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Struck hard: Wheat flour prices

September 05, 2013

THE Punjab government’s decision to raise the wheat flour price to Rs39.25 per kilogram will significantly drive up food inflation hitting those who fall in the lower- to middle-income brackets particularly hard. On Tuesday, the government said it would sell its wheat stocks to the flour mills at Rs1,330 per 40kg, passing on at least part of its expenditure on procurement, storage and handling of grain to the consumers. Food and energy prices have been rising sharply for the last two months. The price hike in wheat flour, electricity and oil were most significant. While the impact of the increase in energy prices on the quality of living is yet to be determined, the surge in food prices has already added to the financial burden of ordinary people. For example, the officially fixed price of wheat flour has gone up by over 17pc since July while consumer price index inflation last month soared to 8.55pc from a year earlier. The hike in food prices, which was recorded at 10.3pc last month and was the first double-digit food inflation reading in 13 months, is the main driver of this latest inflationary round. In fact, the 18pc surge in prices of perishable food items was even more staggering.

The government argues that the weak economic fundamentals — a huge financial deficit, feeble balance-of-payment position, massive public debt, etc — that it has inherited from the previous set-up are to blame for the current price hike; it feels that until the overall economy is fixed it will not be possible to stabilise prices. It has a strong point here. The people too are ready to give it the benefit of doubt. But for how long? Chances are that the people will be disillusioned with the government sooner than later unless they see it putting some check on the rising prices and taking the needed measures to arrest a sliding economy. Procrastination may provide its political opponents with enough fodder to bring the people on to the streets.