Spiralling prices of essentials
Syed Jamaluddin | Saturday, 19 July 2008
Prices of most daily essentials including rice, lentils, edible oil, eggs, baby food, wheat flour, onions, sugar, beef and vegetables increased further during the past one week due to shortage of supply, mainly caused by heavy monsoon and impact of fuel price on transportation. Traders fear the prices would go up more in the days to come as increased production and transportation cost is yet to fully hit the consumers. Prices have already gone beyond the low and fixed income group's affordability. Both the people and government officials fear further rise in prices of essentials ahead of the month of Ramadan beginning in early September. Officials at the commerce and food ministries pointed accusing fingers at the global market situation as well as some local factors for the astronomical rise in food prices but none of them could shed any light on an expected time frame for stabilising the prices, if not curbing them.
The Commerce Secretary was reported to have said a few day ago that they would be holding a meeting with traders to dig out the reasons behind the price hike. But the meetings arranged by the commerce ministry in the past to discuss the price situation hardly produced any result. The Commerce Ministry even does not have a properly constituted monitoring cell. The other day there was a report in the press that the proposal of commerce ministry to allocate fund for recruitment of manpower for the monitoring cell has not been approved by the Ministry of Finance. This speaks of poor inter-ministerial co-ordination. So far only the Bangladesh Rifles (BDR) has played a constructive role in stabilising the rice price through their 'dal bhat' programme. Market monitoring by the BDR and Rapid Action Battalion (RAB) is not evident now.
Many claimed that rice prices would go down with the harvest of boro crop in March. The country saw a bumper boro harvest this year and there is plenty of rice in the country, but with no cooling effect on the prices. The law of supply and demand does not appear to operate in our context. It is often the speculation, rumour and greed rather than the usual theory of demand and supply that prevails in the market place. Of course, the linkage of rice price with other prices has to be noted. The rice farmer has to spend more money for fertiliser, diesel and edible oil. Hoarding and syndication could have also played their role in the price spiral.
The Federation of the Bangladesh Chambers of Commerce and Industry (FBCCI) has set up a price monitoring cell. It is good that the apex trade body has decided to monitor the price situation and to suggest to the govt. as to how to keep the prices of essentials at a tolerable level. But they simply do not have the capacity to do so. They must deploy suitable and sufficient number of officials for conducting this difficult task, keeping in view the half-hearted monitoring of the commerce ministry.
Govt. procurement drive of rice has not been successful because the mill-owners are going back on their contracts. Medium and large mill owners are not willing to sell their stock in the market for speculative reasons. There has been no import of rice during the last few months by the private sector. Under the circumstances, one should not be surprised if the farmers/mill owners become a bit conservative. They are also driven by the motive of more profit. Govt. has already taken some action against rice mill owners because of non-fulfilment of the contract they have made with the district controller of food to supply rice for govt. procurement.
The Finance and Planning Adviser has said that it is difficult to give guarantee about upward and downward movement of prices because of their relationship with other factors. He said his observation on price situation was quoted selectively which created a lot of confusion. According to him, the media highlighted a particular part but missed the linkages to the issue. He said that the caretaker govt. has taken three major steps through the current budget to offset pressure on the poor from soaring inflation. The measures include withdrawal of duties from almost all essential commodities, expansion of social safety net and creation of job opportunities.
The Adviser in charge of the ministry of food has said that govt. will resume open market sale (OMS) and other safety net programmes in September, keeping in mind the advent of Ramadan. But these steps might not have any positive impact on the prices. According to him, the prices of essential commodities might come down when world food market is expected to stabilize in December.
The Commerce Adviser has assured all concerned that Trading Corporation of Bangladesh (TCB) and the BDR will work to ensure that prices of essential items will remain under control during the upcoming Ramadan. Govt. will apply all tools to stabilize the market. He said that prices of food items and edible oil in the international market have already started falling. The Food Adviser has said that decline in food prices will depend on the situation in the food exporting countries.
Price level increase had a serious impact on agriculture. The price of urea has doubled. On top of this, the price of diesel has gone up. The farmers have to buy fertiliser at higher prices from the dealers. They have to stand in the long que to collect fertiliser and they may not get the required quantity. Fertiliser distribution must be made hassle-free. Farmers have to spend a good amount of money for buying irrigation water. Pump owners reportedly exploit the farmers. We must protect the interest of the growers who can really deliver their production which will have impact on the entire population. All agricultural inputs -- fertiliser, seeds, water pesticides -- must be made available to the farmers if we expect a good harvest from them. Fertiliser distribution is a complicated matter. Govt. has to look into this problem and ensure efficient distribution. This will have a salutary effect on production and thereby minimise food shortage.
The recent Group of Eight (G8) meeting in Japan decided to remove export restriction that hinder humanitarian purchase of food and called on nations with sufficient food stocks to release some of their reserves to countries in need. We hope countries like India, Vietnam and Thailand will act accordingly. We expect that India may now resume export of rice to Bangladesh.
In the context of the above discussion, some recommendations are proposed here for follow up action. Monitoring should be strengthened in the real sense. Monitoring through meetings will not be enough. It is necessary to deploy people on the ground. Govt. intervention through the TCB will be necessary. Safety-net programme must be implemented properly. Rice and other items have to be imported according to co-ordinated programme. Rice procurement has to be made on a priority basis. Govt. has to put pressure on the donors for more food aid to the net food importing countries like Bangladesh as per World Trade Organisation (WTO) agreement.
The G8 recommendation on food export, as mentioned above, must be respected by countries like India, Vietnam and Thailand. OMS has to be started on time. The BDR has to reinforce its 'dal bhat' programme. The fear factor has to be removed from the businessmen. Private sector, specially the traders, have to extend all co-operation in stabilising prices of essential commodities. All available tools must be utilised to stabilize the market situation.
(The writer is an economist and columnist)
The Commerce Secretary was reported to have said a few day ago that they would be holding a meeting with traders to dig out the reasons behind the price hike. But the meetings arranged by the commerce ministry in the past to discuss the price situation hardly produced any result. The Commerce Ministry even does not have a properly constituted monitoring cell. The other day there was a report in the press that the proposal of commerce ministry to allocate fund for recruitment of manpower for the monitoring cell has not been approved by the Ministry of Finance. This speaks of poor inter-ministerial co-ordination. So far only the Bangladesh Rifles (BDR) has played a constructive role in stabilising the rice price through their 'dal bhat' programme. Market monitoring by the BDR and Rapid Action Battalion (RAB) is not evident now.
Many claimed that rice prices would go down with the harvest of boro crop in March. The country saw a bumper boro harvest this year and there is plenty of rice in the country, but with no cooling effect on the prices. The law of supply and demand does not appear to operate in our context. It is often the speculation, rumour and greed rather than the usual theory of demand and supply that prevails in the market place. Of course, the linkage of rice price with other prices has to be noted. The rice farmer has to spend more money for fertiliser, diesel and edible oil. Hoarding and syndication could have also played their role in the price spiral.
The Federation of the Bangladesh Chambers of Commerce and Industry (FBCCI) has set up a price monitoring cell. It is good that the apex trade body has decided to monitor the price situation and to suggest to the govt. as to how to keep the prices of essentials at a tolerable level. But they simply do not have the capacity to do so. They must deploy suitable and sufficient number of officials for conducting this difficult task, keeping in view the half-hearted monitoring of the commerce ministry.
Govt. procurement drive of rice has not been successful because the mill-owners are going back on their contracts. Medium and large mill owners are not willing to sell their stock in the market for speculative reasons. There has been no import of rice during the last few months by the private sector. Under the circumstances, one should not be surprised if the farmers/mill owners become a bit conservative. They are also driven by the motive of more profit. Govt. has already taken some action against rice mill owners because of non-fulfilment of the contract they have made with the district controller of food to supply rice for govt. procurement.
The Finance and Planning Adviser has said that it is difficult to give guarantee about upward and downward movement of prices because of their relationship with other factors. He said his observation on price situation was quoted selectively which created a lot of confusion. According to him, the media highlighted a particular part but missed the linkages to the issue. He said that the caretaker govt. has taken three major steps through the current budget to offset pressure on the poor from soaring inflation. The measures include withdrawal of duties from almost all essential commodities, expansion of social safety net and creation of job opportunities.
The Adviser in charge of the ministry of food has said that govt. will resume open market sale (OMS) and other safety net programmes in September, keeping in mind the advent of Ramadan. But these steps might not have any positive impact on the prices. According to him, the prices of essential commodities might come down when world food market is expected to stabilize in December.
The Commerce Adviser has assured all concerned that Trading Corporation of Bangladesh (TCB) and the BDR will work to ensure that prices of essential items will remain under control during the upcoming Ramadan. Govt. will apply all tools to stabilize the market. He said that prices of food items and edible oil in the international market have already started falling. The Food Adviser has said that decline in food prices will depend on the situation in the food exporting countries.
Price level increase had a serious impact on agriculture. The price of urea has doubled. On top of this, the price of diesel has gone up. The farmers have to buy fertiliser at higher prices from the dealers. They have to stand in the long que to collect fertiliser and they may not get the required quantity. Fertiliser distribution must be made hassle-free. Farmers have to spend a good amount of money for buying irrigation water. Pump owners reportedly exploit the farmers. We must protect the interest of the growers who can really deliver their production which will have impact on the entire population. All agricultural inputs -- fertiliser, seeds, water pesticides -- must be made available to the farmers if we expect a good harvest from them. Fertiliser distribution is a complicated matter. Govt. has to look into this problem and ensure efficient distribution. This will have a salutary effect on production and thereby minimise food shortage.
The recent Group of Eight (G8) meeting in Japan decided to remove export restriction that hinder humanitarian purchase of food and called on nations with sufficient food stocks to release some of their reserves to countries in need. We hope countries like India, Vietnam and Thailand will act accordingly. We expect that India may now resume export of rice to Bangladesh.
In the context of the above discussion, some recommendations are proposed here for follow up action. Monitoring should be strengthened in the real sense. Monitoring through meetings will not be enough. It is necessary to deploy people on the ground. Govt. intervention through the TCB will be necessary. Safety-net programme must be implemented properly. Rice and other items have to be imported according to co-ordinated programme. Rice procurement has to be made on a priority basis. Govt. has to put pressure on the donors for more food aid to the net food importing countries like Bangladesh as per World Trade Organisation (WTO) agreement.
The G8 recommendation on food export, as mentioned above, must be respected by countries like India, Vietnam and Thailand. OMS has to be started on time. The BDR has to reinforce its 'dal bhat' programme. The fear factor has to be removed from the businessmen. Private sector, specially the traders, have to extend all co-operation in stabilising prices of essential commodities. All available tools must be utilised to stabilize the market situation.
(The writer is an economist and columnist)