Barter trade plan stalls, Iran cancels wheat export contract

By Zafar Bhutta Published: August 27, 2013

Pakistan’s efforts to export wheat to Iran, aimed at paying outstanding bills for electricity import, have been frustrated as state-owned Trading Company of Iran has cancelled an export contract under a barter trade agreement.

According to sources, the issue came up for discussion in a meeting of the Economic Coordination Committee (ECC) on August 15 in which the body was told that Iran had scrapped the contract for export of 30,000 tons of wheat.

The Trading Company of Iran told the Pakistan Agriculture Storage and Services Corporation (Passco), the two entities that had entered into the contract, about the cancellation of the deal on July 16.

Earlier in an ECC meeting held on July 30, the participants proposed that keeping in view the decision taken by the previous cabinet, the committee may pave the way for export of 30,000 tons out of the approved 100,000 tons, to Iran as well as payment of cost differential estimated at $70 per ton.

The ECC asked the finance ministry to submit in the next meeting a report on the proposal for payment of cost differential by the government on account of transport charges and current international prices of wheat.

Later, the ECC was told that it was no more necessary for the finance ministry to submit the report.

According to officials, Pakistan had agreed to sell wheat to Iran at $300 per ton to cover the cost of electricity being supplied to the National Transmission and Dispatch Company (NTDC) by Iran’s Tavanir. The government was to bear the price differential on account of transport charges and current international prices of wheat, estimated at around $70 per ton, in light of the ECC decision in 2012.

The officials said the NTDC had already paid the rupee equivalent of $9 million to Passco as the cost of 30,000 tons of wheat, out of $53.21 million owed to Tavanir.

The government had been exploring the possibility of barter trade for export of one million tons of wheat to meet Tehran’s needs and ship the surplus commodity. In May this year, the cabinet approved export of 100,000 tons as the Iranians needed 30,000 tons at a rather short notice to meet their key requirements.

The Finance Division, Ministry of Foreign Affairs and Ministry of Water and Power threw their weight behind wheat export under barter trade. Wheat trade is said to be permissible in a barter arrangement with Iran and does not invite the United Nations’ sanctions.

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