After months of obscurantism and mudslinging between provinces, the Pakistan Bureau of Statistics have published prices of “Wheat Flour (Fine category)” for main consumption centres across the country, as tracked by weekly Sensitive Price Index. And it’s a treat for researchers.
Without getting into the politics of the issue, the glaring anomaly caused by constant prices of flour (average quality) in the Punjab province has now been addressed. As regular readers may appreciate, BR Research had frequently highlighted that flour prices for centres in Punjab province had remained unchanged for a considerable period, giving rise to suspicion that the SPI and CPI trackers no longer reflected accurate commodity price data.
Various explanations were offered for the anomaly, from positive spins to downright data fudging. Optimists argued that the Punjab government was the only one to successfully achieve the wheat procurement target set by the centre before crop harvest began; and, timely release of wheat by the provincial food department to flour mills had ensured that price of the essential commodity remained stable across the province, while it went amok in other consumption centres such as Karachi and Quetta.
Other ‘theorists’ insisted that the powerful hammer of district administration and price monitoring committees had ensured that flour retailed at government fixed rate across most of the province. The theory found many supporters, because of another anomaly stemming from price control regime.
Not only was the flour price in Lahore (and other towns of the province) as much as 50 percent cheaper than in Karachi, but flour was so cheap in Punjab that a kilogram of flour cost less than a kg of wheat. Not only did it defy common sense – if raw material was more expensive than processed form (output), there would be no suppliers – it had only one explanation: that Punjab government was releasing wheat to mills at a subsidized rate, to ensure that the benefit is passed on to consumer. The explanation was corroborated by unofficial sources and interactions with flour millers in the province, although Punjab government made no such public announcement.
While the incumbents at the centres (and their supporters) hailed victory for ensuring that flour was being supplied to end consumer at an affordable price in a year of shortfall, it also raised several questions. If the cause of affordable flour had been championed by the centre, why had the subsidy not come into action elsewhere? If the price control regime was so effective in Punjab – effectively forbidding any variation in flour price in nine cities of the province for over 6 months – why had it completely failed in KP and Balochistan? And why were opportunists not making hay in the presence of glaring arbitrage caused by regional price disparity? Similarly, why was obscenely cheap flour from Islamabad/Rawalpindi not making its way to Peshawar at 2 hours distance, and bringing price down in that city?
Finally, the skeptics claimed that they had found proof in the form of investigation reports shown by parts of electronic media. The dirt-cheap flour in Punjab was found to actually contain ‘dirt’ (was claimed to be contaminated), and unfit for human consumption. While the claim remains unproven, the situation found more twist when flour at government fixed rate was just no longer available in the retail markets of Lahore.
Now that the PBS has come up with an additional ‘category’ of “Wheat Flour (Fine)”, it settles some concerns, but raises several more. Of course, it is apparent that if PBS were to update flour prices in CPI and SPI indices all of a sudden, it would lead to an immediate rise to (reported) inflation, something the incumbents can ill-afford. Thus, it is likely that the revision may take phased form, hence the appearance of two different types of wheat flours (previously unheard of).
Moreover, some quiet self-reflection is in order for the incumbents at the centre and in Punjab. If the ‘Fine’ category wheat flour reflects the fair prices of the commodity in the province, did their attempts at price control and supply monitoring really pay off? After all, Fine category flour is most expensive in most towns of Punjab, even more expensive than in far flung regions such as Khuzdar and Bannu. Similarly, prices in Lahore are more expensive than in Karachi (which in hindsight may also be benefiting from imported wheat influx at seaports).
So, before the next wheat harvest season is upon us, PTI must ask itself: why is flour more expensive in the farming heartland of the country – Punjab – than rest of the nation? And who has really benefited from supply of “largest-ever government procurement (wheat) target” at subsidized prices to mills? If price of Fine category flour are anything to go by, it is definitely not the general public.
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