Reining in the mad horse of price hike
Wednesday, 11 July 2007
THE prices of essential commodities have been shooting up without let up for too long. Successive governments have tried in vain to arrest the soaring prices. But without success. The intransigence of the upward spiral of commodities prices has confounded everyone including theorists and practitioners alike involved in the study of market trends. There is a hypothesis that syndicates are working to push up the prices of essentials constantly in order to make windfall profits out of it. The caretaker government, upon assuming office, took a three-pronged strategy to rein in the runaway price hike. It correctly identified that the problem lay in the distribution system of the essentials and accordingly the state-owned body, the Trading Corporation of Bangladesh (TCB), was allowed to import essential commodities and the Bangladesh Rifles (BDR) was employed to supply daily necessities directly to the consumers from different selling points within the city as elsewhere.
At the same time, the government withdrew customs duties on crude edible oil as well as lentils. Imports of other commodities like rice, wheat, onion and peas were brought under zero-duty regime. The aim of the step to lower or withdraw duties totally from some vital commodities was to discourage importers, wholesalers and retailers to use the argument of high import cost to justify price hike. To all intents and purposes, those steps are yet to demonstrate any tangible result.
The government, meanwhile, used its law enforcing agencies to punish errant traders who hiked up commodities prices irrationally. There were also efforts to search out the so-called syndicates blamed for controlling prices of essential commodities and smash those. Such efforts are yet to produce result. Campaigns to bust nexuses responsible for price hike and the various other measures to regulate market price notwithstanding, the reality on the ground is that, the galloping mad horse of price hpike is defying all attempts at taming or breaking it.
As part of its continued efforts at arresting price rise, the government in its latest move has taken a new initiative to involve a non-governmental organisation (NGO) in the job of distributing essential goods to the consumers. The particular NGO named BRAC that the government has selected to perform the task has a good track record of running banks, dairies and various kinds of business ventures. Though marketing and distribution of essential commodities is completely a new area of work, all concerned would hope that the NGO in question may handle the job efficiently with the help of its huge organisational network and its army of well-motivated staff members.
While the function of distributing and marketing essential commodities is purely a trading venture, the objective of the government is not just to contract out the business to another intermediary. There is also an element of social service implied in the task. The NGO in question will therefore have to prove its worth in doing the business as well as contributing towards bringing the runaway essentials' prices under control. If proved successful, other NGO networks might well join hands to frustrate the so-called price syndicates' design to hold the consumers to ransom.
It would be worthwhile to mention here another important source of price hike that has no relation to manipulation of market prices by the vested quarters. That is about the inflationary trend in the economy. High price of fuel, increased cost of transport, high rate of bank interest, increased tariff on power, gas and other utilities are also leaving their cumulative impact on the overall structure of price in the economy. The prices of essentials are not unconnected with this general syndrome. The solution, if any, to this problem lies in macroeconomics management of the economy, rather than in the distribution system of essential goods.
Therefore, in addressing the nagging problem of price hike, the government would be required to consider both these aspects of the issue.
At the same time, the government withdrew customs duties on crude edible oil as well as lentils. Imports of other commodities like rice, wheat, onion and peas were brought under zero-duty regime. The aim of the step to lower or withdraw duties totally from some vital commodities was to discourage importers, wholesalers and retailers to use the argument of high import cost to justify price hike. To all intents and purposes, those steps are yet to demonstrate any tangible result.
The government, meanwhile, used its law enforcing agencies to punish errant traders who hiked up commodities prices irrationally. There were also efforts to search out the so-called syndicates blamed for controlling prices of essential commodities and smash those. Such efforts are yet to produce result. Campaigns to bust nexuses responsible for price hike and the various other measures to regulate market price notwithstanding, the reality on the ground is that, the galloping mad horse of price hpike is defying all attempts at taming or breaking it.
As part of its continued efforts at arresting price rise, the government in its latest move has taken a new initiative to involve a non-governmental organisation (NGO) in the job of distributing essential goods to the consumers. The particular NGO named BRAC that the government has selected to perform the task has a good track record of running banks, dairies and various kinds of business ventures. Though marketing and distribution of essential commodities is completely a new area of work, all concerned would hope that the NGO in question may handle the job efficiently with the help of its huge organisational network and its army of well-motivated staff members.
While the function of distributing and marketing essential commodities is purely a trading venture, the objective of the government is not just to contract out the business to another intermediary. There is also an element of social service implied in the task. The NGO in question will therefore have to prove its worth in doing the business as well as contributing towards bringing the runaway essentials' prices under control. If proved successful, other NGO networks might well join hands to frustrate the so-called price syndicates' design to hold the consumers to ransom.
It would be worthwhile to mention here another important source of price hike that has no relation to manipulation of market prices by the vested quarters. That is about the inflationary trend in the economy. High price of fuel, increased cost of transport, high rate of bank interest, increased tariff on power, gas and other utilities are also leaving their cumulative impact on the overall structure of price in the economy. The prices of essentials are not unconnected with this general syndrome. The solution, if any, to this problem lies in macroeconomics management of the economy, rather than in the distribution system of essential goods.
Therefore, in addressing the nagging problem of price hike, the government would be required to consider both these aspects of the issue.