Strengthening Rupee fails to curb price hikes

KARACHI: Despite a robust 9 percent appreciation of the Pakistani rupee against the US dollar since September 5, along with falling global prices and decreased transportation costs, consumers in retail markets have seen minimal price relief over the past two months. This is in contrast to the declining trend in wholesale prices.

On September 5, the exchange rate was at Rs 307.10 for one US dollar, compared to the current rate of Rs 280, which should have reduced the cost of imported raw materials and finished goods. Simultaneously, there has been a downward trend in diesel prices, with the price decreasing from Rs 329 per litre on September 16 to the current rate of Rs 303 per litre. This should have made the transportation of goods more affordable and manageable for transporters.

Retailers have traditionally been swift in passing on the impact of a falling rupee and increasing transportation costs to consumers, but they have been slow to reduce prices, often citing the need to clear unsold old stock purchased at higher rates.

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One notable exception has been the drop in sugar prices, attributed to an effective crackdown on sugar mafias, hoarders, and smugglers. Wholesale sugar rates have fallen from a peak of Rs 174 per kilogram during the first week of September to Rs 123 per kilogram, and retail rates have decreased from Rs 180-195 to Rs 135-145 per kilogram in Karachi.

The retail prices of various pulses have shown mixed trends with wholesale prices of most of these pulses showing a moderate decline. The weekly sensitive price index (SPI) data indicates that the price of a branded tea pack (less than 250 grams) remains unchanged, despite falling world tea prices. Milk prices have increased, while official rates for fresh milk have been enforced to avoid fines and imprisonment.

Flour prices have slightly decreased due to the arrival of imported wheat. However, retailers continue to charge higher prices for flour, resulting in price disparities. Market watchers suggest that regulations should be enforced to limit excessive profits, especially for products without printed prices. Retailers tend to exploit rising price trends, particularly in loose commodities.

Market observers also recommend extending crackdowns on hoarding and smuggling from sugar and wheat to other commodities like rice and pulses to lower prices at the retail level. Additionally, it’s suggested that the government should discontinue wheat quotas to flour mills and sell confiscated sugar at a reduced price to assist low-income individuals.