Flour export to Afghanistan raises price in local markets

Already pressed hard by the federal government’s decision of gradually doing away with the subsidy on wheat in line with its commitments with international donor agencies, the unlimited exports of flour to Afghanistan have further burdened the people of Pakistan.
The rising exports of flour to the war-torn country, if on the one hand, has helped Pakistan in generating economic activities, it has to it several ills as well, on the other hand.
The rise in demand for flour from across the border and the private sector’s increasing involvement with Afghan importers has resulted in price increases the local markets have undergone over a period of last several months.
Undoubtedly, this has resulted in more economic activities, more jobs for daily wagers, more business for the transport sector and more profits for the flour dealers and millers, particularly of Punjab’s. As an off-shoot, it has caused more burden for atta consumers.
The five month long ban on the transportation of wheat from Punjab to other federating units, apparently meant to check hoarding of wheat, helped its mills to carry out their operations in full swing as there was no one to pose a challenge to them. They were not only feeding flour to NWFP markets. Rather, it was only their product which flooded Afghan markets, too, as the NWFP flour mills – about 260 in number – were out of business because of shortage of wheat.
Though the closure of NWFP mills can not be attributed alone to the ban alone as some 100 mills (out of 260 set up in the Frontier) were out of business much before the ban was imposed, it played havoc with the remaining operating mills which, too, experienced complete halt because of stoppage of wheat from the neighbouring Punjab.
At a time when Islamabad is importing one million tons of wheat, apparently, to meet the country’s flour consumption requirements, it has let its doors open to see dozens of trucks loaded wth huge quantity of flour crossing over to Afghanistan every day. This has left several to raise eyebrows as the increase in demand, because of growing exports to Afghanistan, has resulted in rise in prices of atta in local markets, particularly, in NWFP and Federally Administered Tribal Areas (Fata).
The price of a bag of 85 kg fine quality flour (white) has recorded an increase of around Rs 150 per bag during the last seven months in the local markets, making the owners of tandoors to put a fresh demand for increase in the officially fixed price of Roti (dough of bread) ahead of the holy month of Ramazan.
Interestingly, the exporters do not need to make exports against dollars. It is the Afghani which Pakistan is earning against its flour exports to Afghanistan.
Afghan importers bring Afghani from their country, get it converted into Pakistani rupee in the local currency markets and make payments to flour dealers in Peshawar. That is how the business is being carried out at the moment.
Official circles, too, believe that Islamabad’s policy to declare flour as a freely exportable item for Afghanistan has put under pressure Pakistan’s own wheat stocks, making it to procure one million tons wheat from abroad to meet the flour consumption requirements.
There is no bar on export of flour to Afghanistan, no permit required from any of the official agencies and no foreign convertible exchange is needed.
The Central Board of Revenue is collecting only export development surcharge on the export of flour at a rate as nominal as 0.25 per cent, encouraging millers, traders, exporters and Afghanistan’s importers to lift huge stocks from NWFP’s markets. More interestingly, while flour’s price ranges between Rs 13 and Rs 15 per kilogramme in the markets from Peshawar to Karachi, the CBR is collecting the export development surcharge by calculating the price of flour as Rs 10 per kilogramme, according to the customs sources.
Between 40 and 50 trucks, according to official accounts, loaded with flour bags of 20, 40 and 85 kilogramme each are crossing over to the other side of the border every day from the Torkham border crossing.
Exports [of flour] being made from other border crossings is in Addition. This has encouraged growing business relationship between Afghan importers and flour dealers who are making big profits due to bulk supplies being made every day from different markets of NWFP.
However, for some exporters it is too dangerous and risky to do business with Afghan importers. In view of the lawlessness in the war torn country it would be beyond Pakistani exporters’ capability to recover their money from Afghan importers if they chose to default, as in some of the case the trade is being made on credit basis. In this way, the chances of default can never be ruled out.
Besides, the possibility of under invoicing by the exporters can not be ruled out, even though there was no restriction on the export of flour to Afghanistan.
Officials say that CBR collects between Rs 500 and Rs 1000 per truck as export development surcharge. But there may be instances in which exporters resort to unfair means to evade payment of export development surcharge.
It is believed that flour is being exported in much bigger quantity than what is declared to customs authorities on papers by exporters.
In some of the instances, according to market sources, local atta dealers, supplying flour to Afghanistan, are filling upto 98 kilogramme flour in a bag meant to contain 85 kilogramme, in a bid to evade export development surcharge.
” This can not be ruled out as we can not weigh every single bag,” said the customs official, adding that ” what we do to check this practice is that we weight the whole vehicle by putting it on the weighing machine at the Torkham border crossing”.
Though the whole sale markets in NWFP have experienced major boom during the last few months because of increasing flour export to Afghanistan, much of the benefit in terms of financial gains went to Punjab’s flour millers.
Peshawar’s market receives between 40 and 50 trucks of atta from Punjab every day, whereas, the figure comes to about 400 trucks when the whole of NWFP is taken into account, according to market sources.
The growing exports of flour to Afghanistan because of federal government’s free export policy for the war-torn country has given further rise to demand for Punjab’s flour in the NWFP’s markets boasting trade and business activities.
The situation has undermined the provincial government’s authority to keep prices under control as earlier the federal government’s wheat policy had left it with little role to influence atta market and flour millers who are now heavily relying on procurement of wheat from Punjab’s open market – instead of the provincial government. It would not be wrong to say that presently there is no official mechanism to control prices of flour in the Frontier province, which is totally relying on procurement of wheat from Punjab and the Trading Corporation of Pakistan.
The NWFP food department does collect rates of flour from the local market every day. But it is only for the sake of maintaining record. Nothing else beyond that.
There is a need that a fixed quota be determined for exports to Afghanistan because doing away with the export would not be in the interest of any body, neither trader, exporters, millers nor flour consumers.
Traditionally, too, Pakistan has been feeding considerable amount of flour to markets of the land-locked Afghanistan
However, to protect our own people’s economic interest our planners should revise their strategy and put in place an elaborate plan to take on the smugglers mafia which may try to take benefit of the situation, if export is allowed against fixed quota.

Courtesy : The DAWN

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