Earlier, wheat flour was normally available at Rs12 to Rs14 a kilogramme. But in six months, the prices shot up by 80 to 85 per cent, with fears of hitting Rs25 a kilogramme this Ramazan.
A rather belated release of wheat from government stocks to flour mills in Sindh and in Punjab from September 7 did not create any impact on flour prices initially. But a week later the government’s decision to import one million tons of wheat and more than 40 per cent release of wheat from its stocks, somewhat, eased the supply. It brought down the flour prices to Rs16 - Rs18 a kilogramme by Wednesday.
There is no official explanation as yet why the government delayed release of wheat from stocks of Punjab, Sindh and Passco when flour prices had crawled up beyond Rs18 a kilogramme in August and there were reports of scarcity in many parts of the country.
The Trading Corporation of Pakistan (TCP) is about to float the first tender for import of wheat sometimes this week. With about four million wheat stock, the government’s strategy is to cover lean period from December 2007 to February 2008 from imports.
But the government’s decision to import wheat has come at a wrong time. Food merchants say that global wheat stocks were never as low in last 25 years as these are now. Wheat prices in international market are in the range of $330 to $350 a ton. With rise in international oil prices, the ship freight is also rising.
“Landing cost of imported wheat will be somewhere close to Rs27,500 to Rs28,000 a ton’’ a grain trader warned. As against this expected import price, Pakistan earned about Rs13,000 per ton on wheat export in March and April this year. Total wheat export earning during 2006-07 is less than three million dollars as against which the cost of wheat import may go up to 400 million dollars.
Wheat import this year will cost the government anywhere from Rs35 to Rs40 billion taking into account the price difference between export and import, handling charges, freight cost and the subsidy factor. And if market rumours are to be believed, then a substantial quantity of subsidised items from the Utility Stores Corporation are finding way into private grocery stores. Real beneficiaries are not consumers but officials and shopkeepers. “Will it be so in case of imported wheat on which government will be compelled to give subsidy,’’ a grain trader of Jodia Bazaar enquired.
A blame game has already started within the government. On Wednesday evening, the federal industries and production Minister Mr Jehangir Tareen blamed the Punjab government for price hike and scarcity of wheat and wheat flour in the market. Participating in a talk show of a private electronic channel, the federal minister failed to understand as to why the Punjab government held on to its wheat stock till September when wheat was scarce in market and prices of wheat flour was rising.
Punjab Chief Minister Chowdhry Pervez Elahi also a participant in same talk show programme, blamed wheat export for the crisis in Pakistan as according to him wheat from Pakistan was being sold openly in Afghanistan and Turkmenistan these days.
Sufi Bilal, a senior leader of the flour mills industry in Lahore said those who created wheat crisis were so powerful that they had managed to stop the Punjab government from releasing wheat from official stocks. “It was our pressure that the Punjab government decided to release wheat from its stocks on September 7 and then increased it by almost 50 per cent for the mills that eased the situation’’, he maintained.
A day earlier, a special secretary in the finance ministry blamed the Federal Food Minister Hayat Mohammad Khan Bosan for taking a premature wheat export decision that led to present crisis.
“We started this season in March with plenty of wheat harvest and are ending up with scarcity’’ a market analyst summed up six months story of market manipulation, helplessness of the consumers and an ineffective or rather intriguing role of the government that is being held responsible for converting plenty into scarcity.
With a carryover stock of about 4.3 million tons of wheat from previous season (06-07), initial estimates of harvest of 23.5 million tons of wheat this spring, about 0.8 million tons to 1.3 million tons of wheat (unconfirmed figures) were exported before government suspended it abruptly in late May.
But the government miserably failed to stop speculators from buying and hoarding wheat.
Prices of wheat and wheat flour started spiraling up in May onwards. In late August a special secretary in finance ministry alleged hoarding of two to three million tons of wheat by speculators. He claimed of being in possession of a list of names of all such hoarders in Punjab and Sindh. In fact a list of all such hoarders in Punjab was released to media also. The special secretary had announced to raid on all such hoarders which was never done.
Even now (on September 19) when wheat and wheat flour supply and prices have eased in Karachi and many other parts, there are reports that consumers in larger parts of the NWFP and Balochistan are still facing scarcity and are paying more than Rs20 for a kilogramme.
Both politicians and bureaucrats dealing with food in the government still insist on harvesting a record bumper wheat crop of 23.5 million tons. An optimist assessment of harvesting a bumper wheat crop was, in fact, made months before harvest. As early as December 2006, the Economic Coordination Committee (ECC) of the cabinet decided to export half a million tons of wheat from its 4.3 million tons of stocks, in anticipation of a bumper crop.
The State Bank of Pakistan too shared the optimistic assessment of a bumper crop in its annual report of 2005-06 released in early December. The bank report, however, had a word of caution for the government to build up strategic reserve before allowing exports. It warned of speculators, hoarders and profiteers taking over control of market if wheat export was allowed before an adequate strategic reserve was built up in the country.
Millers and grain traders blame government of being too optimist in wheat crop assessment. Crop estimate is shown on higher side to push up GDP figures because wheat and cotton have relative more weight in production index. “Crop assessment is primitive and a patwari is the lynchpin of whole exercise’’, a leader of flour mills said. Sampling is done without any method or principle and crop estimate is merely a guess work that always proved wrong. He said that same controversy is now going on about cotton production where initial official assessment is on higher side while private observers believe that there has been some damage by the virus and pest attack.
Whether the government assessment of wheat crop at 23.5 million tons is right or wrong, the fact remains that a decision to export as early as in December 2006 from the previous crop and then in spring from new crop has proved disastrous. The Sindh government could procure less than 600,000 tons as against a target of 0.7 million tons because the speculators stepped in the market. It was the same in Punjab where the provincial government and Passco also were not able to purchase wheat from the farmers.
Grain merchants concede of at least one million to 1.3 million tons are in hands of traders while questioning government’s accusation of two to three million tons of hoardings by the speculators.
In India and world over, wheat is being sold at Rs25 for a kilogramme and you cannot keep your wheat at Rs12 to Rs14 a kilogramme within your boundaries.
This is one reason being offered for wheat smuggling by those who believe in market economy. Their prescription is that in present circumstances, the minimum price of wheat should be Rs18 a kilo. But farmers should get this price directly with no subsidy element.
Compensate urban population in some other way because artificially low prices neither help farmers nor consumers.