domestic sector consumers, the regulator on December 11, 2019 determined the increase in gas price by 192.12 percent for consumers falling under first slab using 0.5 hectors cubic meter (Hm3) per month from Rs121 per MMBTU to Rs353.46 per MMBTU. And for second slab categories using gas 1 Hm3 has per month, the gas increase was determined at 17.82 percent from Rs300 per MMBTU to RS353.46 per MMBTU.

And for the consumers falling under 3rd slab category using gas 2Hm3, the regulator recommended the reduction in gas tariff by 4.12 percent from Rs553 per MMBTU to Rs530 per MMBTU. Likewise, the regulator also reduced the gas tariff by 4.2 percent for 4th slab category using gas from Rs738 per MMBTU to Rs707 per MMBTU. The regulator also recommended the gas price increase by 14.99 percent for 5th slab category consuming the gas Hm3 per month from Rs1107 per MMBTU to Rs1273 per MMBTU and it increased the gas prices by 15 percent for 6th slab category using the gas Hm4 per MMBTU from Rs1460 per MMBTU to Rs1679 per MMBTU.

However, the regulator determined the increase in gas tariff by 31.54 percent for Captive Power Plants (CPPs) and 31.57 percent for CNG sector, 31.56 percent for Cement, 31.54 percent for General Industry and 31.57 percent for commercial consumers.

Meanwhile, without holding anyone responsible on account of alleged involvement in wheat/flour crisis that severely hit consumers of all over the country, the ECC of the Cabinet allowed import of 0.3 million tons of wheat to decrease the local prices.

In order to keep strategic reserves at minimum levels, there is no other way out available so the ECC decides to import 0.3 million tons wheat before arrival of new crop.

Top official sources disclosed to The News that Prime Minister Imran Khan had directed in its meeting held on October 19, 2019 for importing wheat that was also shared by Special Assistant to PM on Information and Broadcasting in her press briefing but then this directive of the premier could not be implemented well on time. The Principal Secretary to PM and other close aides could not ensure follow-up on the directives of the premier despite this fact that the Planning Commission had extended warning during one official meeting about looming wheat/flour crisis going to full fledge blown-out and hit the country by January 2020. However, nothing substantial could be done to avoid eruption of this crisis so responsibility should be fixed for this negligence. Secondly, Pakistan exported 693,436 metric tons of wheat from Sept 2018 to Oct 2019 at Rs29/kg. The current price of flour in Pakistan stands at Rs70/kg. The export of wheat was allowed but who is responsible for not fully issuing notification for slapping ban on exports of Maida and Suji.

However, according to the official announcement made by Ministry of Finance that a meeting of the Economic Coordination Committee of the Cabinet (ECC) chaired by Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh has allowed import of 0.3 million ton of wheat to decrease the local wheat price and meet the domestic requirement.

Under the decision, the wheat would be imported by the private sector by withdrawing regulatory duty to the extent of the approved quantity.

The official sources while quoting the summary stated that the price of wheat stood at Rs950 per 20 kg bag in international market in accordance of landed estimated cost so the private sector would be happy to import wheat. The import of wheat in last Oct 2019 would have cost of Rs1,150 per 20 kg bag of wheat but now its price reduced. The wheat could be imported from Central Asian Republic's even through roads.

The ECC further decided that the wheat to be imported under the ECC decision until March 31, 2020 to ensure that the local wheat to be available from the start of April and that would be picked at the right price from the market. The ECC also issued instruction for the immediate release of stocks held by the Passco and the provincial departments.

Besides the import of wheat, the ECC approved a proposal by the Ministry of Industries and Production to reduce the GIDC on gas consumed by the fertilizer manufacturers from Rs405 to Rs5 per bag so that this benefit could be passed on to the farmers.

The ECC also allowed raising of Rs200 billion on the request of Ministry of Energy (Power Division) from the Islamic Banks as fresh facility through Power Holding Limited by way of issuance of Pakistan Energy Sukuk-II against assets of the DISCOs/GENCOs as collateral through open competitive bidding to procure financing in a fair and transparent manner. The amount will be utilised for the purpose of the funding the repayment liabilities of the Discos.

The ECC approved the proposed mechanism by the Ministry of Finance for the grant of Sovereign guarantees. All requests for government guarantees are to be accompanied by request for guarantee by the governing body of PSEs.

Further every request must be reviewed and endorsed by the concerned administrative ministry/department of the relevant entity.

• Audited Financial statements of previous year prior to issuance of guarantee is mandatory for evaluation of guarantee request

• Business plan including an explanation of the business model and financial projections for at least 5 years;

• A note explaining the following;

1. Whether its need for guarantee is short term or long term

2. Business model followed by the entity since inception or over the last 5 years, whichever is less

3. Financial as well as non-financial performance of the entity since its inception or over the last five years, whichever is less

4. Request, along with justification, for the type and amount of guarantee needed by the entity and the timelines over which it is required.

The Finance Division shall evaluate the request internally and finalise its recommendations with the approval of the Finance Secretary.

ECC also approved the report on proposed exemption of 5 percent sales tax on cotton seed cake. It was briefed to the ECC that in case the exemption of sales tax on Cotton Seed Cake cannot be introduced during CFY 2019-20, the same can be considered for inclusion in the Finance Bill of 2020-2021.

The approval of Technical Supplementary Grant of Rs96.652 million of National Book Foundation in favor of Ministry of Federal Education and Professional Training was also granted by ECC.

Technical Supplementary Grant amounting to Rs15 million for centralized procurement of ICT infrastructure to ensure e-readiness of federal government for implementation of E-Governance programme was also approved.

ECC granted approval to the request of the Ministry of Interior for the Technical Supplementary Grant amounting to Rs458 million for payment of subsistence allowance to Personnel of Civil Armed Forces deployed in UN Peacekeeping Missions.

Sindh to purchase 400,000 tons wheat from PASSCO to check flour prices

Meanwhile, given the shortage of wheat, which has led to a steep rise in the prices of wheat-flour, the Sindh Food Department has decided to purchase 400,000 tons of the commodity from PASSCO (Pakistan Agricultural Storage and Services Corporation) to normalise the situation.

Sindh Chief Minister Murad Ali Shah presided over a high-level meeting to discuss the prices issue with all the concerned cabinet members and officials.

The meeting was informed that the Sindh government had stocks of 700,000 tons, of which 0.4 million tons have been supplied to the flour mills. “Every month, 0.13 million tons wheat is supplied to the Karachi city, while the Sindh Food Department released stocks to the mills till the 15th of March,” officials briefed the meeting, adding, thus, the food department would have to ensure supply for the next two months.

The statement also quoted officials as informing the meeting that the provincial food department was in the process of purchasing 400,000 tons of wheat from PASSCO. “It will take three more days to stabilise the prices,” the statement quoted officials as saying during the meeting.

Later on, addressing a press conference, Sindh Food Minister Hari Ram Kishori said they were blamed for not purchasing wheat last year. “Why Punjab, Khyber Pakhtunkhwa, and Balochistan are also facing the wheat crisis, despite their purchases?” Kishori questioned. The provincial food minister explained the hike in wheat-flour prices was actually a result of goods' transporters 12-day strike, which dried up Karachi, because there was no movement of wheat during that period. Currently, wheat-flour is available at around Rs70 per kg in the open market against the government retail price of Rs45 per kg.

Secretary Food, Laeeq Ahmed, said since the government supply was interrupted, the mills were forced to purchase wheat from the open market, which pushed the flour rates upwards. “Rates will stabilise in a few days once the supply is resumed,” he said and stressed the prices did increase but not because of the shortage.

Pakistan had surplus wheat last year. In 2019, the country produced 25.6 million tons of wheat, up two percent against a production of 25.1 million tons in 2018. Pakistan’s total wheat consumption demand is below 25 million tons on the basis of 124 kg per capital requirement.

Moreover, the Sindh government and stakeholders have rejected the government’s decision to import 0.3 million tons of wheat. Mumtaz Shaikh, a leader of Pakistan Flour Mills Association, told The News the shortage of wheat was an upshot of strike of goods’ transporters. “The transporters strike affected the wheat arrivals at flour mills. The situation will be back to normal in 2-3 days,” Shaikh said.

The new crop would start arriving by the end of February from lower Sindh, and continue in the whole province till the end of April, while harvesting will start in Punjab shortly after. “Thus, there is no need to import wheat,” he said.

One flour mill owner said the staff of the Sindh Food Department had delayed dispatches of wheat in Sukkur and Ghotki districts and that too added to the shortage of flour following the transporters' strike. He suggested that expediting deliveries to the flour mills would resolve the issue.

Sindh Minister for Agriculture, Muhammad Ismail Rahoo in a statement, questioned the federal government, "If 300,000 tons of wheat was to be imported, then why four million tons were sent to Afghanistan?" Rahoo said the imported wheat would not reach before March, while new wheat would be harvested in Sindh by that time. "Growers have reservations with the decision of wheat import," he said.

On the other hand, the Sindh government has established wheat flour centers, where consumers can buy flour at a controlled price of Rs430/10-kg across the province. Wheat flour stalls were established in Karachi, Hyderabad, Thatta, Larkana and other districts. Such stalls have also been established in 22 bachchat markets of Karachi alone. Besides, flour is available outside the flourmills on government controlled rate, said a statement.

Meanwhile, Pakistan Tehreek-e-Insaf’s parliamentary party leader in Sindh Assembly Haleem Adil Sheikh on Monday said that the Pakistan People’s Party’s Sindh government was creating an artificial flour crisis in the Sindh province mainly to malign the federal government.

Addressing a media conference outside the Sindh Assembly here Monday, Shaikh, who is also the PTI’s central vice-president, said that wheat, flour crisis during the last three to four days had gone from bad to worse, but the government of Sindh, instead of controlling it, was busy in giving misleading statements. It is blaming the federal government to hide its own incompetence. “We have already told the people about the elements behind this crisis,” he said.

“The NAB-haunted rulers of Sindh are behind this wheat, flour crisis. The NAB has already recovered Rs8 billion after arresting some characters of wheat, flour corruption mafia through a plea bargain,” he claimed.

Shaikh said the ruling PPP is suffering badly from the disease of corruption. “The politics of PPP begins with corruption and ends with corruption. The Sindh health department is facing the crisis of medicine shortage and the entire province has been facing a crisis of AIDS/HIV and dog bite cases,” he said. He said Karachi, the mega city, has already been turned into a big heap of garbage. PTI MPAs and others were also present at the presser.