Finally the trickle down effect…

We’ve all heard the country’s economic managers tell us over the last 6 years how the ordinary man will eventually benefit from the high GDP growth figures. The efforts of these economic managers’ policies have finally borne fruit as food prices take a hike. The latest commodity to register a price hike was milk. The milk vendors have been selling milk at the price of Rs. 42 a liter. The Karachi Dairy Farmers’ Association attributes this rise in prices to increased power costs, as dairy farmers are supplied electricity at commercial rates rather than agriculture rates. Furthermore, rise in prices of cattle feed also pushed the cost of milk higher.

In an earlier discussion on the forum on the same topic, A Tale of 2 Rs., readers pointed out that being an inelastic good, the price rise in milk will not lead to a decrease in the consumption of the product. Controlling prices by the government has also been an ineffective strategy in the past, as they have not been able to cut down the prices of raw materials.

This price hike may hurt the dairy farmers in the long run as even the poor, who preferred ‘Khula doodh’ over packaged milk due to unaffordability might switch over to packaged milk. Contaminated milk by the fresh milk retailers isn’t helping them either. This phenomenon has already been visible in the poultry products market as people have switched from fresh chicken to K&N’s chicken.

It is yet to be seen how industrial farming practices which Engro Foods is planning to launch in the country may help in lowering the prices of this essential commodity.

4 Comments so far

  1. d0ct0r on April 2nd, 2008 @ 12:58 pm

    i again would suggest what i suggested back in Sept07 post, make milkpowder a dutyfree item and then sit back and watch things unfold.. poor consumers will be the prime beneficiary of this step,they’ll get good quality milk at affordable rate free from contamination and adulteration.

  2. sawj on April 4th, 2008 @ 12:15 pm
  3. arifaftab on April 5th, 2008 @ 1:50 pm

    It is a kind of ironic that price of flour and rice goes up by 50% and Katachi city government does not have a problem. However, milk somehow become such an esential commodity that city govenment has to go out of its way to take action without giving any consideration to the fact that in the process they are destroying the dairy sector. Price of Animal feed and fodder have doubled in last year and price of animal has gone up by 35% over the same period. If you don’t control the price of raw material than you have no business controlling the price of finished good. These guys are not giving public a favor by controlling price, they are actually depriving of milk in the long run when people will move out of this business all together.

  4. sawj on April 5th, 2008 @ 2:32 pm

    What is even more ironic is that whatever happens, people will never stop complaining. When nothing happens, "why aren’t they doing it?". When they do it, "what have they done, now this and this will happen!"

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