Wheat prices in local markets are widely expected to drop by Rs. 5-7 per kg, with others expecting the rate to drop by up to Rs. 25 per kg following a private consortium finalizing the agreement to import 0.7 million tons of wheat from Russia and Romania.
The first of 12 shipments carrying 55,000 tons of Russian wheat, is scheduled to dock at Karachi Port on September 15, marking the beginning of this significant import initiative. Subsequently, the second shipment, containing 60,000 tons, is expected to arrive in the third week of this month.
Muzzamil Chappal, Chairman of the Cereal Association of Pakistan (CAP) stated that the imported wheat from Russia and Romania is priced between $282 and $295 per ton (cost and freight) for Karachi, and the landed cost of this imported wheat is estimated at approximately Rs. 100 per kg and may translate to Rs. 105-106 at the retail level.
He anticipated an immediate reduction of Rs. 5-6 per kg followed by a more substantial drop of Rs. 20-25 after the arrival of Russian wheat. added that this import endeavor is poised to contribute to a reduction in flour prices because it is being undertaken without government subsidies.
Chappal also suggested that the government may consider permitting the Trading Corporation of Pakistan to import between 500,000 to 700,000 tons of wheat. Currently, the country grapples with a shortfall of 2.45 million tons in response to market demand, necessitating at least 3.5 million tons of wheat within the current year.
Addressing this supply-demand gap, Chappal argues that the government should authorize the private sector to facilitate the import of 40-60 wheat-laden ships. He also emphasizes the need for the issuance of a Statutory Regulatory Order (SRO) to formalize wheat imports, mitigating potential future issues.
While Aamir Abdullah, Chairman of the Pakistan Flour Mills Association (PFMA) of Sindh Zone, is optimistic about a decline in the wheat rates. He envisioned a potential drop of Rs. 5-7 per kg from the current price range of Rs. 120-123 per kg and hoped this decrease would commence shortly before the arrival of the first shipment of Russian wheat.
Despite the government’s efforts to import 2.7 million tons of wheat at a cost of $1 billion during FY23, as opposed to 2.2 million tons costing $795 million in FY22, consumers have not reaped substantial benefits. The national average price for a 20kg bag of wheat flour now hovers between Rs. 2,600 and Rs. 2,800, compared to a range of Rs. 980-1,940 in the first week of July 2022.
Several challenges, including wheat smuggling to Afghanistan, delays in the release of wheat by provincial governments to flour mills, and millers procuring grain from the open market at elevated rates, have remained persistent issues. Consequently, consumers continue to bear the brunt of high prices for various flour varieties.
A country priding itself in having an agriculture-based economy and yet importing wheat from a far-flung country makes hardly any sense. The fractional reduction in wheat per kg price as being reported by the media is not going to have any substantial impact on the wheat flour price for the common man. The government has neither the will nor any plans to confront this situation. The caretaker government should better hand over power to an elected government as early as possible. This will not make any major difference but at least the elected representatives will be answerable to the people to some extent.