KARACHI: The flour mill owners in Karachi have made an agreement to reduce the ex-mill price of wheat flour by Rs8 per kilogram as a consequence of successful negotiations between Commissioner Karachi Syed Hassan Naqvi and the flour millers. The lowering of flour price in Karachi will bring down the ex-mill price of flour to Rs125 from Rs133 per kilogram.
This deal was made at the Commissioner’s office following the directives of Sindh’s Chief Secretary, Mr. Syed Asif Hyder Shah, indicating that the efforts were being made from the top echelons of Sindh’s administration to reduce prices.
The flour price cut in Karachi takes place at the ex-mill price level. Ex-mill prices refer to the price at which the flour comes out of the mill before it reaches the wholesalers and retailers. According to the Commissioner, the reduced price in the upstream market will be felt all along the downstream markets.
How the Agreement Was Reached
The reduction in the price of flour in Karachi resulted from a negotiation carried out directly between the administrative authorities of the city and the millers of flour. This was a case where regulatory process was bypassed in favor of a directive and a meeting.
The discussion at the Commissioner’s Office was attended by:
- Representatives of Pakistan Flour Mills Association (PFMA), comprising Chairman, Mr. Abdul Junaid, Vice Chairman, Former PFMA Chairman, and other mill owners
- Food Secretary of Sindh, Mr. Ghulam Abbas
- Chairman of the CM’s Inspection, Enquiries and Implementation Cell
- Other top-level Sindh government officials
With the Inspection Team of the Chief Minister present along with the Food Secretary and Commissioner, it is clear that the Government of Sindh considered the negotiations over the flour price to be of high importance.
Fair Price Stalls to Maximise the Benefit
According to the Karachi Flour price reduction deal, one of the commitments made by the flour mill owners is in addition to the ex-mill price cut. This additional commitment involves an assurance from the PFMA and its members to:
Set up fair price stalls throughout Karachi for selling flour to consumers at subsidised prices
Maximise the benefit of price reduction to the actual consumers and not keep the benefit within the supply chain intermediaries
This fair price stall concept rectifies one of the long-standing shortcomings of government intervention policies regarding the commodity prices in Pakistan; this is the problem of the discrepancy between the reduction in price beyond the mill gate price and the reduction in price that is perceived by the consumer.
The Larger Picture: Sindh Steps up Efforts at Stabilizing Prices
With respect to the Karachi flour price cut, the Sindh provincial government is stepping up efforts to stabilize the price of basic commodities in order to help families who are under constant pressure from inflation. Flour is Pakistan’s most important basic food item and forms the base of roti, which is the most important part of the Pakistani diet.
A fall of Rs8 per kg from the mill price makes a significant impact when it comes to the quantity consumed in kilograms on a weekly basis by household members. If the household members consume 10 kgs of flour per week, then they will save around Rs80 from the fall in price of flour in Karachi.
The choice of Sindh government to engage in direct talks at commissioner level with the industry associations instead of just using market-based mechanism shows that it is aware that during periods of high inflationary pressure, it will be quicker to respond through administrative intervention in pricing.
Nayab Fatima is a media professional specializing in fact-based journalism, research, and analytical reporting on technology, telecom, aviation, and automobiles.
