NationalVOLUME 16 ISSUE # 12

Unbridled food prices

Prices of essential food items have started rising again despite monitoring by a special committee of the government. The government expects inflation to fall within the previously announced range of 7-9pc for the current fiscal but rates of edibles have skyrocketed despite a 52pc increase in imports of food items in six months.

Rates of wheat, flour, cooking oil and sugar have gone sky-high while inflation remains the prime focus of Prime Minister Imran Khan. Prices are increasing because of the return of middlemen to the supply chain of commodities and speculation about their shortfalls. Besides, a significant increase in international prices of wheat and cooking oil also impacted their rates in the domestic market. According to media reports, the price of wheat flour increased to Rs64 per kg in retail from Rs58 a few days ago while the price of sugar surged to Rs90-100 per kg from Rs80. Similarly, the price of average quality cooking oil peaked at around Rs270 per litre from Rs220-225.

The price of sugar has skyrocketed after middlemen have returned to the speculative business, at a time when its production is in full swing. New supplies of the commodity have reached wholesale and retail markets. It means that there is no shortage of the commodity but speculative elements are using different tactics to mint money. According to reports, production of sugarcane has increased by 15pc in major cultivation areas of the Punjab. Besides, the average production of sugar from sugarcane has gone up to 14pc as compared to an average of 10-11pc in the past. Traders say mill owners have jacked up sugar rates.

Prices of cooking oil and ghee have also risen in domestic markets in line with the surge in their prices in the international market. Pakistan meets 90pc of its requirement of cooking oil and ghee through imports of raw material (palm oil) and refined products. The price of refined palm oil peaked at $1,080 per ton a few weeks ago compared with around $900 in the recent past. The prices have been rising since November following a drop in production of palm oil and seeds to historic lows in Indonesia and Malaysia in the wake of the pandemic. Similarly, prices of soybean and sunflower have risen in the world market.

The wheat price shot to a high of Rs63 per kg in wholesale as compared to Rs58 in the recent past. The price is rising following a slowdown in imports while local production is expected to arrive in markets at the end of February or the beginning of March. The government had decided to import more wheat to maintain supplies and bring down its prices but its rates shot up to $305 per ton in the world market compared to $235 per ton at the time when Pakistan received the first vessel of imported wheat in August-September 2020.

According to the Pakistan Bureau of Statistics (PBS), higher imports of food items inflated the overall import bill by 52pc to $3.9 billion in the first half of the current fiscal year. The import of wheat and sugar to control their prices played a major role in fuelling the overall import bill. However, the increase in imports of wheat, sugar and palm oil failed to provide any relief to people. The overall food import bill shrank by 4.32pc to $5.423b in FY20 under the government’s plan to curb imports. There were no wheat imports in FY20. Sugar imports also remained negligible. Pakistan imported 2.489 million ton wheat at a cost of $661m, with an average per ton price at $265. However, millers only provided one-time relief to consumers by slashing flour prices by Rs7 per kg in the third week of October.

The import of pulses rose by 13pc to 568,206 ton and 17pc in value to $287m. The average per ton price of pulses rose to $506 from $487. Their rates rose by Rs20 per kg in the wholesale markets recently. The import bill of palm oil stood at $1.111bn in 1HFY21 — up by 32pc than IHFY20 — while its import surged by 7.49pc to 1.629m ton. The average per ton price swelled to $682 from $555, resulting in a jump in ghee and cooking oil prices by Rs40-50 per litre/kg. The import of soybean oil also rose by 23pc to 72,756 ton and 18pc in value to $48m while the average per ton price fell to $663 from $668. A five litre pack of branded cooking oil, which was priced at Rs1,480 on January 14, is selling at Rs1,625. The price of average quality oil is now Rs250 per litre as compared to Rs200 on January 14, while high quality oil is available at Rs300 as compared to Rs250. Sugar saw an increase to Rs90-95 per kg from Rs85 per kg in the last week of December. An increase in high speed diesel prices by Rs2.95 per litre to Rs113.19 has further escalated the transportation cost. A recent hike in the power tariff will also add to high prices.

The government blames the pandemic for rising unemployment but it has no justification for rising prices. According to the Asian Development Bank, inflation in Pakistan is the highest in the Asia-Pacific region and at least twice its South Asian neighbours. Increasing food prices are seriously hurting people, especially low and middle-income groups. The government should take urgent measures to provide relief to people.