WHEAT flour prices remain unchanged despite the Rs200 per 100kg bag cut in the government-issued price for chakki and flour mills in Sindh.

The retail price of chakki flour — considered more nutritious than the variety rolled out by mills — stands at Rs42 per kg. The provincial food department reduced the issued price of a 100kg wheat bag from Rs3,450 to Rs3,250 in line with the government’s December 15 decision.

Usually, the government sells the wheat crop to chakki and flour mills between October and February. Between March and September, they easily buy wheat from the market as the new crop becomes available.

There are reports that Karachi-based dealers had imported wheat for Rs2,900-3,000 per 100kg inclusive of all charges this year, mainly for the provincial capital. This affected the sale of grain from the government’s warehouses, forcing the government to reduce the price to make it competitive.

Due to the small difference between the open market and the government-issued prices for wheat, the Sindh food department is finding it hard to sell its stock ahead of the arrival of the fresh crop

The arrival of the new crop is just round the corner and the government needs to empty its godowns to procure wheat from growers at the support price to avoid an outcry against a delay in procurement.

The provincial food department is approaching chakki owners to buy wheat at the new rate of Rs3,250 — excluding transportation charges, which would eventually take the cost to Rs3,310. Since the grain is available in the market at Rs3,320 inclusive of all transportation and related costs, the government’s offer fails to attract buyers.

Flour millers like Saleem Ghori argue that if they had bought wheat from the government at Rs3,450 in early or mid-2014, the retail price of flour would have hit Rs44 to Rs45 per kg for consumers.

“Until December 21, we purchased a 100kg wheat bag for Rs3,320 in the open market, which was inclusive of all charges and delivered at our end,” says chakki owner Mohammad Hanif Rajput from Hyderabad. He adds that for a few days, the market price stayed at Rs3,350, but then it dropped to Rs3,320 after the government’s latest announcement.

He explains that if the grain is bought from the provincial food department at Rs3,250 per 100kg, one would have to add the transportation cost of Rs60, which would take the price to Rs3,310, leaving only a negligible Rs10 difference between the official and open market prices.

As there is no major difference between the two rates, the buyers are lifting grain from the market. “The purchase of wheat from the market is easier than it is from the government’s warehouses, where we have to face a cumbersome procedure,” he says.

A buyer carries money to the bank to get a draft that is then submitted to the government’s account. Then the food department’s godown is approached for obtaining the wheat bags. To top it all, complaints of reduced quantity of wheat, coupled with quality issues, persist. However, in the market, buyers just place their order over telephonic to a broker, who ensures the delivery of wheat at their doorstep. The payment is made through online banking.

The current reduction in the price of grain doesn’t benefit consumers at all. For instance, in Hyderabad, wheat flour produced by chakkis continues to be sold for around Rs42. Chakki owners, says Rajput, add Rs290 as charges for electricity, labour, packaging etc, taking the overall price of post-grinded wheat to Rs3,610. Out of 100kgs, 86kgs are pure wheat flour, whereas the remaining 14kgs are bran or chaff that are sold at Rs18 per kg.

“This deduction of Rs252 means that 86kg of flour is produced at Rs3,358. So, the net cost of one kilogramme of wheat flour is Rs39.04. After adding 5pc profit margin, it is sold at Rs41 as ex-chakki rate. The retailers then sell it at Rs42 to the consumers,” he remarks.

Flour millers buy wheat from the market and extract superfine and granulated flour separately as by-products. These are used in bakery products or hotels for bread.

The government is trying to sell 300,000 metric tonnes of wheat at a reduced price till January 15, when the new wheat crop would start arriving in the market.

The provincial food department normally purchases around 30-40pc of the wheat crop (1.3m tonnes) of the roughly 3.6m tonnes produced by growers at the support price.

Published in Dawn, Economic & Business, December 29th, 2014