Deciding raw-hide prices

Prices set for raw hides and skins of sacrificial animals during the Eid-ul Azha this time have experienced a cut compared to those in the preceding years. An unlikely scenario though, this is not very surprising as it is the buyers' choice that neither takes care of the sellers' requirements nor the demand - and - supply rule governing market prices. Given the circumstances in which the price fixing was made, it appears too skewed. And who can claim not arbitrary, too?
Curiously, it was only after the commerce minister's directive to the tannery owners to fix prices of raw hides by the deadline of October 03 that the latter responded - that, too, rather unwillingly. Soon after the minister's directive, the tannery owners were quoted by the media as saying that they wanted the market to determine the prices of raw hide, as a departure from the tradition of prices being jointly fixed by them and the government. This sounded rational indeed, theoretically speaking -- leaving things for the market forces to determine. But chances that market forces will prevail without any well-orchestrated pressure from interested quarters do not seem plausible, given how the country's seasonal raw-hide market is made to operate.
Plainly speaking, it is the fear of syndication from potential raw-hide buyers that prompts the government to see that prices are fixed and made public well ahead of the Eid festival. Coupled with this is the intent to try to bring a semblance of transparency in the country-wide collection of raw hides from the festival day onward.
One big question that must not be ignored while reviewing the price fixing mechanism is: why is it the tannery owners - the sole consumers of raw hides - to decide on the matter? They are one of the stakeholders - the big one though. The government in an apparent gesture of innocence has considered it unbecoming to be a party to this all-private sector affair. One has reasons to argue whether this feigning innocence justifies the government's inaction in the matter. If the government deemed it its responsibility to let the people know the buying price for the sake of fairness and, more importantly, to ensure that no side of the trade is left to lose, why did it then stay away? More than asking for a fair deal is the obvious fear of allowing floodgates of smuggling into neighbouring India. Wild tales of syndication are in circulation about various modes of operation in the cross-border deal on hides.
Coming to the prices, the maximum buying price of per square foot of cowhide has been fixed at Tk 70-75 in Dhaka and Tk 60-65 in other parts of the country.
Last year, the maximum procurement prices of raw cowhide were set at Tk 85-90 per sft for Dhaka, and Tk 75-80 for the regions outside it. Prices of goatskin have been set at Tk 30-35 per sft, while the prices of buffalo hide at Tk 40-45 per sft throughout the country.  Tanners last year spent Tk 50-55 for a sft of goat skin, Tk 40-45 for buffalo hide.  Bangladesh Tanners Association (BTA), Bangladesh Hide and Skin Merchants Association (BHSMA) and Bangladesh Finished Leather, Leather-goods and Footwear Exporters' Association (BFLLFEA) jointly announced the prices at a press conference in the city. Arguing in favour of the cut on prices this time, leaders of the associations mentioned falling international prices, slump in demand, closure of leather goods factories in importing countries and a multiplicity of taxes as reasons. The reasoning needed to be looked into as quarters concerned do not consider these valid enough in view of increasing demand for hides and leather goods world-wide.  
According to the ministry of commerce, about 7.0 million sft rawhides are collected during the Eid-ul-Azha every year. During the fiscal year (FY) 2013-14, Bangladesh earned $1295.74 million by exporting leather and leather goods.
The main markets overseas comprised the European Union (EU), Japan and the US. Of the total earnings, some $505.54 million came from leather export, $240.09 million from leather goods, and $550.11 million from leather-shoe export.
About 220 million (22 crore) sft of rawhide is usually collected in the country every year, half of which is stocked up during the Eid-ul-Azha. Raw-hides worth about Tk 40 billion (4,000 crore) are reportedly traded on the Eid day alone. Over 6.5 million cattle were sacrificed during the Eid-ul-Azha last year, according to the Department of Livestock.
In view of the overall situation - prospects as well as threats from smuggling -- pricing of raw-hides is critical to the sustenance of the country's leather industry. That the government is not well poised to take care of the industry as a whole is evident from its shifting policy stances in recent times. While this year it stayed away from fixing prices allowing the tanners a free ride, in the year before (2013) prices were fixed by the government, and in 2012 it was left to the market to decide.
Aren't these enough to suggest that the ill-devised pricing may be instrumental to many misdeeds that eventually become too difficult to control?

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