Commodity News Snapshot-Pakistan

105,000 tons of sugar: TCP unable to open LC

Despite finalisation of sugar import contracts a month ago, the Trading Corporation of Pakistan (TCP) has been unable to open Letter of Credit (LC) for import of 105,000 tons of sugar because of shortage of funds. Sources told Business Recorder on Tuesday that at present the corporation is facing acute shortage of some Rs 4 to 5 billion to open LC of the last tender.

Sugar price increased by Rs five per kg in Peshawar

In less than a month's time, the price of sugar has been increased by Rs 5 per kilogram at the wholesale market in the provincial capital. Two weeks ago, the price of a 50-kilogram sack of sugar was Rs 3,840, which is now being sold at Rs 4,030. Similarly, sugar was being sold at Rs 76 per kg in the wholesale market and has mounted to Rs 81 per kg.

Provinces yet to announce cane support price: crushing may not start from October 1

Although, the country is already facing shortage of sugar due to low production of sugarcane crop last year, the provinces seem reluctant to announce the minimum support price for the crushing season 2010-11, which according to Sugarcane Factories Act 1950 should commence from October 1.

Major portion of allotted wheat quota: Lahore, Rawalpindi flour millers asked to lift from nearby cities' godowns

Punjab food department has asked the flourmills of Lahore and Rawalpindi to lift the major portion of their allotted wheat quota from the godowns situated in nearby cities at their own expense.

Wheat prices register increase

KARACHI: Without any plausible reason wheat prices have surged in the open market of Karachi in the post-Eidul Fitr period creating apprehension among consumers regarding increase in flour rates during the next few days.

THE RUPEE: all-round fall

All-round decline was seen on the currency market on Tuesday as a result of higher demand for the US dollars, dealers said. All the markets reopened after a 4-day closure, including banks, so the rupee was able to retain its outgoing week level versus dollar and euro, losing modestly in both interbank and open market, analysts said.

Over two million cotton bales destroyed by floods: Aptma

KARACHI (September 15, 2010): While expressing his views in connection with the damage to the cotton crop as a result of floods, M. Yasin Siddik, Chairman APTMA Sindh-Balochistan Region said that before the floods Pakistan was expecting a bumper crop of 14 million bales compared to 12.8 million bales produced last year.

Upward trend prevails on cotton market in post-holidays session

Upward trend was seen on the cotton market on Tuesday during the post-holidays session, dealers said. The Karachi Cotton Association (KCA) official spot rate was jumped by Rs 150 to Rs 6,550, they said. In the ready business, prices went up sharply and nearly 6,600 bales of cotton changed hands between Rs 6600-6750, they said.

Crops over 6 million acres in 11 districts of Punjab damaged

Crops over more than six million acres in 11 districts of the Punjab province have been damaged by the flood and a loss of more than Rs 87 billion has been suffered. This has been informed at a meeting chaired by the Punjab Chief Minister Shahbaz Sharif here on Tuesday to review a proposed relief package for the growers who suffered losses due to the flood.

Sindh estimates Rs 446.8 billion damage to agriculture, infrastructure

Sindh government has estimated Rs 446.8 billion damages to agriculture and infrastructure in the province by the devastating floods. The provincial government would provide interest-free loans to the flood-hit people of severely affected districts for agricultural rehabilitation. So far the provincial government has disbursed some Rs 2 billion in flood-hit areas of the province to provide food and medical treatment to the survivors.

Commodity News Snapshot-Pakistan

3,500 tons of wheat supplied to Gilgit-Baltistan

ISLAMABAD (September 02, 2010): The government has supplied 3,500 tons of wheat by air to Gilgit-Baltistan (GB) on the Prime Minister' special instructions to avert any possibility of food shortage in the area. Federal Minister for Food and Agriculture, Nazar Muhammad Gondal said this while chairing a meeting to review the food items supply and availability in the northern parts of the country, here on Wednesday.

Pakistan producing over 40 types of fruits and vegetables: speakers

FAISALABAD (September 02, 2010): Speakers in a workshop on " Sustainable Management of Insect pests of fruits with special reference to citrus through modern protection and post harvest losses reduction techniques" said that Pakistan is producing more than 40 types of fruits and vegetables which have none to compare in the world with respect to taste and quality. But unfortunately we have also credit of using pesticides non-judicious.

Sugar stocks: MoI&P, PSMA presenting contradictory figures

ISLAMABAD (September 02, 2010): Ministry of Industries and Production (MoI&P) and Pakistan Sugar Mills Association (PSMA) are presenting contradictory figures with respect to sugar stocks held by mills, informed sources revealed to Business Recorder. According to the MoI&P, stocks with the mills were 536,326 tons as of August 31, 2010 whereas PSMA claims the stocks with its members mills were less than 0.4 million tons.

Wheat planting season: FAO asks world community for more funds

ISLAMABAD (September 02, 2010): United Nations Food and Agriculture Organisation (FAO) has asked international community to give more funds as wheat planting season is fast approaching in Pakistan where floods have destroyed country's most of the wheat seed stocks. Wheat, is staple food of the country, which is planted from September to November and more than half a million tonnes of wheat seed stocks have been destroyed by the floods, said a FAO report released here on Wednesday.

Growers condemn increase in diesel prices

LAHORE (September 02, 2010): Growers' organisations strongly reacting to the increase in diesel prices have said it will bring already hard hit farmers under further financial burden making it impossible to utilise machinery in agriculture. Agri-Forum Pakistan Chief, Muhammad Ibrahim Mughal while talking to Business Recorder said that around 3.5 billion liters of diesel was used by the growers and farmers in the agriculture sector.

Punjab agriculture board approves high priority research project

LAHORE (September 02, 2010): Punjab Agricultural Research Board (PARB) has approved a high priority research project 'improvement of value chains and tradability of farmer's produce' worth Rs 18.98 million. Approval of this project was given in 23rd meting of Board of Directors of the Punjab Agricultural Research Board (PARB) held here on Wednesday.

Official cotton spot rate cut to Rs 6,500 on improving weather

KARACHI (September 02, 2010): Official spot rate was lowered on the cotton market on Wednesday as floodwater is going into the sea, dealers said. The Karachi Cotton Association (KCA) official spot rate was dropped by Rs 50 to Rs 6,500, they said. In the ready business over 10,000 bales of cotton changed hands between Rs 6300-6800, they said.

Leather industry facing persistent decline in exports: Agha

LAHORE (September 02, 2010): The National Environmental Quality Standards (NEQS) which were fixed at level of 150 mg/liter chemical oxygen demand (COD) are unachievable for the leather industry thus the government should immediately provide interim relief and reduce the NEQ standards to rational level.

Rice farmers, cotton millers: Zardari for special credit package

President Asif Ali Zardari has held a meeting with the representatives of rice growers and cotton ginning millers at Chief Minister's House here on Tuesday to discuss the extent of damages to rice and cotton crops due to recent floods and examine the ways and means to retrieve the losses and help recover the lost ground.

The meeting was attended by Sindh Chief Minister Syed Qaim Ali Shah, Federal Agriculture Minister Nazar Mohammad Gondal, Information Minister Qamar Zaman Kaira, Sindh Minister for Agriculture Ali Nawaz Shah, Irrigation Minister Saifullah Dharejo, Chief Secretary Sindh Fazlur Rehman, Chairman of Zarai Taraqiati Bank Ltd, representatives of State Bank of Pakistan and various concerned departments, president of Rice Millers Association Arif Hussain Mahesar and chairman of Cotton Ginners Association Rana Abdus Sattar.

The meeting was apprised that 50 percent rice crop has been damaged in Sindh. The President emphasised the need for using local rice as seed for the next crop instead of importing seed from abroad, saying that the imported seeds will take a longer time for acclimatisation.

The meeting was informed that 40,000 tons of rice seed would be needed for the next crop. President Zardari advised the government to devise such a policy that the country should not have to import rice seeds. He also asked SBP to devise a special package in consultation with the banks to give incentives to growers and millers to help them overcome the losses incurred on account of heavy floods. He advised the Sindh Home Minister to hold an inquiry into the complaints of 'warabandi' (closure of canal) in context of Nara Canal during the floods.

President Zardari also called for holding an inquiry against tax officials in Hyderabad with reference to complaints of issuing notices to the growers. Responding to a request by the rice growers and exporters, he directed the SBP to examine the possibility of setting up foreign exchange branches of all the banks in every district to facilitate growers and exporters.

Copyright Associated Press of Pakistan, 2010

Thar coal ignored by federal government

Thar coal reserves have been lying in a state of neglect due to the federal government’s indecision, according to the Sindh government.

A lack of infrastructure and absence of proper incentives by the federal government are chiefly to blame.

The Sindh government has claimed that it has asked Islamabad to approve a comprehensive tax incentive package and become a partner in providing the required $1.8 billion of infrastructure for the mining of the Thar coal reserves according to sources in the water and power ministry, according to sources.

However, despite a number of meetings, the federal government has not reached any decision in this regard said the sources, adding that Finance Minister Hafeez Shaikh was reluctant to give a matching grant each year.

Sources also said that the Sindh government has also immediately sought Rs10 billion from the federal government. The amount was to be allocated equally towards the Makhi-Farsh water supply project for Thar and a transmission line scheme.

Regarding investment incentives, the Sindh government has sought a thirty-year corporate income tax and a minimum turnover tax exemption. The exemption is sought from the date of the first sale of lignite to power plants. All imports by mining projects should be allowed zero per cent customs duty to provide the same advantages as those provided to independent power producers, according to the Sindh government’s proposal. The proposal also seeks a waiver of withholding tax on dividends to shareholders and an exemption of WHT on the procurement of goods and services during project construction and operations. The incentive package remains to be approved by the Economic Coordination Committee of the cabinet.

The sources added that “unless Thar Coal projects are incentivized, it will not be possible to attract the capital required to achieve financial close”. Financial close is the time period required for the completion of all documentation and conditions necessary to initiate a project.

The provincial government also asked the federal government to match the contribution for infrastructure development, for support for project financing from multilateral donors and for the World Bank to rekindle its interest in the coal sector. Previously, the WB withdrew its assistance in exploring the Thar coal reserves.

“The development of infrastructure is critical for the development of Thar Coal Block II”, the Sindh government official added. The infrastructure development package consists of a water supply and an effluent disposal system for Thar mining and power generation projects costing $500 million, transmission lines worth a billion dollars, roads for heavy transportation costing $50 million and a railway network costing $200 million.

The Sindh government is developing Block II of Thar Coal reserves by initiating a joint venture with Engro Power Gen Limited. It has also established Sindh Engro Coal Mining Company and has 40 per cent stakes in it.  According to an official of the Sindh government, potential benefits of the Block II project could be enormous. “It would attract $ 20 billion of investment during next ten years and save $79 billion of reserves by replacing expensive oil with coal for power generation,” he claimed.

Thar Desert contains the world seventh largest coal reserves. The reserves have been estimated at 175 billion tons, equivalent to 50 billion ton of oil, which is more than Iran and Saudi Arabia combined oil reserves and enough to generate 100,000MW electricity for over 200 years. Pakistan’s current use of coal, despite having one of the largest reserves of lignite in the world, is extremely negligible. It produces 0.1 per cent of the total energy from coal as opposed to India’s 53 per cent and China 78 per cent. Instead, Pakistan produces 35 per cent electricity by using imported oil.

The need to mine the trillions of dollars worth coal reserves is compounded with the increasing demand and cost of energy. According to the government estimates, the energy shortage would increase drastically in the coming years from its existing peak level of 6577 megawatts to 18320 megawatts in 2015.

[Published in The Express Tribune]

Talks with IMF on: Pakistan seeks release of $2.6bn

ISLAMABAD: Under immense pressure from the International Monetary Fund over failing to make any headway on implementation of reformed GST on services and reducing power subsidy, Pakistan economic managers are not sure if they can convince the Fund for combine release of last two tranches amounting $2.6 billion, official sources told Dawn on Wednesday.
Sources said that the Pakistani delegation in the ongoing fifth review with the IMF at Washington was trying to convince the IMF Board to approve release of the two instalments $1.3 billion each in one-go.

“But there are serious difficulties mainly owing to the issues of power subsidy and implementation of reformed GST in October 2010,” the official added.

Finance Minister Dr Abdul Hafeez Sheikh on Wednesday also joined the Pakistani team, which is headed by the Secretary Finance.

The IMF has been informed about the difficulties faced by the government owing to colossal damages caused by the devastating floods across the country, the sources said.

Pakistan has missed the fiscal deficit target agreed with the IMF both at the conclusion of the last fiscal year and the same is expected for the current year due to the flood damages, while the policy of zero borrowing limit from the State Bank of Pakistan has been breached by Rs40 billion.

However, the sources said that the most serious issue was the failure of the government to eliminate subsidy on electricity from July 1, 2010 as was committed with the international donors.

Sources said that the IMF would be given assurances that the reformed GST on services would be implemented in the VAT mode from October 1, 2010.

Despite assurances being made by the Pakistani delegation to the IMF, no settlement has been made domestically over implementation of GST on services in the VAT mode.

In the last interaction between the federal finance ministry and the Sindh finance department on Sunday, the only decision made was that the issue would be resolved soon and both sides reiterated that the reformed GST on services would be implemented from October 2010.

Adviser to the Chief Minister Sindh Dr Kaiser Bengali criticised the federal finance ministry for failing to finalise the issue and said that the mode to implementation had been decided in June but it had yet to be approved and made a law.

“I have written two letters to the finance ministry while the CM Sindh has also written a letter to the prime minister, but nothing has been achieved,” Dr Bengali said, adding that the finance ministry was delaying the formal settlement for implementation of GST on services.

Sindh has suggested that all the taxes on financial services, advertising, construction and franchises be deposited in a pool and its distribution be made under the NFC formula.

While, Punjab has demanded the distribution on the basis of population of each province whereas Balochistan and Khyber-Pakhtunkhwa have supported Sindh over the issue, but the final settlement has yet to be achieved.

However, the sources said that the authorities anticipate that the IMF would agree to release the single tranche of $1.3 billion immediately after completion of the ongoing talks.[DAWN]

Floods cause Rs 244.6bn loss to agri sector: MinFA

* Small farmers suffer loss of Rs 98bn, while some face total annihilation of their crops
ISLAMABAD: The devastating floods across the country have caused damage worth Rs 244.6 billion to the agriculture sector with maximum losses suffered by the small farmers of around Rs 98 billion, while some facing total annihilation of their crops.

This was revealed in the initial estimate prepared by the Ministry of Food and Agriculture (MinFA) on Monday in coordination with the provincial governments and Azad Jammu and Kashmir (AJ&K) government. However, the estimate prepared by the MinFA has also said that the agriculture loss could be higher in Southern Punjab and some parts of Sindh as clear pictures from many areas have yet not been received. The ministry has said that maximum damage by the floods has been made to the minor crops of Kharif season, which includes jawar, maize, moong and mash pulses and some citrus fruit varieties. “The most upsetting thing is that the minor crops are mainly cultivated by small farmers and in areas where growers have small land holdings,” said a senior official of the MinFA. “This loss is the most serious setback for the farming community because most of the small farmers have lost considerable number of livestock too as they had limited facility for their animals.” Among the major cash crops the ministry’s report highlighted that the largest loss of Rs 71.4 billion has been faced by the cotton crop.

Cotton was sown over 3.1 hectares in the current Kharif season out of which the floods have destroyed crops at 0.51 million hectares, as a result the production is expected to decline by almost 15 percent to 11.7 million bales as against the targeted cotton production of 14 million bales in 2010.

The Minister for Food and Agriculture Nazar Muhammad Gondal has said that Pakistan will face serious cotton shortage in coming days as more than 15 percent of the crop has already been hit by the floods.

“Two million bales have been destroyed in the floods in Punjab alone and we have yet to receive the complete details,” the minister added. The cotton crop has been seriously damaged in Bakkhar, Layyah and Mianwali districts apart from many other areas in southern districts of Punjab, while the left bank of River Indus in Sindh is the cotton belt and the cotton crops have suffered in Sukkur, Khairpur, Ghotki, Naushero Feroze and Benazirabad districts. The paddy crops in the country have faced a loss of Rs 56.3 billion and the worst hit areas are right bank districts of Sindh.

The countrywide paddy production is expected to decline by around 27 percent to 4.35 million tonnes as against the original estimated production of 5.95 million tonnes. Among the major crops, sugarcane farmers have suffered a loss of Rs 19.3 billion and its production is expected to decline to 47.23 million tonnes as against the estimated production of 54.83 million tonnes.

Pakistan Sugar Mills Association (PSMA) Chairman Iskander khan said that the initial reports suggest that the sugar cane crops in Charsadda, DI Khan and some parts of Southern Punjab have suffered damages. He said that 4 million tonnes of sugar production was expected in the coming season but now 3.8 million tonnes is likely to be obtained. The MinFA has estimated that the other serious issue faced by the country in the near future would be shortage of vegetables.[DailyTimes]

Pakistan 2010: The Neverending Flood

One of the most devastating floods in the living memory - According to the UN, it has left 1,600 dead, an estimated 20 million people affected, and destroyed 1.7 m hectares of land so far. As Pakistan struggles to face the catastrophe, here is an in depth cartographic summary of the floods.[DAWN]
http://animation.dawn.com/flood-maps/

The economic losses of annihilating floods

 The economic losses caused by the deadly flood-the worst in Pakistan's history in almost all four provinces is yet to nail down. Significant losses are there for both people and the trembling Government.


Dr Salman Shah, Former federal Finance Minister, estimates that costs of rehabilitation of the flood-affected population and reconstruction of damaged infrastructure in different parts of the country could be in the range of $ 4 - 5 billion. Another economist put the figure between $ 3.5 and 4 billion. These losses are enormous when seen in the context of cumulative damages of about $ 6.5 billion in 14 floods since 1956.
According to Shahid Javid Burki, another former Finance Minister and ex senior Vice President of the World Bank, “we should get ready for another poor year for the economy, in the terms of the rate of the growth in the national product, pace of job creation and inter-personal and inter-regional income distribution. The government’s prediction that GDP in 2010-11 would increase by 4.1% now seems extremely optimistic. Given some of the shocks the economy has received in last few days, it appears that the national product will not increase by more than 2.5 to 2.8% this year. This will be about the same as the revised rate of growth in 2009-10. If that came about, Pakistan’s current economic expansion will be less than one half that of Bangladesh and one third that of India. Pakistan today is South Asia’s “sickest” economy and will remain that way unless the policy makers move decisively”. 

Agriculture knockout 
According to the spokesman of the World Food Programme, Amjad Jamal, “At least 1.4 million acres of crops were destroyed in Punjab. Many more crops were destroyed in North West and Sindh. The flooding has caused massive damage to crops and also to the reserves that people had in their houses. Khyber Pakhtoonkhwa was a ‘food insecure’ province even before the floods, and now in a lot of areas, people can’t afford even one meal a day”.

Damages, on the one hand, are likely to affect raw material supplies to the downstream industry that contributes to the export sector and, on the other hand, reduce the demand for industrial products like fertilizers, tractors, pesticides and other agriculture implements. And all this comes at a time when agricultural productivity has been falling over the years.

 If we include the figures of Sindh and Khyber province, the total goes up to more than 2 million acres. This is massive damage. Sugar cane, rice and cotton crops have been badly damaged. Agriculture experts are saying that farm production in Pakistan, Asia’s third-largest grower of wheat and the fourth biggest producer of cotton, may decline by 20 to 30% because of this damage. The losses to agriculture and livestock would have a spill over effect on industry and commercial activities to a great extent. This is because agriculture continues to play a central role in the national economy. Accounting for over 21% of GDP, agriculture remains by far the largest employer, engaging 45% of the country’s labour force.

As the flooding has been widespread, the damages to cotton crops may not be verifiable at this stage. Cotton, being a non-food cash crop, contributes significantly to foreign exchange earnings. It accounts for 8.6% of the value of agriculture and about 1.8% of GDP.

Sugar cane is a major crop, which is an essential item for industries like sugar mills, chipboard and paper. Its share in the value of agriculture and GDP is 3.6% and 0.8% respectively. Another cash crop, rice, is one of the main export items. It accounts for 6.4% of agriculture and 1.4% of GDP. High quality rice serves domestic demand and earns $2billion in exports every year.

Mostly small cities and towns surrounded by the villages have been affected. The big chunk of the economies of these cities and towns depend on the rural population. The rural population depends on agriculture for its economic survival. There are hardly any big industries in the affected areas. There are small industries which are also agricultural based and depend on agriculture for raw material. The economy of South Punjab largely depends on Cotton and wheat crops and mango orchards. The rural economy of Khyber Pakhtoonkhwa depends mostly on wheat and maize crops and also produces a large quantity of high quality fruits and vegetables. The vegetables have completely been wiped out and big damage done to the fruit orchards. The standing waters in the orchards are causing further damage to them.

The canal irrigation system has also been affected and water for irrigation might not be available to the farmers in many areas for the next crop.  

Small farmers suffer the most
The affected areas of South Punjab and Sindh are dominated by the feudal lords, who own more than 80% of the irrigated land. Small farmers and peasants make up the majority in the population. Some work as daily wage labourers in the nearby cities and towns. A majority of the workers either work as public sector workers or are employed in the agriculture-related small industries.

The small farmers and peasants will suffer the most from this disaster as feudal lords and big farmers will transfer the burden of disaster onto the shoulders of peasants and poor farmers. Feudal lords and big farmers have shifted their families to safe places in the cities but peasants and small farmers are suffering and facing the miseries of life because they have no means to move out of the affected areas. They have no place to go and are forced to live under the open skies. Poor people have been left with nothing and at the mercy of the state machinery for rescue and relief. They have lost their livelihoods and shelter. Now, the real problem will start for them when authorities start to the pay compensation and reconstruction money. They will be asked to provide ownership documents to get compensation for their destroyed homes and livelihoods which they can not provide because these lands belong to the feudal lords. These peasants have been working and living on those lands for generations but they do not own the lands. The destruction of crops means that they will be left without any food reserves or money for months to come. The government will offer cheap loans and other facilities to the feudal lords and big farmers, but nothing will be offered to poor peasants and small farmers. They will be left at the mercy of private money lenders and feudal lords to be fully exploited. These private money lenders and feudal lords will offer loans to these peasants and small farmers at very high interest rates. These peasants will be forced to work like slaves for feudal lords just for few thousand rupees. This disaster will further impoverish the hundreds of thousands of already extremely poor peasants and farmers.[DAWN]