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Case of exorbitant wheat price

Case of exorbitant wheat price


The price of wheat flour is skyrocketing in Pakistan, registering an increase of more than 300 percent during the last 10 years. The question is why Pakistanis are forced to buy wheat flour at exorbitant price as compared to the other parts of the world when surplus wheat is available in the government stocks. According to the Pakistan Economy Watch, the government needs to look into distortions in the market as surplus wheat worth billions of rupees is wasted away annually due to lack of proper warehouse facilities in the country, leaving the field open for hoarders and black marketers to fleece the people. According to the economy watch, a former prime minister increased the wheat price as a poly to arrest the sliding popularity of his party. The step boosted the production of the commodity, but could not ensure his victory in the elections. However, in the process, the country lost competitive edge in the international market.

Reports suggest that the government has currently around six million tonnes of wheat in its warehouses and the next crop is expected to take the stocks to 25 million tonnes. With inadequate storage capacity in the warehouses, the government either will have to export wheat or donate it. Otherwise a loss of Rs 20 billion is imminent. The economic watch chief claims that the government has allowed $45 to $55 subsidy on export of wheat, but it proved to be a futile exercise as the government could not achieve the export target. He says that the government could only export wheat worth $3 million during 2014-15 and there is a need to change strategy to save the national exchequer from losses. Experts believe the government’s decision to increase the support price of wheat has benefited big land owners and curbed its smuggling to Afghanistan and the central Asian states, but it has given a severe blow the poor and fixed income classes in the country.

The mounting speculative pressure on price has also has worked as incentive for hoarders and black marketers, changing the dynamics of the flour market. The flour price has increased by Rs500 and wheat by Rs 800 per 40kg during the last five years, increasing disproportional increase in the cost of living. At a time the wheat price has gone down in the international market, it is constantly being increased in Pakistan, causing closure of about 700 flour mills in the country. Sooner the government brings down the wheat price, the better.