Pakistan picks costlier import options ignoring India’s huge sugar, wheat stocks

Subramani Ra Mancombu Chennai | Updated on September 02, 2021

In April, Islamabad had asked New Delhi to restore Article 370 to allow Indian imports

Even as India is exporting its surplus stocks of sugar and wheat to countries in the Indian Ocean region, Pakistan, its neighbour, is spending huge sums to import them from other countries.

A fortnight ago, the Economic Coordination Committee (ECC) of the Pakistan Cabinet approved the import of 1.1 lakh tonnes (lt) of wheat at $355.9 (₹26,000) a tonne and two lakh tonnes of white sugar at $657 (₹48,000) a tonne. The Imran Khan government will spend $270 million (₹1,970 crore) to import these commodities to meet domestic shortfall and build strategic reserves.

Earlier this year, Pakistan decided to import six lakh tonnes of sugar, of which one lakh tonne have already arrived. The neighbouring country also decided to import five lakh tonnes of wheat with one lakh tonne already finalised through a tender at $304 (₹22,200) a tonne.

Loans to manage imports

The Trading Corporation of Pakistan, which is canalising the imports, has been asked by the ECC to avail of commercial loans to manage the imports. Pakistan is importing wheat despite estimates of a record 27.3 million tonnes production this year.

Pakistan got the first consignment of one lakh tonne of sugar at $515.97 (₹37,650) a tonne. Sugar prices in the global market are ruling near four-and-a-half year high on fears of lower production in Brazil. Raw sugar prices have topped $20 cents a pound (₹32,400 a tonne) on the Intercontinental Exchange (ICE). White sugar in London is quoted at $505.90 (₹36,925) a tonne for December delivery.

Kashmir issue

However, these imports will have to be ratified by the Federal Cabinet. Pakistan is buying both commodities at prices far higher than what India offers to other countries. The dispute over Kashmir is being cited as a reason by Islamabad to not import any commodity from India.

“Kashmir or any other issue is mere posturing. All these deals are underhand ones,” said a trader source not wishing to be identified. The ECC of the Pakistan Cabinet is probing into these deals, particularly when tenders finalised earlier this year were not honoured.

While Pakistan is having to pay a high price for importing wheat and sugar, India has been exporting both these commodities at a very competitive price.

Delivery across the border

“Pakistan could have got sugar from India at $525-30 (₹38,300-38,675) a tonne. We could have delivered them in trucks through our land borders,” said Rahil Shaikh, Managing Director, MEIR Commodities India. “Pakistan could be getting its sugar from one of the refineries in Dubai,” he said.

At the same time, Indian sugar exporters have sold over 10 lt of sugar through forward contracts for the next season starting October. “Most of the contracted deals are for shipping raw sugar. These will be heading for the usual destinations such as Indonesia,” Shaikh said.

All-India Sugar Traders Association Chairman said most of the export deals have been struck at $471.50 (₹34,400) a tonne free-on-rails from Kandla in Gujarat.

Wheat prices

In the global wheat market too, India is currently offering at $290 (₹21,175) a tonne free-on-board. It had begun exporting at $260 (₹19,000) a tonne before it raised the rates following a jump in global market prices. Currently, wheat on the Chicago Board of Trade for December delivery is quoted at $6.96 a bushel (₹18,675 a tonne).

According to trade sources, Pakistan is the only country that is not tapping into India’s “mountain of stocks” of these commodities. Bangladesh has turned out to be a major beneficiary of the huge stocks of wheat and rice in India. Similarly, Nepal and Sri Lanka are also importing a good volume of these from India.

According to Agricultural and Processed Food Products Export Development Authority (APEDA) data, Bangladesh has imported 3.95 lt of wheat valued at ₹767.07 crore during April-June this fiscal. Last fiscal, it bought 11.57 lt worth ₹2,191 crore.

Nepal imported 91,465 tonnes of wheat and Sri Lanka 76,280 tonnes during the first quarter at a total value of ₹322.48 crore. Last fiscal, the Himalayan kingdom imported 3.28 lt and Lanka 94,041 tonnes, totalling ₹798.07 crore.

Supporting Shaikh’s views on delivery of sugar, an exporter said at least 150 trucks plied from India to Bangladesh daily to deliver maize (corn) consignments. Before India-Pakistan relations hit a dead-end, most of the trading was done through trucks across the border.

Nod rejected in April

The case was similar with cotton and cotton yarn earlier this year. In April, the Pakistan Cabinet turned down its ECC approval to import sugar, cotton and cotton yarn “until Article 370 is restored” by India.

Then, the ECC approved import of 5 lt of sugar by June 30 and cotton and cotton yarn from June. Though trade relations between India and Pakistan have been affected due to the Pulawama blast in February 2019 that killed 39 Central Reserve Police Force (CRPF) personnel, New Delhi had said it would have no objection to the trade supplying sugar and cotton to Pakistan.

Pakistan had permitted import of Indian medicines in May last year to tackle the Covid pandemic. But it does not want to import these essential commodities, whose prices have skyrocketed in its domestic market.

Also read: IMF to provide $2.77 bn ‘unconditional’ funds to Pakistan this month

India currently has ample stocks of wheat, sugar and cotton with it. As on August 1, FCI carried 56.48 mt of wheat stocks compared with 51.32 mt a year ago. FCI stocks are higher after the Centre procured a record 43.32 mt of wheat from farmers this year against 38.99 mt last year. Besides, India produced a record 122.27 mt of wheat this year. As regards to sugar, India will have 8.7 mt of ending stocks, while cotton ending stocks are projected to be over 90 lakh bales (of 170 kg).

Published on September 02, 2021

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