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 ^[1], 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. ^[2], 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 ^[3] 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.