Government bans onion exports to prevent further hike
Making home cooked food will cost more this year as the price of onions has doubled since February 2019 while that of potatoes and fresh vegetables increased by more than 60%, according to data released by the Pakistan Bureau of Statistics on Monday.
The consumer price index (CPI), a measure of inflation, which tracks the prices of 356 consumer items in 35 cities increased 12.4% since last February, the PBS data shows.
In urban areas, the price of onions, daal moong, potatoes, fresh vegetables, gas, sugar, cooking oil and wheat increased the most among all the items, also called a market basket of common goods and services a household consumes daily.
However, tomatoes became 60% cheaper followed by eggs which were down 10% and electricity prices that dropped 4% in February this year compared to the corresponding month of 2019.
The vegetable traders SAMAA Digital spoke to say growers were getting a good price from international buyers so this year the country exported more than it usually does, creating a shortage in the local market. As a result retail prices went up to Rs100 per kilogram a couple of months ago. Onions are still selling for Rs70 per kg in some areas of Karachi.
The government sprang into action and banned onion exports on Sunday, placing an embargo till May 31, which some say is a case of too little too late.
Falahi Anjuman Wholesale Vegetable Market President Haji Shahjehan said India is a major exporter of onions in the region, but following a local crisis it banned exports. As a result Pakistan jumped in to fill the gap because it was getting a good price. He added that the new crop from Balochistan has started already and there will be a surplus soon. The government should have banned exports of onions two months ago when it was selling for Rs100 per kg, he said, adding that this embargo will only hurt exporters and growers now.
“There are about 150 containers of onions stuck at the port. If not cleared, they will perish,” says Waheed Ahmed, a leading vegetable exporter. Farmers had been booking losses for near four years and if they didn’t earn they would go out of business, he adds.
Ahmed explained that if farmers don’t get a good price, they will not grow produce, which will also hurt local consumers in the long run. This year was good, some of them got back into profits on the back of exports and strong local prices. This will incentivize them to grow more next year and there will be higher production, which will keep prices in check.
“We need to achieve a balance where both consumers and growers can benefit, but for that the government needs to make a long-term policy and increase focus on research and development,” he said.
Giving an example, Ahmed said only a few months ago tomatoes were selling at Rs400, but now it’s selling at Rs5 to Rs10 in the mandi (wholesale market). With such a low price, growers lose money because of the high cost of production. The government needs to ensure good agriculture practices and focus on research to help farmers increase yield and lower the cost of production, he said, which will lower prices in the long term.
He warned that the country could face a severe food crisis in a decade if it didn’t respond to climate change and its impact on agriculture. Rain and weather patterns are changing, which changes diseases and pests patterns, but who will tell this to the farmer, he said.
Food items, which account for more than a third of the market basket of goods and services, have been driving the inflation rate up for the last few months. In October 2019, tomatoes became nine times more expensive followed by a notable surge in the prices of onions, sugar and wheat.
The government was criticised for its policies as it allowed the export of wheat, which had to be reimported at higher rates after local prices increased sharply. Because of higher food prices, inflation reached a nine-year high of 14.6% in January. It was also higher than the State Bank of Pakistan’s annual target of 12% for the year ending June 2020.
Controlling inflation is one of the central bank’s core functions. To contain inflation, the SBP increases the monetary policy rate. In July 2019, the central bank raised its benchmark policy rate by 1% to 13.25%, the highest level in the last eight years. It has kept the rates unchanged since then because of double-digit inflation.
Because of these inflationary pressures, the government has been postponing a further hike in electricity and gas prices, a deviation from the conditions set under the IMF programme. On February 29, the government also cut petrol prices by Rs5 per litre.