Hike in wheat support price pushes flour rates up by Rs11 per kilo

Published May 7, 2022
With termination of official wheat releases and the millers starting purchase from open market, 22.22 per cent increase in support price – from Rs1,800 to Rs2,200 per maund – on Friday translated into a hike of Rs11 per kilogram of flour.—Reuters
With termination of official wheat releases and the millers starting purchase from open market, 22.22 per cent increase in support price – from Rs1,800 to Rs2,200 per maund – on Friday translated into a hike of Rs11 per kilogram of flour.—Reuters

LAHORE: With termination of official wheat releases and the millers starting purchase from open market, 22.22 per cent increase in support price – from Rs1,800 to Rs2,200 per maund – on Friday translated into a hike of Rs11 per kilogram of flour, making life of the poor even more miserable.

The 10kg flour bag, which has so far been available in the market at Rs550, will now sell at Rs660 and 20kg bag, which hitherto cost Rs1,100, would now be sold at Rs1,310 – the biggest jump ever, which is going to hit the poor more psychologically as subsidy (Ramzan package) ended on one hand and increased wheat price has taken hold of the flour market on the other.

These rates have been announced by a section of millers having a substantial market share. However, the Pakistan Flour Mills Association (PFMA) Punjab chapter, on its part says it has asked its members to restrict the increase to Rs10 per kilogram, and even that will not be province-wide. In south Punjab, where wheat is still relatively cheap, the increase will go down correspondingly, says Asim Raza of the PFMA.

Nevertheless, it is being feared that higher rate (Rs11 per kilo) will be followed by all.

Defending the rate, Majid Abdullah says they have announced the highest rate so that the millers do not sell flour at more than those rates.

“One must not forget that the rates are not official and will not be notified as such. The looseness of the rates gives individuals chances of exploitation. These flour rates were calculated at a wheat price around Rs2,300 per maund (current open market price). If in some area, wheat is available at lesser price than that, the price of flour will be less. There is always five to ten per cent margin in flour price during the peak season. The price, by and large, settles down as market gets drier,” Majid explains.

This increase is only a matter of time, Khaleeq Asrshad, one of the individual millers who hiked the flour rates on Friday, claims. For the last many months, the food department had been providing wheat at a release price of Rs1,950 per 40kg. During Ramazan, it was pushed down to Rs1,600 per 40kg for the first 20 days – and 10kg bag was selling at Rs450.

For the last 10 days, when Prime Minister Shehbaz Sharif took over, it was brought down further to Rs1,380 to sell 10kg flour bag at Rs400. Now, everything is gone suddenly – the release price that had gone down to Rs1,380 per maund has shot suddenly to Rs2,300 per maund.

“It was bound to happen as subsidy bubble burst and the new support price started reigning the market. What added to wheat price increase is the decision by Punjab to procure another million tonnes for its stocks. Till before Eid, the market rate of wheat was Rs2,200 per maund. With the Punjab deciding to purchase one million tonnes more, the market was bound to go up as the millers now have to compete with each other to get their share. This natural market equilibrium is now dictating the market and price is increasing,” he says.

“It is being apprehended that the price may go further up if the department continues competing with millers and buying wheat. The smaller farmers had already thrown the commodity in the market or official godowns. Now, relatively bigger farmers, who had the holding capacity, are not selling wheat, and they will certainly wait and see – selling only when profits maximise,” says Abdul Jabbar – a middleman from the city.

There are market rumours that food department may increase its target by another half a million tonnes – incentivising the farmers to hold wheat for longer period to maximise profit. It means more competition and higher wheat prices in the market, he fears.

Published in Dawn,May 7th, 2022

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