Agriculture Reference
In-Depth Information
4. The difference between the procurement incidentals of the Food Depart-
ment and PASSCO, which in the past was quite substantial, has, however,
narrowed in recent years.
Thus the incidentals of PASSCO do not compare favorably with those of
PFDs. Actually, PFDs supply wheat to flour mills at government's fixed ration
price, which does not cover all procurement and incidental costs of PFDs, and
they are paid a subsidy from the public exchequer. In contrast, PASSCO sup-
plies wheat to specified agencies (the armed forces, Utility Stores Corporation,
and the like) at a price that covers all procurement costs and incidentals with-
out involving a subsidy from the government. Therefore, under the existing set-
up and operating conditions, PASSCO's relatively higher incidentals and pro-
curement losses, by and large, are acceptable. However, it needs to scrutinize
its expenditures and impose strict financial discipline in the wake of curtailment
of its procurement operations to wheat only, and its staffing also needs to be ra-
tionalized. Such steps will also reduce the fixed establishment charges, which are
quite a large chunk of the total costs.
The involvement of the private sector in wheat marketing and storage was
rather limited until recently. The policy environment providing for a uniform and
pan-territorial ration price as well as intermittent restrictions on commodity
movements did not encourage private trade to invest in wheat marketing and
storage. The policy environment in the aftermath of a record wheat crop in
1999/2000 and healthy stocks in the public sector has undergone a qualitative
change favoring a greater role for the private sector in wheat marketing and stor-
age. The incidentals of the private sector, as synthesized through discussions
with the management of a large flour mill in Rawalpindi, are set out in Table 4.7.
These incidentals are reported at Rs 1,500-1,800 per ton, compared to about Rs
2,400 for public-sector agencies, showing a savings of about 40 percent.
However, these incidentals are not strictly comparable with those of the
public sector, because of the limited involvement of the private sector in com-
mercial wheat marketing in the past. Moreover, the available estimates are not
fully representative. These may be comparable with public sector after the pri-
vate traders have functioned in this field for some time, and representative data
from the industry become available.
PASSCO and Its Financial Health
Although the primary activities of PASSCO have been largely focused on wheat
procurement, it is also mandated to perform other tasks that have a bearing on
its financial health. A brief discussion of these activities, the procurement of
other crops, and its infrastructure, is presented first so that its financial situation
can be viewed with proper perspectives.
Besides wheat, the government has occasionally assigned the task of pur-
chasing other agricultural commodities to PASSCO, as the need arose for
