Selling commodities makes money. But selling a commodity crisis helps make money overnight — and lots of it.

The job of the government is to watch who is selling a commodity and who is selling a crisis.

The job of the government is to facilitate trading and prevent crisis. Sadly, the PTI government, just like all previous governments, failed to prevent those who recently ‘created’ and ‘sold’ wheat and sugar crises. They made billions of rupees in a few weeks.

Consumers had to pay Rs10 and Rs15 per kilogram more on wheat flour and sugar. At the peak of the crisis, wheat flour was sold for as high Rs70 per kilogram and sugar for Rs85 per kilogram, up from Rs60 and Rs70 before the crisis erupted.

Perpetrators of the two crises had identified communication gaps between federal and provincial authorities. They took advantage of those gaps and built smokescreens: they stitched together all tactical details behind the smokescreens of the wheat ‘shortage’ and ‘increased prices’ of sugar cane.

It is time for the federal and provincial governments to devise a mechanism to prevent a food commodity crisis

If a prevention policy was in place, the twin crises could have been prevented. But there was none apparently. So the federal and provincial governments could not do much to provide relief to already inflation-battered consumers. To design such a policy, the PTI will have to learn to work in close contact with all provincial governments.

At the root of the wheat crisis lay the lack of desired coordination between the federal and provincial governments — and the hype created about the continuation of wheat exports after they were banned.

Though exports in violation of a ban are totally unacceptable, the way the hype was created obscured some other factors from the public view. According to the Pakistan Bureau of Statistics (PBS), the country exported 44,134 tonnes of wheat in July last year. It is not clear how much of that volume was exported in violation of the ban imposed on the 17th of that month.

In August, we saw no exports at all. On Sept 19, 2019, the federal cabinet again decided to continue the ban on wheat exports. But then quite mysteriously 2,060 tonnes and 1,887 tonnes were exported in September and October, respectively. No wheat was exported in November and December.

If PBS figures are correct, then less than 4,000 tonnes of wheat exports in September and October in violation of the ban could not have created a full-blown wheat crisis in January. It simply could not because when the crisis hit the government informed the nation that the country had four million tonnes of wheat stocks. Even if we assume that a large part of 44,134 tonnes of wheat exported in July 2019 was shipped out after the export ban on July 17, it could not have led to a crisis after a lapse of five months.

So what caused the wheat and wheat flour crisis? Massive smuggling? To a large extent, yes. A Dawn report says Customs Intelligence is still probing under what circumstances 505 containers were cleared without the payment of duties and taxes at the Torkham border between Pakistan and Afghanistan.

Hoarding? Of course. During the crisis, the media reported some cases of hoarding in both Punjab and Sindh. Reports also surfaced about the missing wheat bags from official warehouses.

The delayed release of subsidised wheat from provincial food departments to genuine millers might also have contributed to the wheat flour crisis. Out of 900-plus wheat flour mills in the country, an estimated 300 are not operational. But many of those that exist on paper only manage to get subsidised wheat. Dozens of 600 functional mills also get subsidised wheat in excess of their quotas. They are the people who dictate markets when the wheat crisis hits.

The sugar crisis hit markets when the wheat crisis had started subsiding. The panic-stricken PTI government was fire-fighting on the wheat front when reports of the sugar crisis emerged. Sugar stocks available in markets gradually disappeared, supplies from millers became costlier and thinner and retail prices skyrocketed. And then began endless blaming and counter-blaming.

Fingers were pointed at some powerful, politically affiliated sugar millers, including a close friend of Prime Minister Imran Khan who owns half a dozen mills. But he told a private TV channel that although the Securities and Exchange Commission of Pakistan had found evidence of cartelisation in the wheat flour industry, it found no such evidence about the sugar industry. What he implied was the wheat flour crisis was created by flour millers and not by powerful wheat traders and corrupt government officials. He insisted that sugar prices shot up only because growers were selling sugar cane at higher prices owing to a fall in the cane output.

It is true that the sugar cane production has been on the decline for two years. But it is hard to believe that our politically powerful sugar millers were actually paying Rs220 to Rs250 per 40 kilogram to cane growers — as claimed by members of the Pakistan Sugar Mills Association — against the support price of Rs190 per 40 kilogram in Punjab and Rs192 per 40 kilogram in Sindh. Growers in Punjab and Sindh denied selling sugar cane at such high prices.

It is time for the federal and provincial governments to devise a mechanism on how to prevent a food commodity crisis and mitigate its effects if prevention efforts are somehow dodged. Such a mechanism must envisage the specific roles for all authorities concerned. Post-crisis promises of bringing the perpetrators to task are just that: promises. —MA

Published in Dawn, The Business and Finance Weekly, February 24th, 2020