Flour prices up in Punjab; mill owners blame short supply of wheat

LAHORE: A number of flourmills in Punjab have increased the price of 20kg flour bag to Rs818 on short supply of wheat, as they accuse Punjab Food Department (PFD) of adopting monopolistic policies in the middle of wheat harvesting.

Harvesting has gained momentum in the province, with visible heaps of wheat all around. On the face of it, price of grain should not increase. However, PFD has been discouraging flourmills from purchasing grain as per demand, causing bottlenecks in the supply chain.

On top of it, the provincial food department increased wheat release price to Rs1,400/40kg from Rs1,375. Subsequently, the flour manufacturers are feeling the pinch of lesser grain availability and are left with no option but to increase flour price.

According to a notification issued by PFD on April 26, Punjab increased release price of wheat from Rs1,375 to Rs1,400 per 40kg with immediate effect under the Wheat Release Policy 2019-20. Resultantly, flourmill owners decided to increase the price of 20kg flour bag by Rs13 from Tuesday in the province. Now, ex-mill price of the same bag would be Rs796, with retail price at Rs818/bag.

Manufacturers of branded flour have already implemented this decision, while the rest of the mills might follow suit in the next few days.

The price of wheat is already hovering over Rs1,450/40kg in the open market. Flour mill owners have cautioned that latest increase in the price of flour would continue, as long as the government continues to release wheat to flour mills. Afterwards, they added, market forces would drive prices of flour according to rates of wheat in the open market.

A delegation of prominent flourmill owners on Tuesday met provincial senior and food minister and informed him about the current grain market situation. They were of the view that policies of the department have led to reduced flow of wheat to flour manufacturers.

They admitted that wheat price should not have been increased in the midst of grain harvesting. However, given the present dynamics of wheat markets and dominant role of the food department as lead buyer, wheat supplies to mills were badly hampered.

Flourmill owners demanded the government to allow genuine buyers of wheat to purchase grain from the growers in order to have sufficient stocks of commodity. Otherwise, imbalance in the wheat market would continue to haunt consumers.

The PFD created a major hurdle by restricting wheat by imposing condition of permits. The high ups, despite repeated requests, were not taking into account the ground situation that hindered grain supplies to consuming centres.

The department was focusing on its procurement target and has completely turned its back on millers for not receiving enough wheat for even grinding purposes let alone the year’s requirements.

Flourmill owners called it a sort of non-tariff barrier (NTB) with a view to curb trade. In other words, they accuse of creating an intentional procedural hiccup to maintain monopoly.

If this continues for a longer period, the department would be left with no option but to start releasing wheat by as early as July. And with one supplier, wheat market would likely remain unstable for the rest of the year.