2. NATIONAL INSTITUTE OF MANAGEMENT
ISLAMABAD,
16th Mid Career Management Course
IMPACT OF PRICE HIKE IN FOOD STUFF
By: Muhammad Saghir Khan, S&GAD,AJ&K
2
6. SCHEME OF PRESENTATION
• Statement of the Problem
• Introduction
• Impact of Food Price Hike
• Issues and Challenges
• Analysis
• Conclusion
• Recommendations
6
7. STATEMENT OF THE PROBLEM
Price hike in food items have far reaching effects on common man in
economic, social, cultural and political spheres as well as at national
level, what measures can be taken to control price hike & its effects?
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8. INTRODUCTION
• What is Food?
Food is any substance consumed to provide nutritional support for the
body. It is usually of Plant or Animal origin, and contains
essential nutrients, such as carbohydrates, fats, proteins, vitamins,
or minerals. ( Encyclopedia Britannica )
• Food Sources: 1-Plants 2- Animals
a)-Plants: i-Staple Food ( Cereals/grains i.e maize, wheat,
barley and rice etc.
ii-Seeds, iii-Fruits, iv- vegetable)
b)-Animal Food: i- Meat/Fish, ii-Dairy product, iii-Eggs,
iv- Honey
• How much Food is required for an individual?
The amount of grains, protein, vegetable and fruits you need to eat
depends on your age, sex, and level of physical activity.
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9. INTRODUCTION
• What is price hike
Sharp/abrupt increase in price. A percent of
the cost of goods or services. A 10% price hike means the
particular item has increased by 10%.
Cont’d
increase in
cost of that
• The Detriments of price hike
Its mainly, Inflation, Fuel price, Hoarding/smuggling, Population pressure
Food production and climate change
• Situation in Pakistan
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11. Price Comparison five years and Previous Month
Food Items
Flour 10kg Bag
Basmati rice Per KG
Sugar, Per KG
Beef per KG
Milk (Fresh), Per Ltr
Cooking oil,2.5kg Tin
Mash PULSE WASHED, Per KG
Tea yellow lable,200gm
Egg (Hen),Farm Per Dozen
Mutton
Cumulative
Increase
Price in 2008 Price in Sept 2013 Price in Oct. 2013 5 Year Increase %
110
407.73
412.21
374.74
90
130
140
55.56
39
53.83
55.83
43.15
165
280.13
281.66
70.70
38
68.36
68.56
80.42
290
537
537.35
85.29
55
128.9
129.75
135.91
95
171.82
170.59
79.57
48
97.14
98.45
105.10
350
551.64
553.32
58.09
Source: Pakistan Bureau of Statistic
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12. Price Comparison five years and Previous Month
Chart Title
600
500
400
300
200
100
0
Series 1
Series 2
Series 3
Series 4
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13. The World Health Organization estimates that one-third of the world is well-fed, one-third is under-fed onethird is starving- Since the start of this presentation at least 200 people have died of starvation. Over 4
million will die this year.
Source : World Health Organization
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14. IMPACT OF PRICE HIKE IN FOOD STUFF : (Economic Impact)
Household buying power
Pakistanis spend a little under half of their income on food, about
$7 per person per week: (43% of their income) :World Bank
Food quality compromised
Average monthly consumption on food and beverages dropped to
45.1%, as against 48.9% in the preceding year
Education
Parents are forced to make hard decisions regarding daily
expenditures, including educational expenses. Households spend less
than 4 percent of their total expenditures on education, which translates
into 6-7 percent of their non food expenses.
Health Care
Reduced expenditures on health lead to less adequate treatment of
disease and higher morbidity and mortality rates
GDP Growth
lesser demand in commodities slow the production and ultimately
the GDP growth went down to 3.59% from 4.36 in from preceding
year.
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15. Many of the world’s poorest people
spend more than half their income on
food
(IFAD)
Source: International Fund for Agriculture Development
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16. IMPACT OF PRICE HIKE IN FOOD STUFF: (Economic Impact)
Cont’d
Higher unemployment
Less production would lead to less employment. It has snow ball effect,
Large poverty group
According to some reports, as many as 40 percent of the population lives
below the poverty line. The economic realities are driving even the
middle classes into cutting corners.
Increasing Import Bill
Government would try to buy cheap food elsewhere resultantly imports
will increase and balance of trade will be changed
Positive impact on
producers of food
Price hike benefits the food producer and middle man
Housing Cost
The expenses on housing also went down slightly to 13.2%.
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17. IMPACT OF PRICE
HIKE IN FOOD STUFF
People
interaction
compromised
Cont’d
Recreational
activities
compromised
Social
Impact
Weddings
Soaring crime
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18. IMPACT OF PRICE
HIKE IN FOOD STUFF
EID/Christmas/
Diwali
Cont’d
Ramzan
Cultural
Impact
Cinema
Theater
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19. IMPACT OF PRICE
HIKE IN FOOD STUFF
Government
under pressure
Cont’d
Political
instablity
Political
Impact
Create Unrest
Strikes
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21. ISSUES AND CHALLENGES
Population pressure
The population growth rate officially estimated at 2.1 percent per year, we
will be 260 Million by 2035 (The Express Tribune)
Fuel Prices
Since June Electricity is up 30%, Petrol 20% only in a period of 3
Months, gas is going up which is affecting the price of fertilizer and
transport costs (The News)
Food production
Agriculture sector is still using traditional methods, the production is not
being increased whereas the demand is ever growing
Hoarding and
smuggling
In Pakistan most of the price hike in food is because of Hoarder and
smugglers
International market
influence
Global food prices have risen by 83% from February 2010 to February
2012 (World Bank)
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22. ISSUES AND CHALLENGES
Cont’d
Inflation
Inflation directly effect the prices of commodities, Higher Inflation higher
prices.
Role of middle man
Farmers sell their produce to middlemen at cheaper rates mainly because
they do not have direct access to markets. It is the middlemen who
control market prices.
Price
fixation/monitoring
mechanism
There is no effective price fixation/monitoring mechanism in place
Climate change
Disruptive weather effects the agriculture produce
Food Insecurity
One-half of Pakistan’s population is considered to be “food insecure,”
(World Food Programme)
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23. Analysis
• Pakistan’s population has reached up to 184.0 Million, if we internationally weigh against
the extensive growth rate in our population; we are ahead of Russia and very slightly
behind Brazil. As we import 70% Fuel and its prices have been ever
increasing, resultantly it triggers the food price increase. Increase in Fuel price have
direct impact on fertilizer, transport and pesticide prices.
• Only 25% of the area of Pakistan is used for agriculture and we have serious problem
with seeds, non existent of modern machinery, fertilizer and pesticides are expensive, the
food produce is not what it should be. We should be exporting food rather struggling to
feed our own people.
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24. Analysis
Cont’d
• Despite the fact that farmers are producing more and more, especially wheat, and the
country is enjoying surplus crops, the masses are still suffering shortage and unabated
price hike. The food security issue is getting a serious by courtesy of the nefarious
elements like middlemen, smuggling mafia and official network of some relevant
department. Government is already holding stock of wheat and other essential food.
Utility stores, wheat and sugar support price mechanism is in place. Inflation and
international food prices seriously effects the food price in Pakistan as we import lot of
edible oil.
• Role of middle man and price mechanism is difficult area for government. However there
is National Price Mechanism Committee headed by Finance Minister and have tabled the
price mechanism bill in parliament quite recently. The NPMC is responsible to monitor
the price of 28 essential food items
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25. Analysis
Cont’d
• Many of the Pakistan’s poorest people spend more than half their income on
food. Price hikes for cereals and other staples can force them to cut back on the
quantity or quality of their food. This may result in food insecurity and
malnutrition, with tragic implications in both the short and long term.
• As the agriculture is open to nature and disruptive weathers play havoc to
Agriculture food produce, in 2010 the agriculture sector has received a major
blow of 300 Billion out of 855 Billion total damage.
• Increasing fuel prices increases the input cost of various items i.e.
fertilizers, seeds, pesticides, farm machinery, diesel etc. at sowing time as the
demand increases
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26. CONCLUSION
• Despite the hardships and issues Pakistan is producing enough food for everyone but
the situation is very volatile and can change dramatically. The Federal government is
fully aware of this fact and already have set up Ministry of food security which is
taking steps in right direction. Benazir income support Programme is on, Utility stores
and wheat and sugar support price to farmers is in place and most importantly
Government is paying more price to wheat farmers to protect their interests.
• Hoarder and smugglers are continuously creating food shortage, rupee is losing its
value fast, fuel prices are always rising. There is no effective price control in place. The
middle man role is vital and Free market for food is almost non existent
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27. CONCLUSION
Cont’d
• No direct subsidy is being provided on Agriculture Inputs particularly
on wheat, however there is indirect subsidies like flat rates on power
for irrigation, subsidy on gas for fertilizer and imported fertilizer
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28. RECOMMENDATIONS
• Population pressure, we can’t afford to allow the present ratio, Bangladesh and
models can be followed
• Hoarding and smuggling must be curbed (by sever punishment and
tracking, good governance The present system of quota should be gradually
abolished and corporate sector be brought.
• Effective price mechanism to be established. At the movement it is at legislation
stage should be expedited and enforced forthwith
• Farmers access to market: Infrastructure required to be built, new roads, rail
track etc.
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29. RECOMMENDATIONS
Cont’d
• Food Security:
The government must ensure household food security in the face of dramatic
food price shocks through targeted safety nets. Controlling domestic food price
• Modernizing Agriculture
Improved Seeds quality, Farm Mechanization, Storage/processing
facilities, /More Production
• Subsidies:
The Government should provide red diesel (without government taxes) to
farmer for agriculture use as many western countries do to bring their cost
of production down
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4-( 87% Staple food is fed to Animals6-The amount of grains, protein, vegetable and fruits you need to eat depends on your age, sex, and level of physical activity.
1-Pakistanis spend a little under half of their income on food, about $7 per person per week: (43%) of their income (World Bank) 2-Price hike will hamper buying power., Average monthly household expenditures in 2011-12 came to around Rs22,379, higher by Rs3,043 or 15.7% as compared to 2010-11.In what appears to be another interesting trend, average monthly consumption expenditures on food and beverages dropped to 45.1%, as against 48.9% in the preceding year. 3-Price spikes can also limit the ability of poor households to meet important non-food expenses, such as education and health care. Soaring price hike in food stuffputting pressure on their limited financial resources. As food prices rise, parents are forced to make hard decisions regarding daily expenditures, including educational expenses. Households spend less than 4 % of their total expenditures on education, which translates into 6-7 percent of their non food expenses. 4-poorer food consumption increases malnutrition, which in turn heightens susceptibility to disease; both may lead to higher mortality rates; ii) greater workload (to increase income) negatively influences care and feeding practices, resulting in poorer health and nutrition status; iii) reduced expenditures on health lead to less adequate treatment of disease and higher morbidity and mortality rates6- lesser demand in commodities slow the production and ultimately the GDP growth went down to 3.59% from 4.36 in 2011/12It is like vicious cycle, food price has direct effect and once it is ignited, it hassnow ball effect. Resultantly this cycle ends up on economic crunch
1-Less production would lead to less employment. It has snow ball effect, 37.6% are unemployed, was 33.3% in 20082-The spiraling rise in the prices of food items on the one hand, and the static incomes on the other have combined to spread hunger, which now affects a large segment of our society. According to some reports, as many as 40 percent of the population lives below the poverty line. The economic realities are driving even the middle classes into cutting corners.3-Government would try to buy cheap food elsewhere resultantly imports will increase and balance of trade will be changed.4-Food demand is inelastic so the producer and middleman are the beneficiaries,provided if farmers have access to agricultural inputs and markets. Producer Prices in Pakistan increased to 211.70 Index Points in October of 2013 from 209.33 Index Points in September of 2013. Producer Prices in Pakistan is reported by the Pakistan Bureau of Statistics. Pakistan Producer Prices averaged 75.45 Index Points from 1989 until 2013, reaching an all time high of 211.70 Index Points in October of 2013 and a record low of 20.05 Index Points in September of 1995. In Pakistan, the Producer Price Index measures the average change in price of goods and services sold by manufacturers and producers in the wholesale market during a given period. This page contains - Pakistan Producer Prices - actual values, historical data, forecast, chart, statistics, economic calendar and news. 2013-15-The expenses on housing also went down slightly to 13.2% since 2008.
1-People tends to avoid meeting friends and families because of price hike.2-Price spikes hamper the ability of people to spend money on holiday, going out for meal3-Lot of people in our society can’t marry because they cant afford to spend on weddings4-1-The NCD indicates that the crime in the country constantly increased with the average of 17.86% as compared to the figures of 2008. The crime against person and property, shows upward trend with the average of 24.12% as compared to the figure of 20087. Crimes like gang rape, kidnapping for ransom, bank robbery and other heinous offences created unrest and sense of insecurity among the people of the country. According to the National Crime Data (NCD), total of 3,170,889 offences, including 456,552 against persons and 611,852 cases against property, were recorded during the last five years.
People don’t celebrate their festivals i.e. Ramzan, Eid ,Diwali Christmas
1-In our country the Jalsa is a main medium of interaction politically, due to price increase both politician and public ability to communicate with each other is less likely2-Government seems to remain under pressure, people feel it’s the government who is responsible the price hike3-People come out to roads and start vandalizing, strikes and law and order issues4- People anger leads to damage to public and private properties damaged
1-The population growth rate is among the world’s highest, officially estimated at 3.1 percent per year, but privately thought to be closer to 3.3 percent per year by many planners involved in population programs. According to the latest surveys Pakistan’s population has reached up to 174.59 Million, if we internationally weigh against the extensive growth rate in our population; we are ahead of Russia and very slightly behind Brazil. By the year 2020 it is expected that our population will reach 208 Million, hence curtailing our current resources. Still we have 20% of our population who is living below international poverty line earning around 1.25 $ per day.2-Electricity up 30%, Petrol 20% only in a year, gas is going up3-Higher petroleum prices (affecting the price of fertilizer and transport costs),Disruptive weather patterns negatively affecting harvests in several region4-Global food prices have risen by 83% from February 2008 to February (World Bank)
1-3-Inflation rate from 1957 until 2013, averaged at 8.0 percent with all time high 38 percent in December 1973 and lowest -10.3 percent in February 1959. However, after falling from 20.8 percent in 2008-09,.Devaluation of Rupee seriously hamper the buying power, increase the import bill, higher fuel price2-The middlemen role is exploitative and detrimental to the interest of farmers. Farmers sell their produce to middlemen at cheaper rates mainly because they do not have direct access to markets. It is the middlemen who control market prices. They are the most powerful players and set the rules.2-there is no effective price mechanism in place, most of the time the magistrate check the prices merely for their personal publicityFarmer don’t have direct access to market mainly no road infrastructure, The middleman role stays3-Disruptive weather cause lot of damage to food production. Agriculture production is severely effected in recent years4-According to a study titled ‘Food Insecurity in Pakistan, conducted by the Sustainable Development Policy Institute (SDPI) , that 48.6 percent of the population was food insecure. Out of which 22.4 percent of the population was extremely poor.
1-1It is expected by the year 2020 population 208 Million and by 2035 it is going to be 260 hence curtailing our current resources. Still we have 20% of our population who is living below international poverty line earning around 1.25 $ per day. This aggressive growth of population create enormous demand of food whereas the agriculture produce growth is not catching up.
1- Ministry of food security and research ismainly responsible for policy formulation, economic coordination and planning in respect of food grain and agriculture. It also includes procurement of food grains, fertilizer, import price stabilization of agriculture produce, international liaison, economic studies for framing agricultural policies.
wheat procurement price which had been raised to Rs625 per 40kg from Rs510 some time ago.
1- As per statistics, it was claimed that the growth in population up by 2.1 per cent in 2011-12 to 184.91 million as against 175.31 million in 2010-11. This increase in population is also claimed to have led to decline in growth in per capita income. Bangladesh population growth is 1.59 and china’s is3-It is imperative to maintain the stability in Food price and only a gradual price increase may be allowed. The government is already on it and framed and legislation has been tabled.
1-Government must Evolve a comprehensive National Food Security Strategy as all developed countries do, Ministry of food security have already been set up2-Value addition by processing and packaging3-Step up efforts to encourage expansion of domestic agricultural production by improving infrastructure, distribution and storage systems; 4-Provide healthy competition, a stable regulatory environment and access to financing; and removing trade barriers. This will increase productivity and food supply5-Short time subsidies to protect the poorest
