LAHORE, April 3: Flour supply and price crises on Thursday shot through the roof with the price of a 20kg bag going up by almost Rs70 -- the biggest ever increase in one go -- in some pockets of the province. District governments took charge of the supply line, thus drying normal supply channels and only worsening the situation.

On Thursday, flour was hardly available on retail shops, and was being sold at over Rs350 per 20kg at few places in the city.

As expected, all stakeholders in the flour supply chain -- the Food Department, millers and the retailer -- blamed one another for the situation.

Food Department officials claimed the millers had stopped grinding wheat in the last few days because of new procurement price, which created a margin of Rs4 per kg if they held stocks for 15 days.

The existing price of wheat is Rs465 per 40kg. With the government announcing new procurement price of Rs625 per 40kg, the millers had stopped grinding as they could make windfall on their current stocks of around 80,000 tons. Some of the millers even started hoarding wheat being released by the Food Department, thus completely drying up supply line, they alleged.

The situation forced official agencies to take flour from the millers and sell it at their own points.

From Thursday, the district government has taken the flour from the mills, equal to their wheat release, and started selling it in union councils. The government agencies have taken the risk of selling flour in spite of having a bad experience some three months back when they went for the sale through officials.

The millers, however, have a different version on the crisis. Without denying their expected margin of profit and tendency to hoard whatever stocks they have, they said the official procurement price should not have been announced at the nick of time.

“The huge increase in the price, which is working as an incentive for the private sector to hoard wheat, has turned the market topsy-turvy in financial terms,” says Khaleeq Arshad of the Pakistan Flour Mills Association. With only 15 days left in the arrival of fresh crop, the government should also announce a cut-off date for the current price and the new one taking effect. It should have also taken the hoarding factor into calculation before announcing the price so close to the arrival of the crop. Even if the new crop hits the market in southern part of the province right now, the millers would not buy it because of price differential.

Thus, the sooner the government announces cut-off date for current price and new one taking effect and translating it into retail price, the better it would be for every one.

A Food Department official, seeking anonymity, said the new price would be allowed for the purchase of fresh crop only. He insisted that the millers held around 78,000 tons on Wednesday. Had they not been going slow on grinding, there would have been no crisis, he said.

The combined stock of millers and the Food Department, which had 160,000 tons, could have easily seen through the rest of a 10-day period before the arrival of new crop. But, the millers went for huge profit and played havoc with both the supply and the price, he said.

The retailers, on the other hand, vent their anger on both the district administration, which challaned them for overcharging, and the millers who were already selling flour at Rs70 more than the agreed ex-mill price per 20kg.

Rao Akram Khan of Lahore Retailers Association said the millers had already increased the price of a 20kg bag by Rs70 and the district government was raiding their shops.

Talking to Dawn, he threatened to stop selling flour if the government and the millers did not agree on a price and supply formula.