Lip service alone

Published September 7, 2020

August was the month of sharing good news on Twitter by Prime Minister Imran Khan and his team regarding the economic front.

Among them included the record high remittances of $2.768 billion in July 2020, a nine per cent jump in cargo handling in July – the highest in Port Qasim’s history, record bike sales of 300,000 units in July, the swinging of the current account deficit into a surplus of $424 million in July and the recovery of exports which aided in achieving the fourth monthly surplus since October.

The prime minister termed the last two years of his tenure “difficult” but many consumers believe that the 730 days were actually “very difficult” in terms of braving high prices of food items towards which the government paid little attention.

In his August 14 address to the nation, Imran Khan recounted difficulties such as low foreign exchange reserves, debt, avoiding defaults, reviving investor confidence in the stock market and business community, the boom in the construction sector, exceeding tax collection targets and reaching agreements with power producers for low power generation.

However, the prime minister ignored consumers’ rising cost of living in the last two years, triggered by soaring prices of essential food items. The two years’ performance report issued to the media in August by the PTI government also did not mention any progress in controlling food inflation.

From August 18, 2018, to August 18, 2020, the government opted for the easy option of putting the onus of the price hike for various commodities especially wheat, wheat flour and sugar on the mafia, hoarders and commodity investors instead of taking any action against them, leaving consumers to withstand persistent price increases.

Consumers have yet to receive any price relief amid scores of meetings in the last two years

The only thing the prime minister did was to take notice of escalating food prices in cabinet meetings, show concern during meetings with provincial government representatives and issue instructions to curb skyrocketing prices. On many occasions, Imran Khan appeared determined to end hoarding and profiteering. In April, the government issued an ordinance declaring hoarding a punishable crime. The culprits will have to face three years in jail, trials, heavy fines of up to 50pc of the value of seized goods and confiscation of stored products.

However, there are no reports of achieving any big recovery of goods like wheat and sugar from hoarders so far.

Manufacturers, retailers and wholesalers have not feared repercussions during the last two years, thus continue to push up prices based upon the vulnerable exchange rate, the soaring cost of production, utility rates and demand and supply gap.

Consumers have yet to receive any price relief amid scores of meetings in the last two years.

A big difference between retail and wholesale prices exists for various varieties of food items. Consumers pay 50-100pc more at the retail stage as compared to wholesale for vegetables, spices, pulses, etc.

The government is also taking credit for bringing down the current account deficit (CAD) by curbing imports of raw materials and finished products. However, the fall in the CAD also indicates low factory output of various items owing to falling imports of raw materials.

The rupee depreciation against the dollar continues to jack up production costs as one dollar reach­­ed Rs168 as compared to Rs123 during August 2018.

However, the government did not take into account the falling price of commodities in the world market which could make a strong case against manufacturers for jacking up prices on exchange rate parity.

Consumers continue to bear high prices of sugar and wheat flour amid scrutiny of wheat hoarding, smuggling of grain to other provinces and increase in flour prices.

Bread makers also played havoc with prices by raising rates by 28pc over the last two years. After a massive jump, plain and milky bread (small) is now available for Rs60 and Rs61 and large plain bread is priced at Rs110.

An increase of Rs30-40 per kg in various varieties of rice has also gone unnoticed.

Research Director and Senior Economist at Top Line Securities Atif Zafar said 50kg bags of sona urea and Diammonium phosphate are priced at Rs1,665 and Rs3,444 respectively as compared to Rs1,650 and Rs3,381 two years back.

He said gas rate (captive) has swelled to Rs1,021 per million British thermal units from Rs780, up by 31pc. The electricity rate has witnessed a jump of 25.20pc to Rs 18.5 per kW/h. According to Mr Zafar, food prices over the last two years increased by 28pc on average. The prices of perishable items registered a high jump of 32pc. He said prices have risen due to the higher cost of production as in between urea prices rose by over 15pc as well.

He said the rupee had depreciated by around 35pc in the last two years while other reasons for the price increase were supply-side disruptions due to tensions with India and poor crop output. “The inventory of crucial commodities like wheat and sugar has also been mismanaged,” Mr Zafar added.

General Secretary, Jodia Bazar Traders Association, Abdul Qadir Noorani said prices of spices have risen by an average 40pc over the last two years due to currency devaluation, local crop output and demand and supply situation.

He said the wholesale small cardamom price is now Rs4,200 per kg as compared to Rs2,000 in August 2018, while Dandicut Red Chilly of Umer Kot is available at Rs700 per kg as compared to Rs200-250 per kg two years back. Cinnamon’s wholesale rate is Rs450 per kg compared to Rs250 two years back.

Commodity and spices importer, Haroon Agar said “retailers mint a huge amount of money as consumers are unaware of wholesale prices. People do not get the actual benefit of falling wholesale prices in local and world markets of pulses and spices. Only 10 grams of small cardamom sells for Rs100 in retail markets.”

Published in Dawn, The Business and Finance Weekly, September 7th, 2020

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