DEVALUATION AND MINI-BUDGET

The effect on essential commodities A 25% increase is expected

 
By Syed M. Aslam
Oct.26 - Nov 01, 1996

The mini-budget announced on the 22nd of this month has started a price spiral which has instantly affected, and would continue to affect the lives of millions of masses as prices of such essential kitchen items as pulses, spices, tea, edible oil, sugar, and rice are expected to increase by as much as 25 per cent. Prices of nearly half of these items already stand increased since immediately after the budget.

According to importers, many of whom are also wholesalers at the biggest commodity market of Karachi, Jodia Bazaar, the increased prices are the cumulative result of the 8.5 per cent devaluation of the Rupee, added with 2 per cent service charges on all imports subjected to pre-shipment inspection, withholding Income Tax on imports which has been increased by one per cent from 4 to 5 per cent, and a ten per cent increase in the prices of petroleum.

PAGE talked to a number of importers/wholesalers inviting comment on the effect of the mini-budget on the commodity market. The following are the views expressed by some of them.

Tea

A tea importer who talked to PAGE on condition of anonymity said that a medium quality tea, Goodsea imported from Kenya would now cost Rs 66 per kg to import instead of Rs 59/kg that it cost prior to the announcement of the mini-budget.

Pakistan, he said, will be importing some 150 million kg of tea from various countries during the current fiscal. "While we estimated that some 56 per cent or 85 million kg of it would be imported legally and the rest of 44 per cent or 65 million kg would find its way into the country illegally, we now feel that legal imports and smuggling would have an equal share of the market at 75 million kg each," he said.

Citing the figures compiled by the Federal Bureau of Statistics to support his contention he said these official statistics showed that 22.6 million kg of tea was imported during the first quarter (July-September) of the current fiscal--- 7.182 m kg in July, 6.925 m kg in August, and 8.495 m kg in September (provisional).

The statistics clearly show that while the country should be importing an average of 12.5 m kg of tea per month to meet the local demand it imported on an average merely 7.5 m kg per month during the first quarter of the current fiscal, he said. This clearly means that of the 12.5 m kg monthly demand only 65 per cent or 7.5 m kg was legally imported while the rest of the 40 per cent or 5 m kg was met through smuggling, he added.

The situation would become worse in the months to come as devaluation added with the increased tariff would discourage legal imports to the immense benefit of the smugglers.

He said the increase in the prices of various qualities of tea, both packed and open, reflected only half of the increase in the landed cost and would increase further within the next few days to reflect the real effect.

For instance, while the wholesale price of the above brand has increased from Rs 59 to Rs 63 per kg, it is expected to increase by another 3 rupees within the next few days.

Spices

Haji Usman, a trader who is also the chairman of Karachi Medicinal Importers and Trade Group, said that the wholesale prices of spices and ayurvedic drugs have registered an initial average increase of 10 per cent immediately after the mini-budget and will go up by at least another 10 per cent within the next few days.

He said that the wholesale prices of spices, on an average, have registered an increase of Rs 200 per 40 kg.

The wholesale price of black pepper of Vietnamese origin has increased from Rs 6550 to Rs 6800 per 40 kg and is expected to go up by an extra Rs 400 within days. The price of the Sri Lankan origin black pepper has gone up from Rs 6350 to Rs 6500-6600 per 40 kg while it will rise by another Rs 200 in a few days time.

Similary, a 40 kg bag of cloves which was wholesaling for Rs 2700 before the mini-budget is now going for Rs 2950 while another Rs 250 increase is imminent.

The wholesale price of a 40 kg bag of cinnamon has increased from Rs 4200 to Rs 4500 and will touch Rs 4700.

The per kg wholesale price of green cardamom has risen by Rs 10 to Rs 240 and is expected to reach Rs 270 while that of mace (jawitri) has gone up by Rs 5 to Rs 230 and will touch Rs 250, PAGE was informed.

Similarly, Haji Usman said, the wholesale prices of ayurvedic medicines which are mostly imported from India will ultimately increase by 25 per cent, with half of them having registered the increases already.

Another trader informed PAGE that the wholesale price of better quality 'kach kattha' from India has increased from Rs 180 to Rs 195 per kg and will go up to Rs 210, while that of RR Quality, also from India, has increase from Rs 2900 to Rs 4100 per 50 kg which translates into a per kg increase of Rs 24 from Rs 58 to 82.

Edible oil

A broker and importer of edible oil told PAGE that the price of Armati Malaysian palm oil has gone up from Rs 1130 per maund to Rs 1175 per maund while that of soya bean oil has increased from Rs 1130/40 kg to Rs 1160/40 kg and that of cotton seed oil from Rs 1090/40 kg to Rs 1115/40 kg. The above oils are used in the manufacture of ghee.

Similarly, he added, the prices of 17 kg of ghee have been increased on an average by Rs 20 and (Rs 2 per kg) by both the Ghee Corporation of Pakistan and other manufacturers one of which, Dalda, increased the price by Rs 2 per kilogram immediately after the mini budget was announced on Tuesday.

The prices of oils used in the manufacture of soap have also been increased — from Rs 62/kg to Rs 68/kg for coconut oil from Malaysia and from Rs 79/kg to Rs 84/kg for the same item of Sri Lankan origin, and white coconut oil from Rs 68/kg to Rs 76/kg and the 1st and 2nd quality of tiger coconut oils, all from Malaysia, from Rs 70 to Rs 75/kg and from Rs 66 to Rs 70/kg respectively.

Pulses

Surprisingly, the least activity has been registered in the pulse market the prices of which have increased only marginally from 2-3 per cent as the basic pulses such as channa (gram), moong' which had a good crop this year, and 'arhar' are produced locally.

Though the pulse market remains more or less detached at present, the real effect of the mini-budget would take months to manifest itself as importers at present are reluctant to clear their pulse consignments due to increased levies and if the situation persists it would result in increased prices. There has been no change in the price of black 'maash' which is wholesaling for Rs 625/40 kg and 'masoor' at Rs 2200/100 kg. Similarly, imported chick peas are wholesaling for Rs 21/kg while its smuggled Iranian is available for Rs 18/kg.

A kiryana (commodity) retailer while confirming that the prices of pulses remain least affected did confirm that prices of many essential items went up immediately after the mini-budget.

Sugar & Rice

Sugar which was retailing for Rs 22/kg is now selling for Rs 24/kg and the prices of different qualities of rice have increased anywhere from Rs 2-4/kg, he said. The wholesale price of rice has gone up by Rs 100 for a 100 kg bag, he added.

This is surprising as no rice is imported and shows that the retailers have used the prevailing confusion to make quick profits.

Dalda, he informed PAGE, has already increased the price of its 5 kg tin from Rs 242 to Rs 255 and 2.5 kg from Rs 123 to132. Similarly,

the prices of unpacked ghee and cooking oil have gone up by Rs 2 per kg to Rs 42, he added.

While the overall situation would become clearer over the next few days, it is certain the people would be paying some 20 per cent more on their kitchen budget.

Pakistan, he said, will be importing some 150 million kg of tea from various countries during the current fiscal.