Did you hear about the recent milk price hike? Milk sellers have increased prices from Rs118 to Rs200 per litre in Karachi. Mind you that the price increase has come ahead of winter. So you can imagine how much pricier milk could be in next summer.
Before this, prices of tandoori roti and chapati rose Rs2-5. According to a Dawn report, in most neighbourhoods of the metropolis, tandoori roti is selling for Rs20-25 and chapati for Rs18-20. Even before that, branded bakery bread prices had also increased. Now, large, medium, small and mini bakery bread sells for Rs200, Rs150, Rs110 and Rs70, respectively. All kinds of bread have become pricier because wheat flour prices have increased. Currently, wheat flour in Karachi sells for Rs120-Rs125 per kg, depending on the brand.
Towards the end of September, the Ministry of National Food Security and Research told the nation that Pakistan had 8.664 million tonnes of strategic wheat reserves. Considering a lower-than-expected wheat output in the next year, the government had decided to import 3m tonnes of wheat. Prime Minister Shahbaz Sharif said last week that the private sector would not be allowed to import the commodity because of the ongoing foreign exchange crisis. The State Bank of Pakistan has only about $7.6 billion in reserves, equal to less than one and a half months of merchandise imports.
Pakistan’s agriculture is not suffering just because of the recent floods though the losses to the crops and livestock during the floods were huge. (The floods devoured more than 1.16m cattle heads; damaged one-third of the cotton crop, washed away a large part of the vegetable crops, marginally hit maise and sugarcane crops and made it difficult to sow wheat for the next season in the targeted area of land).
Perennial structural issues with our agriculture affect the availability of food for domestic markets at affordable prices and limit the growth potential of exports
Perennial structural issues with our agriculture affect the availability of food for domestic markets at affordable prices and limit the growth potential of food exports.
Wheat flour and sugar crises continue to hit year after year. But policymakers have not done little to avoid these crises or mitigate their impact on the 220m Pakistanis. The basic reason is top politicians of all the three major political parties — PML-N, PPP, and PTI directly or indirectly control these two main food crops and the backbone of their respective supply chains.
In the case of wheat, the Competition Commission of Pakistan (CCP) reidentified (as recently as in August 2022) some structural problems that continue to produce the recurrent wheat flour crisis — the problems that are identified time and again but not addressed.
The CCP asserted in a policy note that crop support policies and subsidies are too costly for the economy, there is a lack of level playing field for all the players in the value chain, lack of monitoring and enforcing the rates of extraction of wheat flour from wheat in traditional roller flour mills, lack of an adequate mechanism for testing of the quality of wheat flour and absence of labelling and variation in packaging size.
Top PML-N, PPP and PTI politicians directly or indirectly control wheat and sugar but have little incentive to mitigate the frequent price hikes
Furthermore, the CCP found that owners of chakki (small non-industrial scale grinding machines) now have an estimated two-thirds share in the wheat flour market. But “more than 95 per cent of the wheat’s subsidised quota is issued to roller flour mills annually” — and you get a clear picture of what is ailing our wheat flour industry.
Milk, wheat flour and sugar are among the 10 essential food commodities in the Sensitive Price Index (SPI) basket. (Others include onion, tomato, potato, edible oil and ghee, rice, poultry and pulses). Repeated wheat flour and sugar crises and arbitrary price hikes of milk affect the common people most and contribute to higher food inflation.
The CCP is working on a detailed study to identify the measures that could be adopted to address distortions in the market of these essential items. One hopes that the recommendations of the study will be taken seriously and at least one aspect (market distortions) of the agricultural economy would be taken care of.
Food inflation during September shot up to 30.8pc and 32.7pc, respectively, in urban and rural areas of the country. The damage done to the agriculture sector is one big reason for the higher level of food inflation. But poor, least-coordinated agricultural policymaking and poorer implementation are equally responsible for keeping food prices where they are now.
Since the devolution of agriculture as a provincial subject (effective from FY11), the federal government has done little to foster a culture of real on-time information sharing between all the provinces. The Ministry of National Food Security and Research is supposed to coordinate all agricultural dialogues and policymaking.
But when did you last see the federal minister for agriculture sitting flanked by provincial food and agriculture ministers at a presser? Did you see that even after the recent floods? Obviously not. That sheds light on the quality of coordination among all provincial heads of agriculture and between provincial and federal authorities. The agriculture sector’s post-flood rebuilding is impossible unless agriculture is spared political divisions and bureaucratic inefficiency.
Food exports and imports have long suffered from delayed decision-making and knee-jerk reactions to global or domestic events. Two handy examples are (1) the government is yet to finalise a decision about sugar exports, and (2) Prime Minister Shahbaz Sharif has already announced not to allow the private sector to import wheat. Who will be responsible for the sugar glut and further increase in wheat and wheat flour prices?
Published in Dawn, The Business and Finance Weekly, October 24th, 2022