Containing price spiral of essentials
Sunday, 26 July 2009
Shahiduzzaman Khan
PRICES of essential commodities are spinning out of reach of the common people well ahead of Ramadan. Monsoon rain, drought, scanty supply and various other factors are being cited as the reasons for the phenomenal price hike of essentials in the kitchen markets. Even the government's efforts to monitor the market or curb the escalating prices have apparently floundered in spite of the fact that the country's commerce minister had expressed his determination to rein in the situation. The government does not even have a short-term plan to contain the prices, let alone a long-term strategy, while the prices have already gone beyond the low and fixed income group people's affordability.
Both the consumers and the relevant ministry officials fear further rise in prices of essentials ahead of the Ramadan beginning next month. Reports say traders are sceptical about stabilisation of the prices of essentials in the near future. Consequent upon the price hike, middle and low-income group people as well as the ultra poor have been hit hard. Two government committees, functioning under the commerce ministry, have apparently failed to play any effective role in taming the wild horses of price hike.
On many occasions, ministers and advisers were seen visiting the kitchen markets in the city. In various meetings with the business representatives and associations, the government fixed the prices of those items that had registered an abnormal rise. Unfortunately, a day after fixation of the prices, the commodities in question become dearer. The nexus formed by the intermediary vested interest groups cannot be broken.
Launching open market sales of rice, market monitoring by law enforcers, and expansion of government safety net programmes like vulnerable group feeding, were some of the steps the government had taken earlier in an effort to bring the prices under control. But the hike continued, turning all government efforts into futile exercises over the past months. Market monitoring by the commerce ministry officials have not been visible since long while the price lists that used to hang at every market in the city have also been missing for months now.
Meanwhile, wholesalers and importers of essential commodities identified 'rent-seeking' by different government personnel like tax officials and law enforcers as one of the major reasons for the hike in prices of essentials ahead of Ramadan. They said the action of the law enforcers had contributed to the hike. Many businessmen fall victim to secret extortions by some law enforcers during the time, which results in the rise of commodity prices by over 10 percent. It is not possible to keep prices low by merely reducing tax. Businesses suggested that there should be adequate supply of essentials and immediate halt to rent seeking and extortion on roads and highways.
Although the commerce and the finance ministers admitted the existence of syndication behind the manipulation of commodity prices, the government has failed to take any legal action against the alleged syndicate members. As such, prices of commodities are unlikely to come down to a tolerable level within a short time. A former commerce minister took an initiative to hang price list in every retail market of the capital city. But unfortunately, the initiative was not followed there after. Some laws relating to market monitoring also returned from the cabinet without approval.
In a free market economy, the government usually does not have direct authority over the market. As such, it is largely left in the hands of the businesses. But a good number of these are not scrupulous and have a strong "greed" factor. It is this particular group who takes advantage of the free market and manipulate it for their benefit. Imperfections in the market and the absence of free competition, encourage them to create a kind of monopoly, holding the general consumers hostage.
All the country needs is an effective regulatory framework and proper enforcement mechanism for facilitating a rule-based market system to operate. In a crisis situation, the government should have the proper means to intervene and uphold the interest of the consumers. Had the government been a little alert, the type of price spiral of essentials that the country has been witnessing for long, could have been averted. Much of the unusual price-hike during the holy month of Ramadan centres around the fact that the supplies of even agricultural products such as onion, ginger, garlic, turmeric, pulses, sugar, oil, wheat, rice etc., in the market are dependent on imports to the extent of 70 per cent. At times when consumption of particular vegetables increases or when the local production falls drastically during floods or droughts, unscrupulous businessmen allegedly indulge themselves in hoarding in order to create an artificial crisis in the market. To keep prices stable, the government can import these items and release the stock in the market in case of any scarcity, either real or artificially created. If not on a regular basis, such measures can be taken ahead before the advent of Ramadan or after a natural calamity.
There is no system of regular price monitoring and it is only after media outcry that the government wakes up. In order to monitor the prices, the commerce ministry needs to launch a data bank on the prices of daily essentials to identify the gap between demand and supply at different times of the year and keep the update about the international market rates, especially of the goods Bangladesh generally imports. During Ramadan or at any other time when the prices go up, a section of traders often blames the higher international 'rates' of a particular good or goods. Being not fully informed of the latest developments in the international market, the government finds itself in a difficult position to make an appropriate policy response. A data bank on prices of essentials can work as a guideline for the government about when to intervene and how.
Commerce Minister Faruk Khan claims repeatedly that the government has adequate preparations to keep the prices of essentials stable in the local market, especially during Ramadan. But his words have not been translated into action. The government should mean business this time about its commitment to keep the prices within the affordable means of the people. Some circles believe that the market has been opened too widely and too prematurely. They say, Bangladesh should follow a middle position -- a free market economy with some regulations, if not restrictions. The country with its import-dependent market for supply of many essential items is reaping few benefits, but losing out substantially because of it.
.........................................................
szkhan@thefinancialexpress-bd.com
PRICES of essential commodities are spinning out of reach of the common people well ahead of Ramadan. Monsoon rain, drought, scanty supply and various other factors are being cited as the reasons for the phenomenal price hike of essentials in the kitchen markets. Even the government's efforts to monitor the market or curb the escalating prices have apparently floundered in spite of the fact that the country's commerce minister had expressed his determination to rein in the situation. The government does not even have a short-term plan to contain the prices, let alone a long-term strategy, while the prices have already gone beyond the low and fixed income group people's affordability.
Both the consumers and the relevant ministry officials fear further rise in prices of essentials ahead of the Ramadan beginning next month. Reports say traders are sceptical about stabilisation of the prices of essentials in the near future. Consequent upon the price hike, middle and low-income group people as well as the ultra poor have been hit hard. Two government committees, functioning under the commerce ministry, have apparently failed to play any effective role in taming the wild horses of price hike.
On many occasions, ministers and advisers were seen visiting the kitchen markets in the city. In various meetings with the business representatives and associations, the government fixed the prices of those items that had registered an abnormal rise. Unfortunately, a day after fixation of the prices, the commodities in question become dearer. The nexus formed by the intermediary vested interest groups cannot be broken.
Launching open market sales of rice, market monitoring by law enforcers, and expansion of government safety net programmes like vulnerable group feeding, were some of the steps the government had taken earlier in an effort to bring the prices under control. But the hike continued, turning all government efforts into futile exercises over the past months. Market monitoring by the commerce ministry officials have not been visible since long while the price lists that used to hang at every market in the city have also been missing for months now.
Meanwhile, wholesalers and importers of essential commodities identified 'rent-seeking' by different government personnel like tax officials and law enforcers as one of the major reasons for the hike in prices of essentials ahead of Ramadan. They said the action of the law enforcers had contributed to the hike. Many businessmen fall victim to secret extortions by some law enforcers during the time, which results in the rise of commodity prices by over 10 percent. It is not possible to keep prices low by merely reducing tax. Businesses suggested that there should be adequate supply of essentials and immediate halt to rent seeking and extortion on roads and highways.
Although the commerce and the finance ministers admitted the existence of syndication behind the manipulation of commodity prices, the government has failed to take any legal action against the alleged syndicate members. As such, prices of commodities are unlikely to come down to a tolerable level within a short time. A former commerce minister took an initiative to hang price list in every retail market of the capital city. But unfortunately, the initiative was not followed there after. Some laws relating to market monitoring also returned from the cabinet without approval.
In a free market economy, the government usually does not have direct authority over the market. As such, it is largely left in the hands of the businesses. But a good number of these are not scrupulous and have a strong "greed" factor. It is this particular group who takes advantage of the free market and manipulate it for their benefit. Imperfections in the market and the absence of free competition, encourage them to create a kind of monopoly, holding the general consumers hostage.
All the country needs is an effective regulatory framework and proper enforcement mechanism for facilitating a rule-based market system to operate. In a crisis situation, the government should have the proper means to intervene and uphold the interest of the consumers. Had the government been a little alert, the type of price spiral of essentials that the country has been witnessing for long, could have been averted. Much of the unusual price-hike during the holy month of Ramadan centres around the fact that the supplies of even agricultural products such as onion, ginger, garlic, turmeric, pulses, sugar, oil, wheat, rice etc., in the market are dependent on imports to the extent of 70 per cent. At times when consumption of particular vegetables increases or when the local production falls drastically during floods or droughts, unscrupulous businessmen allegedly indulge themselves in hoarding in order to create an artificial crisis in the market. To keep prices stable, the government can import these items and release the stock in the market in case of any scarcity, either real or artificially created. If not on a regular basis, such measures can be taken ahead before the advent of Ramadan or after a natural calamity.
There is no system of regular price monitoring and it is only after media outcry that the government wakes up. In order to monitor the prices, the commerce ministry needs to launch a data bank on the prices of daily essentials to identify the gap between demand and supply at different times of the year and keep the update about the international market rates, especially of the goods Bangladesh generally imports. During Ramadan or at any other time when the prices go up, a section of traders often blames the higher international 'rates' of a particular good or goods. Being not fully informed of the latest developments in the international market, the government finds itself in a difficult position to make an appropriate policy response. A data bank on prices of essentials can work as a guideline for the government about when to intervene and how.
Commerce Minister Faruk Khan claims repeatedly that the government has adequate preparations to keep the prices of essentials stable in the local market, especially during Ramadan. But his words have not been translated into action. The government should mean business this time about its commitment to keep the prices within the affordable means of the people. Some circles believe that the market has been opened too widely and too prematurely. They say, Bangladesh should follow a middle position -- a free market economy with some regulations, if not restrictions. The country with its import-dependent market for supply of many essential items is reaping few benefits, but losing out substantially because of it.
.........................................................
szkhan@thefinancialexpress-bd.com