Agriculture Reference
In-Depth Information
underpinning their market prices during the harvest season. Thus, in addition
to wheat, PASSCO has procured paddy, onions, potatoes, gram, and oilseeds
in various years (Appendix Table 4A.3). Unlike wheat, for which both PFDs
and PASSCO have regularly intervened in the market, only PASSCO has in-
tervened in other food crops and then only occasionally. The intervention by
PASSCO in marketing these crops has been characterized by an ad hoc ap-
proach. The scale of activity has not only been small but frequently late as a
result of delayed government decisions or fund allocation. In some cases the
reluctance of the finance ministry to pick up the losses borne by PASSCO for
its procurement operations also played a role in an ineffective market outcome.
Notwithstanding these deficiencies, it has been observed that the very presence
of PASSCO in the market had a salutary effect on the market prices during the
harvest season.
Furthermore, PASSCO has developed infrastructure to design, construct,
and oversee the development of grain storages to meet its requirements. At pres-
ent, it has a covered storage capacity of more than 400,000 tons. These stores
are of three types: house-like warehouses, open bulkheads, and mechanical
silos. Moreover, about 100,000 tons of capacity in the form of raised platforms
is also available. PASSCO is not only a pioneer in the construction of silos in
Pakistan but has also developed infrastructure for mechanized bulk handling of
grain. Because of these advances, grain losses and handling times have been
considerably curtailed. In recognition of its services in the field of engineering
works, PASSCO has been nominated as the agency for rehabilitation of grain
warehouses owned by PFDs.
Despite performing additional policy-driven tasks, PASSCO's financial
condition is sound. It has paid-up capital of Rs 30 million and has over time ac-
cumulated reserves of Rs 533 million. Despite its small capital base, PASSCO's
annual turnover from 2000/01 to 2002 on average was Rs 10 billion. The agency
does not receive budgetary supports from the government except for the lower
mark-up on cash credit to finance its commodity procurement operations (that
is, 9.5 percent versus the current market rate of 10-14 percent). Similarly, there
is no burden on the exchequer for the pay and allowances of PASSCO's em-
ployees and its other expenditures.
According to a study by the World Bank, PASSCO is essentially a service
organization for implementing the government's food procurement and distri-
bution policy (see Faruquee, Coleman, and Scott 1997). Thus, its financial per-
formance need not be judged strictly as that of a commercial concern. But prof-
itability has become a basic criterion to measure the efficiency of such an entity,
because many people believe that the best way to make an enterprise efficient
is by requiring it to maximize profits in a competitive environment (see Mary
and Nellis 1991). In this context, data on the financial performance of PASSCO
from 1984/85 to 2001/02 are given in Table 4.8.
