Strong rupee fails to end price shocks

KARACHI: The strengthening of the rupee by eight per cent against the dollar has substantially reduced the landed cost of imported finished goods and raw materials, but consumers continue to pay high prices for food items, automobiles, steel bars and cement.

The dollar price has been declining since the last week of August 2020. The rupee is now trading at Rs155.50 in the interbank market. The greenback hit an all-time high of Rs168.70 in August 2020.

Consumers witnessed price hike trends mainly in ghee and cooking oil, sugar, wheat flour varieties, pulses, powdererd and tetra milk products, Chinese and Japanese cars and bikes, steel bars and cement.

Stakeholders defend price hike by attributing it to increase in transportation charges owing to increase in diesel prices to Rs116 per litre from Rs106.46 per litre in August 2020 followed by rising prices of raw materials on the world markets compounded by higher freight charges and delayed shipments which offset the positive impact of the rupee’s strengthening.

Consumers pay more for wheat, sugar despite massive imports

For example, high-quality ghee and cooking prices are now tagged at priced at Rs300 per kg/litre which was Rs250 in August 2020. Average quality sells at Rs250 as compared to Rs200. The 2.5kg pack of ghee and cooking now costs Rs760 versus Rs655 while a five-litre cooking oil pack sells at Rs1,495 versus Rs1,240 in August 2020.

Palm oil imports slightly went up to 2.167 million tonnes valuing $1.6 billion in 8MFY21 as compared to 2m tonnes costing $1.18bn in the same period last year. The average per tonne (APT) price of palm oil soared to $731 from $587 in the above period.

In February, palm oil imports stood at 235,764 tonnes ($217m) as compared to 301,710 tonnes ($256m) in January. The APT price in February rose to $922 from $848 in January.

Gram pulse, masoor, moong and mash now sell at Rs180, Rs180, Rs280 and Rs280, respectively, compared to Rs160, Rs160, Rs240 and Rs250 per kg in August 2020.

Pulses’ imports, however, fell by 5.5pc in terms of quantity to 720,249 tonnes while it grew by 0.77pc in terms of value to $378m in July-February 2020-21 as compared to the same period last year. The APT price of various pulses stood higher at $524 as compared to $491 in the same period last year.

Regulators fail

Huge imports of wheat and sugar have failed to arrest the soaring prices of these commodities thus exposing the non-serious attitude of federal, provincial and city governments in dealing with the stakeholders and market forces.

Consumers are paying Rs105-110 per kg for sugar against Rs100 in August 2020. With APT price of $455 per tonne, sugar imports during 8MFY21 stood at 278,733 tonnes costing $123m.

Wheat and sugar imports cost the exchequer over $1bn during 8MFY21, thus jacking up the overall import bill of food items by over 50pc to $5.344bn in 8MFY21 from $3.556bn in same period last year.

The wheat imports stood at 3.328m tonnes costing $916m in 8MFY21. Its APT price was $275. Despite massive wheat imports from Ukraine, Russia and Germany, the 10kg and 5kg bags sell at Rs740 and Rs380 in Karachi.

Import of spices climbed to 120,250 tonnes ($138m) in 8MFY21 as compared to 90,185 tonnes ($105m) in the same period last year. The APT price of spices stood slightly lower to $1,150 as compared to $1,168.

Chilly powder 200g pack is now priced at Rs380 as compared to Rs280. In tetra and powdered milk, the rate of Nido 390g pack is now available at Rs480 as compared to Rs450 in August 2020, while the one-litre tetra milk pack now sells at Rs160 as compared to Rs155 in January 2020 followed by Rs2 jump in 250ml pack to Rs42 in February.

The local tea prices held unchanged from August 2020 till to-date despite massive drop in APT price to $2,212 from $2,409 based on rising tea imports during 8MFY21 to 171,470 tonnes ($379m) as compared to 131,604 tonnes ($324m) in same period last year.