Pakistan and Iran have yet to finalise barter trade deal on wheat and rice in lieu of electricity and iron ore because of issues in mode of payment, well informed sources told Business Recorder. The sources said Iranian authorities have accepted samples of Pakistan wheat and rice but payment mechanism has not been finalised.
The sources said Economic Co-ordination Committee (ECC) of the Cabinet considering the summary of Ministry of National Food Security and Research on “sale of wheat to Iran under barter trade” had allowed the export of one million tons of wheat to Iran from Passco’s stocks at $300 per ton. It was also agreed that the federal government would pick up price differential of around $100 per ton.
According to sources, the Ministry of Food and Security wrote a letter to the Finance Ministry requesting payment of Rs 350 million to Passco as wheat transportation charges from Punjab to Karachi. It is unclear whether the Finance Ministry had released this amount or not.
According to sources, after hectic and lengthy consultations both sides finalised modalities of export on November 21 last year in Islamabad. To implement the transportation of already agreed one million tons of wheat export from Passco’s stocks to Iran, the following was agreed: (i) 100,000 tons of wheat to be exported by official channels; and (ii) the remaining 900,000 tons of wheat will be exported through the private sector.
The sources maintained that both sides also agreed that “wheat barter trade may be converted into commercial sale of wheat”. However, the top officials who are dealing with this deal identified following issues for clarity: (i) mode of payment – it was agreed that the Governors of central banks of both the countries would decide on the mode of payment; and (ii) transportation of wheat to Karachi. The Finance Division was supposed to provide funds for transportation and port handling charges. The sources stated that Pakistan had to pay millions of dollars to Iran for electricity imported from Iran which will be adjusted in the barter trade of wheat.
Earlier, the Governor State Bank of Pakistan had informed the Commerce Ministry that the issue of mode of payment had become complicated as the Iranian side was not opening an account in Pakistan to cover the cost of wheat. Pakistan Steel Mills (PSM) has also made concerted efforts to import ion ore from Iran in lieu of exported wheat but deal has not been finalised so far as an Iranian Company ICIOC is unwilling to supply iron to PSM until the latter clears the outstanding amount of $15 million.
PSM had assured the federal government that GTC Iran will make payment to ICIOC Iran based on indexation prices of iron ore to be mutually agreed between PSM and ICIOC. The sources said, Iran had also expressed interest in importing Pakistani rice in huge quantities in barter trade. Iranian public sector agency dealing in grain business has sought the consent of other concerned departments and as they get permission, the deal will be finalised.