https://arab.news/5fafs
- Soaring prices of wheat and sugar have been fueling consumer anger for past months
- Experts say imports are short-term reprieve as Pakistan needs to improve its domestic supply chains
ISLAMABAD: Pakistan is offering tax incentives to the private sector to import sugar and wheat, as it wants to push down the price of the commodities in the local market and ensure their smooth supply to the public, officials said on Saturday.
Sugar and wheat are two important food staples in Pakistan and their soaring prices present a challenge for the government, as local administrations have failed to ensure their smooth supply in the market, fueling consumer anger. The price of sugar per kilogram has increased to Rs95 in August from Rs55 in December 2018. The price of wheat per 40 kilograms has increased to Rs2,100 from Rs1,450 in May this year, resulting in a sharp increase in the price of flour and bread.
“We hope the import will help stabilize prices of these commodities, and force hoarders to release the stocks in the local market,” Dr. Javed Humayun, senior joint secretary at the Ministry of National Food Security and Research, told Arab News.
Wheat importers have been exempted from the 60 percent regulatory duty, 11 percent customs duty, 17 percent sales tax and 6 percent withholding tax. The government has also reduced sales tax for imported sugar from 17 percent to 1 percent, value added tax from 3 percent to zero and withholding tax from 5.5 percent to 0.25 percent.
Encouraged by the new wheat import policy, the private sector has already booked 500,000 metric tons of wheat and the first shipment is scheduled to reach Pakistan by Aug. 26. In addition to this, the Economic Coordination Committee (ECC) on Friday allowed the state-owned Trading Corporation of Pakistan (TCP) to import 200,000 tons of wheat.
“The arrival of 700,000 tons of wheat in the next couple of months would help defuse price volatility, overcome shortage and discourage hoarding of this essential commodity," the Ministry of Finance said after the ECC's announcement.
According to Humayun, Pakistan failed to achieve its wheat production target this year due to multiple reasons, including unexpected torrential rains from February to April, which destroyed the crop.
Against the production target of 27 million metric tons, Pakistan’s yield was 25.5 million tons, while it could procure only 6 million tons from growers to release the commodity at a subsidized rate — the target was 8.25 million tons, according to official data.
Tax incentives for sugar imports come as the country's stocks stand at 1.2 million tons and according to government estimates are likely to exhaust by early November.
Experts see the imports of both staples as a short-term solution until Pakistan reforms their supply chains.
"The administrative actions and imports are only a short-term reprieve and that too if they are done timely and effectively," Dr. Khaqan Najeeb, former adviser to the Ministry of Finance, told Arab News.