A crushing wheat crisis

November 12, 2019

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Wheat flour prices are on the rise even though we have enough stocks in the country and the government has banned the exports of wheat and wheat flour.

Six months ago, prices of ordinary wheat flour were in the range of Rs33.5 and Rs34 per kilogram. But now they have soared to Rs48.5-49 per kg, according to a recent Dawn report. This price surge, more than 30 per cent within six months, betrays the soundness of our entire wheat economy. It is a proof of the lack of coordination between the provinces and the federation.

In August, Pakistan had wheat stocks of 7.42 million tonnes, far less than 10.77m tonnes it had a year ago. The federal government had already banned the export of wheat and wheat flour on July 25. On the face of it, the country was bound to see a wheat flour crisis and averting it required enough imports and effective checks on the smuggling of wheat and wheat flour from Khyber Pakhtunkhwa to Afghanistan.

But between July and September, not a single grain of wheat was imported and the smuggling of wheat flour from Khyber Pakhtunkhwa to Afghanistan continued. The federal government did realise the seriousness of the wheat crisis — that hit Sindh and Khyber Pakhtunkhwa severely — in October and sprang into action.

Effective curbs were imposed on smuggling and the federal government told a Senate committee on Oct 23 that it was considering allowing imports.

The problem has its roots in the improper assessment of the grain availability, bureaucratic delays and poor coordination within different tiers of government

So the wheat flour crisis has its roots in the improper assessment of the grain availability, bureaucratic delays in decision-making and a lack of coordination between federal and provincial governments as well as within provincial governments. Pakistanis experience a wheat flour crisis after every few years, but the current crisis is unique: we are experiencing it at a time when the same party is in power in centre Punjab and Khyber Pakhtunkhwa. During the PML-N rule, this was not the case.

Whether it is the naivety of the PTI’s maiden federal government or our rotten and corrupt bureaucratic system — or perhaps both — we are once again in the vortex of a wheat flour crisis. The federal and provincial governments are trying to mitigate its effects on the public, but they are late. People have already suffered. They suffer now and may continue to suffer until these efforts bear fruit.

This is not to suggest that general inflationary trends in the economy have nothing to do with the recent price escalation of wheat flour. Headline inflation has remained in double digits since August when the year-on-year increase was 10.5pc. It increased to 11.4pc in September before inching down to 11pc in October, data released by the Pakistan Bureau of Statistics (PBS) reveals.

What is more disturbing is that food inflation in both urban and rural areas has remained even higher. Urban food inflation in August stood at 11.9pc. It soared to 15pc in September before falling to 13.7pc in October. Food inflation in urban Pakistan was 12.6pc in August. It rose to 15pc in September before slipping to 14.6pc in October.

Wheat flour is one of those 51 essential items that are included in the basket of goods and services for calculating the Sensitive Price Index or SPI. Inflation measured through the SPI is regarded as inflation for the poor. If the prices of food items like wheat flour rise sharply, poor Pakistanis suffer more.

According to the PBS, SPI inflation during the week ending on Oct 29 recorded an 18.44pc annual increase with the wheat flour price accelerating 17.64pc. The veracity of officially admitted prevailing prices of essential items almost always comes under question from political parties of the opposition and independent market watchers. But even if we believe that wheat flour prices went up by 17.64pc between November 2018 and October 2019, it is still too much.

Perturbed about the meteoric rise in the prices of essential items of daily use, Prime Minister Imran Khan has now decided that the PM Office will monitor these prices on a weekly basis. He has also directed provincial authorities to take effective steps against profiteering and hoarding. Former premier Benazir Bhutto during her second term in office had initiated this exercise, but her approach was more inclusive. She had created a forum for all stakeholders, including business representatives, to meet and discuss threadbare the root causes of food inflation.

It is time for our policymakers to dig deeper into the root causes of the past and current wheat flour crises, learn their lessons and spell out clearly for all stakeholders what they are supposed to do to avert such a crisis in the future.

Such an exercise must also examine honestly how political meddling and economic anomalies in the fixing of support prices and corruption in the distribution of subsidised wheat to flour millers have mired our entire wheat economy. —MA

Published in Dawn, The Business and Finance Weekly, November 12th, 2019