Before getting down to detailed discussion on the syndicate, formation of syndicate and efficiency of these syndicates, I would like to arrest the readers' attention towards the factors of price hike, especially the essential items. The price of a commodity if procured locally reflects its production costs, transportation costs from one centre to another, wholesalers' margin and retailers margin and some other incidental expenses like frequently used rent seekers' costs. Commodity price, if procured internationally, usually reflects international market price, shipping costs, importers' margin, distributors' margin and retailers' margin. Bangladesh with its growing population though have shown tremendous success in keeping her people fed through adequate rice production, at times it had to import rice at the international price, when there is a flood or drought. We also regularly need to import pulses, edible oil, sugar and other essential commodities and last but not the least fuel. Though lately we are witnessing some slide in the fuel price, but it is yet to come down to the level of USD 30 per barrel of two years ago. Same is the case with various commodities like sugar, wheat, rice, lentils and etc. While the USD 30 per barrel fuel has seen a highest price like USD 72, rice during last 2 years has seen a hike from USD 160 to USD 270 per ton, wheat from USD 150 to USD 250 per ton, lentils from USD 350 to 600 per ton, 'motor dal' from USD 225 to USD 270, rape seeds from USD 300/MT to USD 425/MT, edible oil from USD 400/MT to USD 650/MT. Moreover, drought in our neighbouring country has forced them to stop exporting pulses, sugar and wheat to Bangladesh, further contributing to increased shipping costs and supply constraints driven price hike. During the same period, exchange rate also fluctuated between BDT 60 and BDT 74. All these components along with congestion in Chittagong Port, political unrest contributed significantly to the price hike of imported commodity in Bangladesh, besides increasing financing cost due to contractionary monetary policy followed by the government.

Now, let us come to the domestic market. Starting with rice- the farmers in Bangladesh produce rice primarily for own consumption. Farmers' decision to produce rice for own consumption generally is not based on economic cost benefit analysis, however they decide to do cost benefit analysis when they produce rice in excess of their own need. There are two main rice types- aman and boro. Production cost of aman is relatively low, as it does not require irrigation. However, production cost of boro is high.

This season my relatives back home are reaping boro rice on about 6 acres of land. We expect 450 'maunds' of paddy. At current market price value of the paddy is BDT 180,000 (BDT 400 per maund, though at present 40kg paddy is being sold at BDT 420 in the northern region of Bangladesh). We estimate BDT 120,000- (roughly BDT 265 per maund) as the production costs (seeds, irrigation, fertilizer, pesticides and labour), so production of boro rice is only marginally profitable or not even profitable if we take into account the required return on investment in land.

Fertilizer and irrigation account for more than 50 percent of rice production cost. This season the production cost will go up if current fertilizer crisis lingers. These days farmers in some areas have started to produce maze in paddy producing land, as they find it more profitable. Therefore, the opportunity cost of not producing maze or other crops will be factored in rice price in future. Current market price of coarse rice at around BDT 18-20 per kg is fully reflective of associated cost. Production of 1 kg rice requires 1.5 kg of paddy. Paddy at BDT 400 per maund means that BDT 15 worth of paddy is required for production of 1 kg rice. If we take the crashing, distribution and retailers' mark up into account, current price is well justified. The rice market is fully competitive and efficient. Because of sheer size and number of players this market can't be manipulated. There is some `rent seeking' in practice, while carrying rice trucks into `Babu Bazar' and other wholesale points in the country, but if we distribute that into per kg of rice it won't be more than 25 paisa per kg.

The objective of putting forward the above analysis is to make the statement that, a lot of our economists are creating absurd and exaggerated expectation in public mind with distorted data about the real price level. This exaggerated expectation is creating the perception of syndicate, whereas the actual power of this so-called syndicate may be unrealistic or insignificant. Of course, we want more transparency in the price of our commodities. But that has to be ensured through the mechanism of market, not by force. Any outside intervention will actually distort the whole wealth generating process and will only create obstacle in our economy's growth path. Yes, with further improvement of law and order, war against corruption can reduce the prices by 25- 50 paisa per kg cost from the rice price, but it can't be sold at 10-12 taka per kg as estimated by some populist economists, unless government comes up with drastic subsidy measures and even then, if it reaches the real producers, who produces a kg of rice at 15/16 taka per kg, and the economists want them to sell those at 10-12 taka, not to talk about the contribution of agriculture to our national GDP. Same is the case with other agricultural products. Improving the supply side constraints, better storage facility, reduced fertilizer and fuel price may have a positive impact on the price, but it won't take us to the Shayesta Khan's regime of the history, that's for sure. Plus, we have to take care of our farmers too, and ensure appropriate price for their produces to keep them on the ground.

Bangladesh imports 800 thousand metric tons (MTs) of sugar. International sugar price for the last 1 year averaged at USD 325/MT, therefore the country needed USD 260 million or BDT 1820 core to import sugar, therefore an economist's claim of misappropriating BDT 5000 crore through `sugar trade syndicate' is not based on reality or supported by any numerical counts. Same is the case with another popular economist who said the last government misappropriated BDT 186000 crore through various 'ill ways'. Planning Commission data ensures that during 2002 to 2006 fiscal years our total ADP implemented amount was BDT 84650 crore and the revenue earnings was BDT 178258 crore. I am sure, he or his flimsy popularity biased economists friends, appreciate that the entire ADP or revenue earnings didn't go to the pocket of the politicians or political parties.

Yes, our politicians are bad and mostly corrupt, their parties don't have any transparency or accountability within them. But these types of aggressive and baseless comments unnecessarily increases the expectation of the common people and will obviously put the next government, whoever comes through a free and fair election into a real problem. Unnecessary stimulation of the expectation of common people by a certain quarter has shown this nation its founding leader being buried without any standing ovation or due respect. Time has come to be more objective and focused for all of us. Of course, if we don't want to encourage `acute intelligence deficiency syndrome' in Bangladesh' and want to establish as `knowledge based society 'or economy like many of our neighbors.

The writer is a banker