On February 24, 2026, Pakistan’s Economic Coordination Committee (ECC), chaired by Finance Minister Muhammad Aurangzeb, approved the disposal of 500,000 metric tons of wheat held by Pakistan Agricultural Storage and Services Corporation (PASSCO).
The decision marks a significant fiscal and market intervention aimed at easing storage pressure, containing financing costs, and stabilizing wheat supply dynamics. However, it comes with a projected loss of roughly Rs 23.6–24 billion, reflecting the widening gap between procurement cost and current market-clearing prices.
Below is a comprehensive breakdown of the pricing structure, financial implications, supply chain context, and parallel ECC approvals.
Why the ECC Moved Now
PASSCO is currently holding approximately 2.1 million metric tons of wheat, including substantial volumes imported during 2021–22 at elevated global prices.
Several factors forced the federal government’s hand:
- Mounting storage and warehousing costs
- Rising mark-up expenses on financing
- Quality deterioration risks for older stocks
- Weak bidder response during previous disposal attempts
Earlier auctions failed because private bidders offered prices significantly below the government’s reserve expectations. The revised pricing reflects market realities rather than book values.
Revised Reserve Prices
The ECC approved new reserve prices to facilitate competitive bidding.
| Wheat Category | Revised Reserve Price (per 40 kg) | Pricing Context |
|---|---|---|
| Locally Procured Wheat | Rs 4,150 | ~12.5% below carrying cost |
| Imported Wheat | Rs 3,800 | ~41% below original import cost |
The reduction signals an acknowledgment that holding costs now exceed potential recovery value.
Financial Impact: The Rs 24 Billion Write-Down
The disposal is expected to result in a fiscal loss of approximately Rs 23.6–24 billion.
This loss stems from:
- Procurement at higher support prices
- Storage and handling expenses
- Financing charges
- Depreciation and deterioration of aging stock
However, policymakers appear to view the loss as a cost containment strategy rather than a fiscal shock. Prolonged holding would likely deepen the financial damage.
In economic terms, this is a sunk-cost recovery decision.
FIFO Mechanism: Clearing the Oldest Stock First
The wheat will be sold through competitive bidding using the First-In-First-Out (FIFO) method.
This approach ensures:
- Older imported wheat (particularly from 2021–22) is liquidated first
- Deteriorating stock does not accumulate further
- Storage infrastructure is freed for upcoming procurement cycles
Reports indicate portions of older imports may have deteriorated to the point of being unsuitable for human consumption, increasing urgency.
Federal–Provincial Pricing Tension
The ECC decision also intersects with provincial policy.
The Punjab government recently set a procurement price of Rs 3,500 per 40 kg, substantially lower than federal reserve pricing for locally procured wheat.
This creates a complex pricing dynamic:
- Federal reserves are higher than provincial procurement levels
- Market traders may arbitrage between supply channels
- Farmers could face downward pressure on open market rates
Managing this dual structure will require careful coordination to prevent distortions.
Broader Market Context
Pakistan’s wheat market is currently shaped by:
- Elevated carryover stocks
- Slower-than-expected private uptake
- Lower global wheat prices compared to 2022 peaks
- Liquidity constraints among flour mills
The disposal aims to inject supply into the market while reducing fiscal exposure.
The risk, however, lies in depressing farm-gate prices if supply overshoots demand.
Additional ECC Approvals
The February 24 meeting extended beyond wheat policy.
Technical Supplementary Grant for Pak-PWD Projects
The ECC approved a Rs 536 million Technical Supplementary Grant (TSG) for projects under the now-defunct Pakistan Public Works Department (Pak-PWD).
The funds will be transferred to:
- Government of Punjab
- Government of Khyber Pakhtunkhwa
These allocations ensure continuity of ongoing Public Sector Development Programme (PSDP) projects under revised administrative structures.
Petroleum Division Review: Cnergyico Settlement
The Petroleum Division presented a fact-finding report on a settlement agreement involving Cnergyico PK Limited related to delayed petroleum levy payments.
The ECC returned the summary with observations, requesting a more comprehensive presentation at a future meeting.
This suggests unresolved fiscal or compliance concerns regarding levy recovery and contractual arrangements.
Who Attended the ECC Meeting
The session included:
- Finance Minister Muhammad Aurangzeb (Chair)
- Federal Minister for Petroleum Ali Pervaiz Malik
- Federal Minister for National Food Security & Research Rana Tanveer Hussain
- Federal Minister for Investment Qaiser Ahmed Sheikh (virtual)
- SAPM on Industries & Production Haroon Akhtar Khan (virtual)
- Senior officials from relevant ministries and divisions
The multi-ministry presence underscores the cross-sector implications of wheat disposal, infrastructure transition, and petroleum compliance issues.
Strategic Implications
The wheat disposal decision reflects three broader themes in Pakistan’s macroeconomic management:
1. Fiscal Realism
Carrying losses forward to preserve book value is no longer sustainable under tight fiscal conditions.
2. Storage Capacity Reset
Clearing older inventory prepares the system for the upcoming harvest cycle and reduces spoilage risk.
3. Intergovernmental Coordination Challenges
Differing federal and provincial procurement prices may complicate market equilibrium.
Final Assessment
The ECC’s approval to dispose of 500,000 metric tons of wheat is not merely an inventory adjustment.
It is:
- A balance sheet correction
- A storage system stabilization effort
- A signal of pragmatic fiscal management
While the estimated Rs 24 billion loss is substantial, delaying action could have magnified the financial burden and worsened quality deterioration.