Taming the skyrocketing prices of essentials
Sunday, 11 November 2007
Shahiduzzaman Khan
Food and Disaster Management Adviser Tapan Chowdhury has given the people an avowed assurance that the prices of rice would come down after the next Boro harvest, which government estimates say is going to have a bumper production. He shared the concerns of the people over the prices of different food items, especially rice and wheat. Keeping in mind international forecast, he hoped that the price would come down after February or March next year.
The adviser ruled out any shortfall in government food stock this fiscal year saying the stock position is better this year than in the previous year. The government has 0.75 million tonnes of food grains procured from local and international markets. The present stock comprises 0.56 million tonnes of rice and 0.15 million tonnes of wheat.
The government has signed contracts for importing 0.18 million tonnes of rice during the current fiscal year, and has already received 0.15 million tonnes. Of the 67,000 tonnes of wheat for which the government has signed contracts, 28,706 tonnes have already arrived. And the rest will arrive soon. India had earlier slammed a ban on the rice and onion exports. Now on request from Bangladesh, the country is likely to withdraw the ban on the export of the essential commodities.
According to agriculture ministry, production cost of one kilogram of rice is Tk 16, and the ministry is of the opinion that Tk 20 a kg is not a bad deal. Besides, the government will distribute 15kg rice per head in 26 poverty- and Monga-prone districts through vulnerable group feeding (VGF) programme, and 10kg each in 15 other districts. But the government has no immediate plan to introduce rationing in Dhaka and other cities. It appears still reluctant to reactivate its trade arm, the Trading Corporation of Bangladesh (TCB), for market intervention, despite the continued price spiral of essential commodities for the last few years.
No visible progress has been made during the six months since the Chief Adviser in May pledged to prevent local cartels, which are intent on profiteering, from raising prices by importing 'substantial amounts of essential goods' through the corporation. Admitting the failure to contain the price hike of essentials, the chief adviser at a meeting with the secretaries on May 21 expressed his government's intention to make the TCB operational again. The corporation has remained dysfunctional since the immediate-past BNP-led alliance government adopted the so-called free market economy.
Some economists contend that the immediate past alliance government allowed a number of private entrepreneurs to dominate the import-oriented domestic market as they wished. Now the government's reluctance to intervene in the commodity market had triggered the unabated skyrocketing of prices. And the efforts undertaken by the present and the previous caretaker governments to arrest the price hike have proved futile, according to market analysts. Now the government conceives an idea of turning the TCB, which was established in 1972 by a presidential ordinance basically for market intervention during crisis period and which now virtually has no work in line with its objectives, into a public limited company.
The TCB once used to import huge quantities of essential goods, besides industrial raw materials, to meet the immediate need of the people. But a policy paper prepared by the body says in the new context of globalisation and free market economy, the importance of the public enterprises has gone down. Under the changed situation, the TCB's role needs to be redefined. The TCB would watch the working of the market and take necessary action, including imports, if necessary. But some experts differed with the notion. They said free market does not necessarily mean there will be no control. For example, America, the champion of free market economy, also has an anti-monopoly law to intervene in the market.
Meanwhile, the retailers and wholesalers in the market are blaming each other for unusual rises in the prices of essentials. Retailers said the wholesalers hoarding essential commodities are responsible for the soaring prices while the wholesalers said the retailer's bump up the prices to make fast cash.
Indeed, the city's kitchen market continues to present a dismal scene of ever-rising prices of essentials. Prices of essentials except some vegetables keep on rising. Few things affect the daily life of the common people, as do the prices of essentials. If prices are not controlled, the common people's interest will go by default, whatever the gains in other areas, be they real or rhetorical. When the state of emergency was proclaimed and the interim government under Fakhruddin Ahmed took over, the people by and large welcomed the changeover, maybe because the years of poor governance had made them impatient. At that time too uncontrolled price line, along with lawlessness and corruption topped the list of public woes.
Public expectation from the interim government was therefore high but the government seemed to have mixed up its priority and went on a programme of demolition and eviction and, thus, exacerbated people's hardship by making many of them jobless too. Some think that the eviction of roadside hawkers contributed to price hike because the owners of big and established stores now had no smaller competitors.
Initially, the drive against hoarding had led to harassment of some traders and this set off a panic among traders and they were holding back on import; but later the government reassured the traders that their fears were ungrounded. In the light of government's assurance, the traders resumed their trade normally and cooperate in the government's efforts to keep prices of essentials at reasonable levels.
The government's initiative of dialogue with importers, wholesalers and traders was also a welcome move. What is important at this stage is that trust and confidence must be restored among the innocent citizens and they must not be harassed in business sector or any other sector. Stability must prevail in the market so that no nervous situation is created triggering price rise.
At a high-level meeting with the secretaries of all ministries last week, the Chief Adviser said the government had taken a number of steps to check the price-hike of essentials that produced some positive results, but the desired downtrend in prices did not come due to increased prices in the international market. The government is continuing its efforts to control price-hike, but increasing supply is important for controlling prices and to increase supply it is necessary to raise production. Some good results might be achieved during the next crop season. The Chief Adviser also said the government will constitute a high-powered Better Business Forum to provide a boost to the country's trade and investment activities at both the domestic and international levels. The Forum is expected to restore much-sought-after business confidence, which is badly needed at this critical juncture of the nation.
Indeed, keeping the prices of essentials is a serious agenda and should not be left to the vagaries of market forces or goodwill of individual businessmen. Even in a free market economy, many experts are of the opinion that a market does require government intervention from time to time. The government must have an intervention mechanism in place which it can resort to whenever needed. Market manipulation can only be corrected by market intervention, the experts say.
Food and Disaster Management Adviser Tapan Chowdhury has given the people an avowed assurance that the prices of rice would come down after the next Boro harvest, which government estimates say is going to have a bumper production. He shared the concerns of the people over the prices of different food items, especially rice and wheat. Keeping in mind international forecast, he hoped that the price would come down after February or March next year.
The adviser ruled out any shortfall in government food stock this fiscal year saying the stock position is better this year than in the previous year. The government has 0.75 million tonnes of food grains procured from local and international markets. The present stock comprises 0.56 million tonnes of rice and 0.15 million tonnes of wheat.
The government has signed contracts for importing 0.18 million tonnes of rice during the current fiscal year, and has already received 0.15 million tonnes. Of the 67,000 tonnes of wheat for which the government has signed contracts, 28,706 tonnes have already arrived. And the rest will arrive soon. India had earlier slammed a ban on the rice and onion exports. Now on request from Bangladesh, the country is likely to withdraw the ban on the export of the essential commodities.
According to agriculture ministry, production cost of one kilogram of rice is Tk 16, and the ministry is of the opinion that Tk 20 a kg is not a bad deal. Besides, the government will distribute 15kg rice per head in 26 poverty- and Monga-prone districts through vulnerable group feeding (VGF) programme, and 10kg each in 15 other districts. But the government has no immediate plan to introduce rationing in Dhaka and other cities. It appears still reluctant to reactivate its trade arm, the Trading Corporation of Bangladesh (TCB), for market intervention, despite the continued price spiral of essential commodities for the last few years.
No visible progress has been made during the six months since the Chief Adviser in May pledged to prevent local cartels, which are intent on profiteering, from raising prices by importing 'substantial amounts of essential goods' through the corporation. Admitting the failure to contain the price hike of essentials, the chief adviser at a meeting with the secretaries on May 21 expressed his government's intention to make the TCB operational again. The corporation has remained dysfunctional since the immediate-past BNP-led alliance government adopted the so-called free market economy.
Some economists contend that the immediate past alliance government allowed a number of private entrepreneurs to dominate the import-oriented domestic market as they wished. Now the government's reluctance to intervene in the commodity market had triggered the unabated skyrocketing of prices. And the efforts undertaken by the present and the previous caretaker governments to arrest the price hike have proved futile, according to market analysts. Now the government conceives an idea of turning the TCB, which was established in 1972 by a presidential ordinance basically for market intervention during crisis period and which now virtually has no work in line with its objectives, into a public limited company.
The TCB once used to import huge quantities of essential goods, besides industrial raw materials, to meet the immediate need of the people. But a policy paper prepared by the body says in the new context of globalisation and free market economy, the importance of the public enterprises has gone down. Under the changed situation, the TCB's role needs to be redefined. The TCB would watch the working of the market and take necessary action, including imports, if necessary. But some experts differed with the notion. They said free market does not necessarily mean there will be no control. For example, America, the champion of free market economy, also has an anti-monopoly law to intervene in the market.
Meanwhile, the retailers and wholesalers in the market are blaming each other for unusual rises in the prices of essentials. Retailers said the wholesalers hoarding essential commodities are responsible for the soaring prices while the wholesalers said the retailer's bump up the prices to make fast cash.
Indeed, the city's kitchen market continues to present a dismal scene of ever-rising prices of essentials. Prices of essentials except some vegetables keep on rising. Few things affect the daily life of the common people, as do the prices of essentials. If prices are not controlled, the common people's interest will go by default, whatever the gains in other areas, be they real or rhetorical. When the state of emergency was proclaimed and the interim government under Fakhruddin Ahmed took over, the people by and large welcomed the changeover, maybe because the years of poor governance had made them impatient. At that time too uncontrolled price line, along with lawlessness and corruption topped the list of public woes.
Public expectation from the interim government was therefore high but the government seemed to have mixed up its priority and went on a programme of demolition and eviction and, thus, exacerbated people's hardship by making many of them jobless too. Some think that the eviction of roadside hawkers contributed to price hike because the owners of big and established stores now had no smaller competitors.
Initially, the drive against hoarding had led to harassment of some traders and this set off a panic among traders and they were holding back on import; but later the government reassured the traders that their fears were ungrounded. In the light of government's assurance, the traders resumed their trade normally and cooperate in the government's efforts to keep prices of essentials at reasonable levels.
The government's initiative of dialogue with importers, wholesalers and traders was also a welcome move. What is important at this stage is that trust and confidence must be restored among the innocent citizens and they must not be harassed in business sector or any other sector. Stability must prevail in the market so that no nervous situation is created triggering price rise.
At a high-level meeting with the secretaries of all ministries last week, the Chief Adviser said the government had taken a number of steps to check the price-hike of essentials that produced some positive results, but the desired downtrend in prices did not come due to increased prices in the international market. The government is continuing its efforts to control price-hike, but increasing supply is important for controlling prices and to increase supply it is necessary to raise production. Some good results might be achieved during the next crop season. The Chief Adviser also said the government will constitute a high-powered Better Business Forum to provide a boost to the country's trade and investment activities at both the domestic and international levels. The Forum is expected to restore much-sought-after business confidence, which is badly needed at this critical juncture of the nation.
Indeed, keeping the prices of essentials is a serious agenda and should not be left to the vagaries of market forces or goodwill of individual businessmen. Even in a free market economy, many experts are of the opinion that a market does require government intervention from time to time. The government must have an intervention mechanism in place which it can resort to whenever needed. Market manipulation can only be corrected by market intervention, the experts say.