Rice procurement through PASSCO to cause Rs 12 billion loss to tax-payers

[Naveed Yaseen]

By Sajid Chaudhry

KARACHI: Continuing public sector intervention policy in the paddy procurement through Pakistan Agricultural Storage and Services Corporation (PASSCO) would cause a loss of Rs 12 billion to the national exchequer, Ministry of Agriculture has estimated.

Despite knowing all these facts, the Economic Coordination Committee (ECC) of the Cabinet has authorised PASSCO and provinces to procure 1 million tonnes paddy from the rice growers to ensure them a good return.

A latest presentation on public sector intervention in paddy procurement, available with this scribe, revealed that estimated loss to the national exchequer due to paddy purchased by PASSCO ex-2008 Kharif Crop would be Rs 7 billion. Any Further foray of PASSCO in paddy procurement ex-Kharif Crop 2009 will entail additional loss of Rs 4 billion to Rs 5 billion.

According to the further details mentioned in the presentation, PASSCO is already reeling under the colossal financial burden of storing and handling of 425,000 tonnes of rice. After multiple tenders for disposal of rice, only 111,092 metric tonnes IRRI-6 has been sold, incurring a loss of Rs 934 million. Sluggish market price of rice, especially basmati, preclude early disposal of the rice stored with PASSCO, which is worth Rs 21.969 billion.

PASSCO’s entire existing storage capacity, which at present stands at 0.341 million tonnes and available hired private sector storage, has been used to hold rice ex-2008 Kharif Crop. PASSCO’s authorised manpower complement of 1650 (configured to handle 1.5 million tonnes stocks) is already over stretched. On the other hand, hiring or ad-hoc manpower cannot be employed due to sensitivity of the task, as well as due to financial responsibility.

It has been stated that PASSCO is already overstretched due to 2.145 million tonnes wheat procured ex-Rabi Crop 2009. In addition, it holds 0.425 million tonnes of rice. At present PASSCO holds 2.57 million tonnes wheat and rice, against the organization’s assigned optimum grain-handling capacity of 1.5 million tonnes.

PASSCO has got no technical manpower, logistic facilities or organisational expertise to manage highly technical and skill-oriented task of paddy procurement. Due to quality imperatives (specifications, temptations chance of admixing with inferior varieties of stored rice), need for elaborated care and preservation of stored rice. It has been further stated that PASSCO is ill equipped to procure paddy and manage rice.

According to the production estimates of rice production in the country during 2009-10, some 6.37 million rice is to be produced that includes 2.5 million tonnes basmati rice and 3.87 million tonnes IRRI and other varieties. Rice production in 2008-09 amounted to 6.95 million tonnes and out of which domestic requirement stood at 2.50 million tonnes. Some 2.56 million tonnes have been exported during July-June period of last fiscal year 2008-09 and a balance of 1.89 million tonnes is still with the organisation. Rice worth $1.986 billion has been exported from the country during 2008-09, which included 0.868 million tonnes basmati and 1.691 million tonnes IRRI.

Despite knowing this situation, The ECC of the cabinet in its last meeting has decided that the government would intervene in the rice market to ensure that the farmers get appropriate price. The ECC decided that the paddy price for the current crop would be Rs 600 per 40 kilogram for IRRI-6, Rs 1250 per 40 kilogram for basmati paddy and the minimum price paddy of 385 variety has been set Rs 1000 per 40 kilogram. If the farmers would not get this price from the rice mills than PASSCO would intervene ECC has also allowed PASSCO to raise capital form the market sources as per its requirements.

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