LAHORE, Nov 28: The flour price is set to rise further in the province as the Punjab government has decided to release wheat to millers at an ‘exorbitant’ price of Rs440 per 40kg. The Food department on Monday decided to release 18,500 tons of wheat on daily basis from Wednesday (tomorrow) after continuous pressure from the millers during the last one month.

According to market analysts, the decision to release wheat at Rs440 per 40kg will soon reflect on the flour market and the price of 20kg bag may go up by at least by Rs5 per 20kg bag in the next few days.

Supporting their claim, Majid Abdullah of Pakistan Flour Mills Association says that the millers will hold negotiations on Tuesday (today) with the department to fix a new price in the light of hike in the release price.

Should that happen, it will be second hike in flour price in the last three weeks — the millers unilaterally increased flour price by Rs4 per 20kg bag after Eid on the pretext of wheat shortage in the open market. (They raised ex-mill price from Rs244 per 20kg to Rs248.)

Market sources claim that the official decision to raise release price will benefit traders at the cost of urban consumers. They maintain that presently wheat price in the southern part of the province is around Rs420 per 40kg. It increases marginally in the central Punjab and goes up to Rs450 per 40kg in the deficit divisions like Rawalpindi, Lahore and partially Gujranwala.

By releasing wheat at Rs440, which will cost the millers at around Rs455 per 40kg because of transportation and gunny bag expenses, the department will end up increasing market price from Rs450 to Rs460 per 40kg in the province.

Agreeing to the market watchers, Majid Abdullah of the PFMA concedes that ex-mill price of flour will go up at least by Rs3 per 20kg — Rs7 in total during the last three weeks.

The millers are also on the record seeking additional Rs4 in the head of increase in input cost. They have been pressing the food department to allow them Rs4 hike because the present formula for fixing ex-mill price has been agreed upon five years ago while the prices of inputs have gone up sharply since then.

“The government has repeatedly failed to realise that traders are neither grinders nor farmers,” says an official of the Kissan Board Pakistan. But every time the government ends up benefiting them. The traders purchase this wheat at Rs400 per 40kg as does the government. Now, since the government wants to decrease its so-called subsidy on wheat, it has ended up allowing traders to increase their profits correspondingly. This is being done at the expense of urban consumers who face the brunt of the decision.”

An official of the Punjab food department concedes that the wheat price may also be increased further in the next two months when the subsidy is slashed further. With present price of Rs440 per 40kg, the provincial government will have to pay Rs1.5 billion subsidy. The Punjab government wants to cut the subsidy down to Rs1.2 billion and in order to achieve this figure, the department has to increase wheat price by at least Rs5 in the next two months, he said.