Unnecessary Government Efforts – Journal

Prime Minister Imran Khan recently admitted that his government had not controlled the prices of flour and sugar. Shortly after, his tweet about the possible drop in vegetable prices hit the headlines.

The Prime Minister and the members of his cabinet seem determined to reduce the rise in the cost of living by using an iron fist for their relations with the market mafias and hoarders. The Federal Investigation Agency has been charged with investigating the wrongdoings that have pushed up the prices of wheat flour and sugar.

Consumers are surprised by the government's late awakening on the issue of burning prices. They believe the government wants to take credit for lowering prices when supply improves due to the Sindhs wheat crop arriving in mid-March and the Punjabs harvest arriving on the market in mid-April.

The Prime Minister and his team were nowhere in sight when the flour mills triggered soaring prices from April 2019 to January 2020, bringing the various flour prices to Rs60-75 per kg against Rs33- 35 per kg. Blaming the Sindh government for not buying wheat in 2019, they said they had to buy expensive wheat on the open market.

How can consumers forget that they had to pay Rs400 per kg for tomatoes, followed by Rs500 per kg for chicken meat, Rs120 per kg for onions, Rs320 per kg each for pulses and the pepper, Rs80 per kg for the sugar and Rs260 per kg for the mungo daal?

The only reason for falling vegetable prices is the arrival of new crops and not the fear of a crackdown on hoarders and mafias in the market

Ghee and cooking prices have appreciated by 50 to 60 rupees per kg / liter in recent months, while the price of bulk milk has increased by 120 rupees from 94 rupees. Bread makers increased their prices by 17% in mid-2019. Tea prices have risen by 100 rupees per kg in the past seven months.

Now the price of tomatoes has dropped to Rs30 per kg and retailers are offering three to four kilograms for Rs100. The price of onions ranges from 60 to 80 rupees per kg, followed by the price of wheat flour to less than 50 rupees per kg due to the drop in the price of wheat to 3,800 rupees per 100 kg bag from 5,300 rupees a few months ago due to improved supplies Sindh Government to the mills. In April 2019, a bag of wheat was available at Rs3,000. The prices of other vegetables such as carrots, peas, cucumbers, peppers, calabashes, bottled squash, cabbage, etc. are now lower in the last quarter of 2019.

The only reason for the downward trend in prices is the arrival of new crops and not the fear of traders and mafias in the face of reports of a crackdown on hoarders, commodity investors and stockists. If the fear were really there, the price of sugar, produced by both the government and opposition MPs, would have dropped significantly. According to official figures, sugar production in December 2019 recorded a jump of 97pc to 1.093 million tonnes against 554 544 tonnes the same month in 2018.

Multinationals and other manufacturers are free to push up prices, as evidenced by soaring rates of ghee / cooking oil, powdered milk products, tea, bread, confectionery and baked goods, etc. Tetra milk producers recently raised prices to Rs200 from Rs180 on 1.5 liter packages, Rs150 from Rs140 for one liter carton and Rs38-40 from Rs35 on 250 ml pack.

The government also did not strictly monitor the inventory situation, the import price of commodities, the massive differences between wholesale and retail prices, ineffective price monitoring campaigns by municipal authorities and the illegal interurban movement of wheat and flour. Manufacturers drive prices up on exchange rate parity. If the government had gathered these statistics, it would have been easy to process them to avoid food inflation.

Manufacturers pushed prices up by citing rising transportation costs due to rising diesel prices, devaluation, new taxes and duties, tax rates on registrants and non-registrants, etc. However, the government has never taken into account the drop in import prices of certain products which could have given them a hand in relations with manufacturers.

The average unit price (AUP) of tea imports in the first seven months of 2019-2020 was $ 2,379 per tonne, compared to $ 2,649 per tonne for the same period in 2018-2019. Likewise, the UAP for palm oil was $ 568 per tonne compared to $ 613 per tonne last year.

There was a marked decrease in the pulses PUA to $ 489 per tonne in the first seven months of 2019-2020, compared to $ 545 per tonne. Likewise, the UAP for spices decreased slightly to $ 1,126 per tonne, compared to $ 1,136 per tonne.

Former President of the Pakistan Vanaspati Manufacturers Association (PVMA), Sheikh Amjad Rasheed, said that global palm oil prices have dropped in the past two months and that 90pc factories are passing on the lower costs by lowering prices by Rs5-7 per kg / liter for ghee and cooking oil.

The chief boss of the association of Karachi wholesaler grocers, Anis Majeed, said that world prices for pulses had dropped because of wholesalers who had reduced prices of Rs10-20per kg. However, the price reduction was not passed on to consumers, as retailers made higher profits by charging 40 to 70 rupees per kg, which is unjustified.

On the other hand, retailers believe that wholesalers have not taken full advantage of the massive fall in prices on the world market. They also did not pass on the lower costs due to the valuation of the rupee in the past seven months. One dollar is now equal to Rs154-155 compared to Rs164 in June 2019, which indicates a drop in import costs.

General secretary of the Karachi Retail Grocers group Farid Qureishi, while giving an example of free multinationals, said the government was least concerned with checking the frequent price increases by manufacturers of tetra and milk powder, manufacturers of tea, cookies and chocolate makers. He said these manufacturers have reduced the weight of their products but have continued to raise prices, which has also gone unnoticed by the government.

President Falahai Anjuman, the wholesale vegetable market of Haji Shahjehan, expressed surprise at the Prime Minister's tweet on falling vegetable prices. According to him, vegetables are perishable goods and their prices are based on demand / supply and crop situation; their prices are not falling due to the efforts of governments.

Take the example of tomatoes. Their wholesale price is now Rs10 per kg, which causes a sleepless night for producers. However, this price had swelled to more than Rs300 last year and consumers were paying Rs400, he said, adding that almost all of the vegetable crops were in full swing, driving prices down.

Vegetables are perishable and cannot be stored any longer. The government should check the hoarding and prices of solid foods like sugar, pulses, wheat and wheat flour, etc., he added.

The role of municipal governments in control is limited to establishing price lists rather than implementing these lists. Few retailers post price lists, which is unrealistic.

Traders feared magistrates in the days of the Musharrafs, but now they sell on their own terms. At the end of each day, the city government imposes a paltry amount of fines and imprisons traders in a few areas, but these efforts have yet to provide price relief to the masses.

This is the area where the federal government should have focused more.

For example, the city government has fewer than 100 officials to check profits in 18 cities in Karachi. Even 500 civil servants would be too few to cover the markets of the megalopolis. With limited officials, the price verification exercise becomes more futile during the Ramazan, forcing consumers to pay more than double the price of fruit.

Posted in Dawn, The Business and Finance Weekly, March 2, 2020