Galloping price of soya bean oil
Monday, 20 August 2007
The price of soya bean oil, the basic cooking essential of all classes of people, has hit its highest ever recorded level between Tk 95 and Tk 100 per litre in loose form in the retail markets. More remarkable has been the leaping up of its price within a span of only a week. It was selling for Tk 75 or 76 per kg early this month. The price differential on the higher side between that time and now is Tk 20-24. But the branded form of the oil sold in containers has not increased so much. Each litre of such branded oil in containers costs some Tk 78-80. But the branded oil in five litre containers are usually consumed by upper class and middle class people. The poor because of their obvious lower purchasing power tend to buy the oil in loose form in small quantities at retail level where its price has soared astonishingly.
According to a report in this paper last Sunday, the wholesellers were quoted as saying that lower production in the mills and transportation problems have restricted its supply and hence the abnormally higher prices. They also pointed to slowed-down unloading activities of crude soya bean oil at Chittagong port due to inclement weather which in turn affected the refining or production of soya bean oil in the mills. Some of them also blamed the higher procurement prices of the oil in crude form in international markets.
But these contentions do only partially explain things in relation to edible oil prices. There is a dire need for strengthening official monitoring activities relating to the prices charged for this indispensable cooking item, as much for other various essential commodities. It would be highly irrational to state that the stocks of soya bean oil currently maintained by the wholesellers have suddenly dropped to zero or near that level. They have stocks which they bought from the mills when the prices were not so abnormal. Thus, if they were bound by any business ethic, then they would feel obliged to go on selling the oil at their justified previous prices to the retailers and the retailers could then go on passing the benefits of the same to the consumers. It needs also monitoring whether the retailers are truthful about buying soya bean oil at unusually high prices from the wholesellers.
The effective antidote to this can be mainly market monitoring and taking of appropriate actions to help augment supplies at the retailers' level. Furthermore, any unethical practices on the part of the traders should also be countered effectively. Simultaneously, the complained transportation and other supply-related problems also should be addressed promptly. The shooting up of prices of soya bean oil raises concern because centering on such high prices of this cooking oil, sellers concerned will find the justification for raising also the prices of all kinds of food items to be consumed during the holy month of Ramadan. Sellers of 'iftari' items will find an excuse to increase the prices of these foods saying that they need to compensate for preparing the foods with much higher priced soya bean oil. Thus, the government's intention of keeping prices of essential foods reasonable during the Ramadan month, will face a challenge.
Not only soya bean oil but also other essential items have come under severe price pressures for a variety of factors that merit a clear scrutiny and review for taking appropriate corrective steps. There are no quick fixes to the problem. While monitoring and surveillance on the part of the government and its selective intervention in areas where it can help manage things without creating distortions in the market can be useful in the short term, such measures alone will not solve the problem of inflation on a sustained basis. Letting the market forces work in a free and competitive manner that leads to a better balance between supply and demand holds out the effective answer to the inflationary situation.
According to a report in this paper last Sunday, the wholesellers were quoted as saying that lower production in the mills and transportation problems have restricted its supply and hence the abnormally higher prices. They also pointed to slowed-down unloading activities of crude soya bean oil at Chittagong port due to inclement weather which in turn affected the refining or production of soya bean oil in the mills. Some of them also blamed the higher procurement prices of the oil in crude form in international markets.
But these contentions do only partially explain things in relation to edible oil prices. There is a dire need for strengthening official monitoring activities relating to the prices charged for this indispensable cooking item, as much for other various essential commodities. It would be highly irrational to state that the stocks of soya bean oil currently maintained by the wholesellers have suddenly dropped to zero or near that level. They have stocks which they bought from the mills when the prices were not so abnormal. Thus, if they were bound by any business ethic, then they would feel obliged to go on selling the oil at their justified previous prices to the retailers and the retailers could then go on passing the benefits of the same to the consumers. It needs also monitoring whether the retailers are truthful about buying soya bean oil at unusually high prices from the wholesellers.
The effective antidote to this can be mainly market monitoring and taking of appropriate actions to help augment supplies at the retailers' level. Furthermore, any unethical practices on the part of the traders should also be countered effectively. Simultaneously, the complained transportation and other supply-related problems also should be addressed promptly. The shooting up of prices of soya bean oil raises concern because centering on such high prices of this cooking oil, sellers concerned will find the justification for raising also the prices of all kinds of food items to be consumed during the holy month of Ramadan. Sellers of 'iftari' items will find an excuse to increase the prices of these foods saying that they need to compensate for preparing the foods with much higher priced soya bean oil. Thus, the government's intention of keeping prices of essential foods reasonable during the Ramadan month, will face a challenge.
Not only soya bean oil but also other essential items have come under severe price pressures for a variety of factors that merit a clear scrutiny and review for taking appropriate corrective steps. There are no quick fixes to the problem. While monitoring and surveillance on the part of the government and its selective intervention in areas where it can help manage things without creating distortions in the market can be useful in the short term, such measures alone will not solve the problem of inflation on a sustained basis. Letting the market forces work in a free and competitive manner that leads to a better balance between supply and demand holds out the effective answer to the inflationary situation.