KARACHI, Sept 20: With Ramazan hardly five weeks away, prices of sugar and flour are reported to be crawling up in the retail because neither the sugar nor the flour mills are under any legal or moral obligation to declare retail prices of their products on container bags.
Sugar prices are reported to have crawled up to Rs20 a kilogramme during the single month of September in face of millers claim that they retained over a million tons of sugar inventory from 2002-03 crushing season.
The next crushing season is hardly 10 to 12 weeks away and with abundance of sugar available in the inventory, there does not seem to be any plausible explanation for price hike. Market watchers fear sugar becoming scarce during Ramazan when consumption is higher than other months.
Market operators blame sugar millers for suspending supplies to the distributors, which has forced the retailers to push up the prices. A set of brokers is also reported to be operating from New Chali and Jodia Bazar in Karachi to see that sugar supply remains shorter than the demand and hence the justification for price hike.
Another set of brokers with stake in flour milling is reported to be responsible for pushing up wheat price in open market to Rs900 plus for 100 kg bag. Demand for wheat in the open market has started mounting when the Sindh food department made a policy decision to offer a mix of 2003, 02 and 2001 crops from the government stocks to the flour millers.
An auction of 69,000 tons of old crop wheat from the government stocks on August 5 in a single lot has already put the Sindh food department under tremendous pressure as the chief minister is still holding up the decision to release stock to the successful bidder even after one-and-a-half month. The successful bidder is from Ghotki, the chief minister’s home district, and the local market is abuzz with many rumours. Reports suggest that bid was offered at Rs5,710 a ton, which was renegotiated at Rs6,370 to push up total price by about Rs45 million.
One such rumour suggests that auctioned stock is short by 20,000 tons indicating either a pilferage or wheat stock being rendered unfit for human consumption. The food secretary was reported to be in Bahawalpur on Saturday and no other official was available to offer any explanation of this auction transaction of the biggest ever single wheat lot, which is now becoming a mystery.
Market analysts believe that these recent developments in the wheat and sugar trade indicate either total ineffectiveness of the Sindh food department or collusion of its officials in creating conditions of scarcity and price hike.
A conversation with millers, traders and business professionals indicated the need for an effective strategy to safeguard the interest of the consumers from the market sharks.
Putting retail price on product is one such method. “It is being done in Punjab and why can’t it be done in Sindh,” Iqbal Qandhari, a former leader of the Pakistan Flour Mills Association (Sindh), said while suggesting that every wheat bag of two, five or 10 kilogramme should carry a printed retail price. “Atta is atta,” he said rejecting that there is some special atta, chakki atta or any other variety of atta which should have difference in prices. Now that there is a move to iodize flour there is a need to declare ingredients of the flour bag boldly.
Sugar millers also do not put up retail prices on their bags. Sugar is sold in loose quantity. Millers can offer them in small and big bags with retail prices printed on them.
Both these segments of industry — sugar and flour — are plagued with acute financial and technical problems that stem from over-capitalization, surplus installed capacity, under utilization of capacity and total dependence on highly subsidized wheat from the government stocks and a virtual green house market conditions for sugar millers. Both these sectors expanded under official patronage of political and Martial Law governments and represent the conventional parasite capitalists who thrive only in green house conditions.
Market reports suggest that seven sugar mills out of 78 are now idle. The 71 odd mills are operating on partial production capacity. A rough estimate shows Rs55 billion investment in these sugar mills. As much as Rs25 billion is stuck up with idle mills and those which are not operating on full capacity.
An official report on sick sugar mills showed that the sugar sector showed bad loans of about Rs35 billion in 1999. This included over Rs29 billion principal amount and remaining was accumulated mark. It is doubtful if the sugar mills could have cleared this stuck up amount of bad loans.
Leaders of the flour mills report closure of 300 mills out of about 900 in the country. Total grinding capacity of all these flour mills is more than three times the actual consumption of flour in the country. For long there has been a collusion of provincial food departments, millers, traders and brokers, and subsidy on government stock wheat ran into billions of rupees every year. This subsidy was never passed onto the consumers.
Powerful political families have thrived on these rich subsidies. Corruption too has a saturation point and it has reached this stage or about to reach this stage in wheat trade where now the government, thanks to mounting pressures by the IMF, is forced to cut down heavily on subsidies.
