Time to act!

Dec 08 - 14, 2003

If the substantial increase is any indication we are heading towards an acute wheat crisis which many fear would push the prices to levels that would be unaffordable to the greater part of the population. Before we discuss the reasons, or lack of it, responsible for the quick rise let us see the pattern of increase in the recent months.

Information collected by PAGE after talking to a number of small millers as well sources in the biggest commodity market of Jodia Bazaar show that the price of wheat flour has registered a substantial increase since the advent of the holy fasting month of Ramazan about 40 days ago. Like everything else the real, or created shortage as many say, to help push the prices started in Ramazan during which the prices of all edible as well non-edible items are increased on this pretext or other, and in many cases without any pretext at all.

The Sindh government instructed the big flour mills, there are some 80 such mills in Karachi, to supply the 10 kilogram bag of wheat flour to the retailers which they were asked to sell at Rs 105. However, the quality of the flour was inferior and many blamed it on the bad wheat stored in the godowns for last many years. While the big flour mills which market their products under various brand names have a policy to accept returns from the retailers in case of complains or damage they refused to accept the returns in Ramazan, an indicator that there was certainly something wrong with their products.

Later in the month, the officials of the provincial food department raided many flour mills, for instance in the Samnabad area, which were selling a 10 kilogram bag of rice way above the official price at Rs 140. The mills found a novel way to continue fleecing the consumers by putting up signs that while the price of a kilo of wheat flour was Rs 12 the price of milling was Rs 2 per kilo thereby circumventing the law to avoid further raids. Meanwhile, the consumers were forced to keep paying the same price under different set-up.

At the writing of these lines branded flour from any of 80 big mills is selling between Rs 13 to Rs 14.50 per kilo while the same product from some 1,500 small millers spread across the city has touched the Rs 16 per kilo level. For instance, on the 2nd of this month a 10 kilo bag of Ashrafi brand flour was retailing for Rs 140 while the same quantity bag of another brand A-One was retailing for Rs 125. Retailers told that the prices of the two brands were expected to increase by another Rs 5 anyday.

On the same day, the price of wheat in the open market registered a sharp increase of Rs 35 per 80 kilogram increasing to Rs 1,130 from Rs 1,125 two days earlier. Retailers said that the price of wheat in the open market has been on a constant increase during the last month. They also expressed fears that failure to check the situation would push the retail prices to Rs 18-20 in the coming weeks.

Two days later PAGE talked to the chairman of Karachi Wholesalers Grocers Association, Anis Majeed, who said that the price of wheat in the open market had touched Rs 1,150 per 100 kilogram way over the official rate of Rs 830-850 per 100 kilogram that it supplies to the big flour mills. "The wheat is available in the open market as yet but it is getting short by each passing day and it is feared that the province has only a month stocks of the commodity left."

Asked who he think should be blamed for the crisis he said that the increasing prices clearly show that the demand far exceeds the supply and that explains why the government is not able to supply the required quantity to the millers. "All said, the shortage seems to be genuine and the crisis is getting acute by each passing day that necessitates the need for imports."

What makes the situation even worse is that while the Economic Coordination Committee (ECC) of the cabinet decided to abolish the 15 per cent import duty on the commodity in its meeting held on the 20th of the last month it withheld any decision just how much wheat should be imported because of the absence of reliable data on the stocks held by the private sector. That also fuels the speculations that the private sector is sitting on substantial stocks of the commodity in league with big millers who have found it convenient to earn heavy profits overnight without any work at all. The fact that the government blames the miller and the millers blame the government for short supply offer no relief to the consumers who are forced to absorb unaffordable prices for the most staple dietary item.

With the wheat harvesting season months away and the ongoing shortage, irrespective of the fact whether it is real or created by one or all of the mant players in league, has already pushed the flour prices to high Rs 16 per kilogram. It is time that the government take the necessary measures either to nab the culprits, if any, responsible for the fiasco or invite international tenders to import the commodity to ease a situation which is getting worse by each passing day. The shady distribution system that does not allow the government itself to know just how much of the stock lies with the private sector, the unethical practises by numerous middlemen at every stage of the supply chain, the inaccurate and unreliable production forecasts and rotting of tens of tons wheat in the godowns should be investigated to avoid any real, or man-made, crisis in the future.

The international prices of wheat stands at around $ 180-200 at present. If the government has to import the commodity it may consider importing the commodity from neighbouring India which would cost it much less than any other source including substantial savings in freight. The time to act is now.