The federal government’s steadfast determination has paid dividends. Despite advocacy from MNFS&R and coalition allies, it resisted temptation to give in to farming lobby’s pressure and increase wheat MSP exorbitantly to Rs 2,000 per 40kg. Ever since, wheat and flour prices are on a decline across country.
But national averages hide regional discrepancies. Consider that in the past 30 days, while wheat prices have declined by 4 to 6 percent in all major centres across the nation, flour prices have shown an altogether different trend. National average decline of 5 percent in flour prices is led primarily by fall in Sindh and Balochistan, while prices have remained virtually unchanged in Punjab. What gives? Look closer, and it becomes apparent that prices in southern provinces are only converging to the much lower levels already prevailing in Punjab since July. Consider: average flour price in Sindh currently stands at Rs 1075 per 20kg bag, against just Rs 860 in Punjab – a whopping premium of 20 percent! Has the Sindh government failed at managing wheat/flour crisis once again?
Before we jump the gun, consider that the raw material – wheat – price in Karachi has been consistently lower than in Lahore, and has been so since at least July. Yet, curiously, flour prices in Punjab’s heartland dropped to Rs 860 back in July and have stayed there since.
So, what is going on? Has the PTI-led province managed to clamp down on wholesalers and retailers to bring down prices of flour, while the PPP governed Sindh has managed to bring down price of raw material by stamping out hoarders? And why has decline in price of one commodity failed to affect the momentum of the other in each city?
The answer? ‘Management of reported prices’. But let’s start with few quick questions first to establish clarity. Are prices of wheat and flour declining across all major centres? Yes. Have prices declined more in Punjab than in Sindh? Yes. Have flour been cheaper in Punjab than in Sindh for much longer? Not exactly.
Now the explanation, with some flashback. Historically, Punjab has produced more than two-thirds of national wheat requirement, thus, it is only natural that both the raw material commodity and its processed forms – flour, maida, and suji – are cheaper in the province than elsewhere. Yet, the current round of phenomenally low flour prices in the province reeks of inaccurate reporting, not price control nor market dynamics.
The evidence? Check all Sensitive Price Index reports published by PBS ever since its changed SPI/CPI base back in September 2019. Ever since, minimum, average, maximum price of flour across all tracked centres of Punjab – Gujranwala, Sialkot, Lahore, Faisalabad, Sargodha, Multan, and Bahawalpur – report exact same prices every week, without fail.
Did Punjab’s district management authorities suddenly become more efficient at price control circa rebasing of SPI/CPI in Sep-2019? Clearly, that does not appeal to intuition. But what is more illogical, is the exact same minimum and maximum price in the same centre during the same time, which not only contradicts common sense, but also belies the objective of Sahoolat/Sasta Bazaars and Utility Stores, which are supposed to sell basic kitchen essentials at lower than market prices elsewhere in the same city/region.
Two possible explanations stand out. Either the PBS revised the methodology for price tracking and now only reports minimum, average, and maximum prices across Sasta Bazaars and Utility Stores; or, Punjab district governments are only reporting government notified rates for flours which accounts for the artificial disparity.
Either way, the anomaly has been identified in this space earlier (Read “Punjab’s wheat price anomaly” by BR Research, published on September 14, 2020). But it is now creating cause for political mudslinging between provinces. Moreover, the higher wholesale price for wheat (than retail price) in Lahore as reported by Agriculture Marketing Information Department of the province gives away the reality: the average price of raw material isn’t actually all that cheaper in the region – and is in fact higher than the retail price.
It is high time either PBS or Punjab government comes clean about the reporting methodology. For better or worse, Punjab has clearly done a better job at price-management/control. The commodity is slightly cheaper in the province and has been so for some time now. But the difference isn’t all that is made out to be based on weekly SPI reported figures.
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