Cushioning the poor against runaway price hike
Wednesday, 29 August 2007
Syed Fattahul Alim
The newspapers are about everyday carrying reports with screaming headlines on the soaring prices of essentials. What worries or even strikes fear in the heart of the lowest income group is the price of the staples, especially rice and flour. Though majority of the population are rice-eaters, the population also have got used to eating roti, which is made of ground wheat called flour. Small wonder the poorer section of the people gradually took a liking for roti, as flour was cheaper than rice in the market. In a strange twist of market behaviour, recently the price of flour has overtaken that of rice. Now that the very poor are switching to rice, if only for the fact that it is a price-induced choice, some are blaming such propensity of the people on the shift in their food habit. What is worse, for obvious reasons, it has not been due to any fall in the price of rice that the poor are returning to their older habit of rice-only menu for the staple part of their diet. On the contrary, it is a matter of choice between two evils-pricey rice, but pricier wheat.
While the price of essentials is galloping upwards, experts, common people, policymakers and even the dealers in food grains, who usually draw the flak for pushing up the rice of essentials artificially, are intrigued by the stubborn hike in the prices of staples and other daily necessities. A plethora of theories including some that even smack of 'a kind of conspiracy behind price hike' are going the rounds to comprehend, as it were, the Kantian unknowable-the bizarre behaviour of rice and flour price and other essentials in the market.
The average person, however, is quite uninterested in such theories on the price hike of essentials. What they come across in the market is that there is no scarcity of foodstuff for sale. So, the availability of the basic necessaries has never been the problem. The government's food department, too, has no misgivings about any shortage of staples in the near future. Even the current flood poses no major threat to the normal supply of foodstuff to the shelves of the stores and kitchen markets. The flood has certainly wreaked havoc on the economy by disrupting communications, dislodging people from their home and hearth and submerging standing Aus crops or Aman seedlings. But still, the government thinks this damage to the economy and crops can be compensated for by providing necessary inputs to the farmers in time. Seeds, Aman seedlings, fertiliser, fuel, pesticides and credit are the basic inputs that the affected farmers will be mostly in need of. There is also a brighter side of the devastating flood. The alluvium brought in by the flood will make the inundated fields more fertile. If the farmers are able to plant Aman seedlings in the silted fields by the first week of the next month they may even harvest bumper Aman this year. In sum, so far as the stock of food grains and the prospect of future harvest in the post-flood period are concerned, there is no reason to be alarmed considering the present level of food stock in the country.
The total annual demand of rice and wheat in the country is about 26.52 million tonnes. Assuming that this year's production target of both rice and wheat at 26.39 million tonnes would be fulfilled, one can say that the shortfall between demand and supply of rice and wheat is at best 150,000 tonnes. Put differently, the shortage is equivalent to about two days' food grains demand of the population. But to avoid shortage, the government has meanwhile planned to import 800,000 tonnes of food grains. The private sector has also been importing large amount of food grain every year due to relaxed import policy of the government in this regard. So, ideally there should be no reason for food scarcity in the country.
From the above mentioned statistics provided by the government, one can conclude that there is no dearth of food grains in the country. But then why is it that the price of foodstuff is on an ascending curve without letup for such a long time? Does the market not follow the universal law of demand and supply here? Or is the market distorted beyond recognition by market manipulators, the so-called syndicates and the monopolistic interests?
There is yet another theory to supply a probable reason for the apparently whimsical behaviour of the price of foodstuffs, especially the staples. The relaxed policy of the government regarding import of rice and wheat has tilted food grain traders more towards dealing in imported rice and wheat than that produced locally. As a result, the local stock of rice is being overlooked by the marketing channels operated by the import-driven food grains dealers. The kitchen market price of rice and flour, therefore, is reflecting the higher price of imported food grains, they argue. The problem with this kind of argument is that it does not consider the fact that an importer would not have gone for putting their money in food grain import in the first place had they known beforehand that there is surplus food grain in the country and that, too, not in the depots but very much in the distribution channels. Even if one has to accept this argument, then one must return to the long-held view that a big syndicate is hoarding the largest chunk of food grains in the country with a view to reaping windfall gains from the artificially created crisis in the market. But this argument also fly in the face of the fact that kitchen markets are well-stocked with rice, flour and other daily essentials.
Notwithstanding the swaying arguments that there should not be any shortage of foodstuff in the country, and given that there is no visible crisis if one looks at the shelves and baskets of the wholesalers and retailers in the market, that is hardly any solace for the very poor and the limited income segment of the population. Their purchasing power does not permit them to arrange two square meals a day.
The government, if it has no mechanism to bring down the price of the staples, should at least do its best to generate employment opportunity for the millions of poor and vulnerable people in the countryside as well as cities. It would be worthwhile to issue a cautionary note here. History provides ample evidence that it was more often due to the lack of access to food distribution system than its stock that often led to famine and other kinds of food-related disaster in a country. While the experts would continue to cudgel their brain to ascertain the real cause of the runaway price hike, the government should meanwhile make sizeable investment in the economy to stimulate development activities including the post-flood rehabilitation work and engage the poor people in work so that they have the money to survive these hard days. Side by side with the government, the Non Government Organisations (NGOs) need also to rise to the occasion and create jobs for the poor and vulnerable section of the community in the rural Bangladesh.
The newspapers are about everyday carrying reports with screaming headlines on the soaring prices of essentials. What worries or even strikes fear in the heart of the lowest income group is the price of the staples, especially rice and flour. Though majority of the population are rice-eaters, the population also have got used to eating roti, which is made of ground wheat called flour. Small wonder the poorer section of the people gradually took a liking for roti, as flour was cheaper than rice in the market. In a strange twist of market behaviour, recently the price of flour has overtaken that of rice. Now that the very poor are switching to rice, if only for the fact that it is a price-induced choice, some are blaming such propensity of the people on the shift in their food habit. What is worse, for obvious reasons, it has not been due to any fall in the price of rice that the poor are returning to their older habit of rice-only menu for the staple part of their diet. On the contrary, it is a matter of choice between two evils-pricey rice, but pricier wheat.
While the price of essentials is galloping upwards, experts, common people, policymakers and even the dealers in food grains, who usually draw the flak for pushing up the rice of essentials artificially, are intrigued by the stubborn hike in the prices of staples and other daily necessities. A plethora of theories including some that even smack of 'a kind of conspiracy behind price hike' are going the rounds to comprehend, as it were, the Kantian unknowable-the bizarre behaviour of rice and flour price and other essentials in the market.
The average person, however, is quite uninterested in such theories on the price hike of essentials. What they come across in the market is that there is no scarcity of foodstuff for sale. So, the availability of the basic necessaries has never been the problem. The government's food department, too, has no misgivings about any shortage of staples in the near future. Even the current flood poses no major threat to the normal supply of foodstuff to the shelves of the stores and kitchen markets. The flood has certainly wreaked havoc on the economy by disrupting communications, dislodging people from their home and hearth and submerging standing Aus crops or Aman seedlings. But still, the government thinks this damage to the economy and crops can be compensated for by providing necessary inputs to the farmers in time. Seeds, Aman seedlings, fertiliser, fuel, pesticides and credit are the basic inputs that the affected farmers will be mostly in need of. There is also a brighter side of the devastating flood. The alluvium brought in by the flood will make the inundated fields more fertile. If the farmers are able to plant Aman seedlings in the silted fields by the first week of the next month they may even harvest bumper Aman this year. In sum, so far as the stock of food grains and the prospect of future harvest in the post-flood period are concerned, there is no reason to be alarmed considering the present level of food stock in the country.
The total annual demand of rice and wheat in the country is about 26.52 million tonnes. Assuming that this year's production target of both rice and wheat at 26.39 million tonnes would be fulfilled, one can say that the shortfall between demand and supply of rice and wheat is at best 150,000 tonnes. Put differently, the shortage is equivalent to about two days' food grains demand of the population. But to avoid shortage, the government has meanwhile planned to import 800,000 tonnes of food grains. The private sector has also been importing large amount of food grain every year due to relaxed import policy of the government in this regard. So, ideally there should be no reason for food scarcity in the country.
From the above mentioned statistics provided by the government, one can conclude that there is no dearth of food grains in the country. But then why is it that the price of foodstuff is on an ascending curve without letup for such a long time? Does the market not follow the universal law of demand and supply here? Or is the market distorted beyond recognition by market manipulators, the so-called syndicates and the monopolistic interests?
There is yet another theory to supply a probable reason for the apparently whimsical behaviour of the price of foodstuffs, especially the staples. The relaxed policy of the government regarding import of rice and wheat has tilted food grain traders more towards dealing in imported rice and wheat than that produced locally. As a result, the local stock of rice is being overlooked by the marketing channels operated by the import-driven food grains dealers. The kitchen market price of rice and flour, therefore, is reflecting the higher price of imported food grains, they argue. The problem with this kind of argument is that it does not consider the fact that an importer would not have gone for putting their money in food grain import in the first place had they known beforehand that there is surplus food grain in the country and that, too, not in the depots but very much in the distribution channels. Even if one has to accept this argument, then one must return to the long-held view that a big syndicate is hoarding the largest chunk of food grains in the country with a view to reaping windfall gains from the artificially created crisis in the market. But this argument also fly in the face of the fact that kitchen markets are well-stocked with rice, flour and other daily essentials.
Notwithstanding the swaying arguments that there should not be any shortage of foodstuff in the country, and given that there is no visible crisis if one looks at the shelves and baskets of the wholesalers and retailers in the market, that is hardly any solace for the very poor and the limited income segment of the population. Their purchasing power does not permit them to arrange two square meals a day.
The government, if it has no mechanism to bring down the price of the staples, should at least do its best to generate employment opportunity for the millions of poor and vulnerable people in the countryside as well as cities. It would be worthwhile to issue a cautionary note here. History provides ample evidence that it was more often due to the lack of access to food distribution system than its stock that often led to famine and other kinds of food-related disaster in a country. While the experts would continue to cudgel their brain to ascertain the real cause of the runaway price hike, the government should meanwhile make sizeable investment in the economy to stimulate development activities including the post-flood rehabilitation work and engage the poor people in work so that they have the money to survive these hard days. Side by side with the government, the Non Government Organisations (NGOs) need also to rise to the occasion and create jobs for the poor and vulnerable section of the community in the rural Bangladesh.