Price hike riddle in a distorted market

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Shahiduzzaman Khan
Prices of some essential commodities, especially the food items, are rising again. Market watchers have termed such increases as phenomenal. The retail price of coarse rice is 40 per cent higher than its was a year ago and that of flour rose 51 per cent, soyabean oil 23 per cent and palm oil --mostly consumed mainly by the commoners -- 43 per cent over the year, according to a report of the commerce ministry released early this week.
Finance Minister AMA Muhith, was reported to have expressed concern, at the last cabinet meeting, over food inflation caused by the surging prices of these major food items. The common people, as he was furthermore reported to have said, are suffering badly for the exorbitant food prices.
At a time when the import and export volumes are satisfactory, why should the prices jump abnormally? There is no reason as to why the prices of rice should go higher when domestic Aman harvest is satisfactory, the finance minister said and he advised the agriculture ministry to take drastic steps to increase production of food grains to prevent any marked food shortage.
The country's private sector, as the reports suggest, is reluctant to import rice now as the prices of it in the international market are high. Although domestic harvest is good, traders see this point as the reason for raising the price. The government has stated that there is a buffer stock of food and hence, there is no reason for the price spiral. But the fact is that some unscrupulous traders are reportedly thriving now on dishonesty and by forming cartel, they are manipulating the market.
The parliamentary standing committee on food and disaster management ministry has also expressed concern over the soaring prices of rice. They committee asked the authorities concerned to keep its price within Tk 25 per kilogram. In a meeting last week, the committee asked the ministry to prepare a list of hardcore poor people using voter identification (ID) card for better distribution of food aid. It is an abnormal trend that the price of rice is increasing, in spite of good production and its sufficient stock this year, the committee observed.
The rice mill owners across the country have reportedly stocked up a substantial quantity of rice causing volatility in the market. The parliamentary committee asked Bangladesh Bank to be more careful in disbursing loan to such millers in order to curb their buying power. It suggested reduction of the amount of rice in fair price outlets and the Vulnerable Group Feeding (VGF) programme to bring more poor people under the food aid programmes.
Bangladesh needs to import wheat as the domestic production is unable to meet the demand. Due to drought, global wheat production this year marked a substantial decline and as a result, wheat prices soared globally. Wheat is mainly imported from Russia and Ukraine. But recently Russia stopped exporting wheat following drought and poor harvest there. Importers have to procure wheat at a higher price and as a result, flour price has registered a substantial rise. But local traders had raised flour price much before the arrival of the imported wheat consignments that were bought at higher prices.
Meantime, volatility in the edible oil market is hurting the commoners. After a series of warnings and meetings with top edible oil refiners, the government set the mill gate and retail prices of edible oil to stop its sky- rocketing in the local market. Edible oil price started rising in the local market after Eid-ul-Azha in line with rising international market prices. But those increases were abnormal. The commerce minister, after elaborate discussions with the refiners, fixed the prices of loose soyabean oil at 86 per litre in Dhaka and Tk 84 in Chittagong. The price of bottled soyabean oil was capped at 15 per cent above the retail price of loose soyabean oil. Yet this directive could hardly be enforced in the retail market. The officials incharge of consumer's protection visited a number of kitchen markets in the city after fixation of the prices and slapped fines on the errant traders.
In fact, edible oil prices jumped by Tk 13 per litre in the market within a brief time and the situation even drew the attention of the judiciary. A High Court bench issued a rule upon the government to explain why its inaction in taking effective measures to prevent the sky-rocketing-price hike of soyabean oil should not be declared illegal. Both the High Court Rule and the market volatility prompted the commerce minister to go for discussions with refiners and traders and made them to come to terms.
The irony of the fact is that when international prices jump, traders waste no time to enforce a hike. But when global prices show a declining trend, they turn a deaf ear to it and prices do not come down at all. The consumers, at the receiving end, continue to suffer and fight a grim battle against the soaring prices of essential commodities.
However, an increase in prices in an unregulated market is deemed to be the natured outcome of the inter-play of market forces. Distinguishing this from an artificial increase, orchestrated by any cartel, is not that much easy. The government needs to ensure that the market remains free from distortions. Besides monitoring the market, it should concentrate more on building buffer stock of food in order to ensure its security. szkhan@dhaka.net