Bracing up for higher prices

Prices of six major essential items factored into measuring inflation increased by 30 to 217 percent in the last few months, according to TCB estimates. The rising trend in prices is likely to stay for quite a few months more due to a global spiral fuelled by increasing petroleum prices.
It is significant but not inexplicable that along with the prices of imported essentials those of locally produced items have also increased. This is because local production of food items declined due to two successive floods. Government's procurement of cereals from domestic sources has been predictably unsatisfactory. To make matters worse, international production of rice and wheat has been on the decline and India has applied ban on export of rice, wheat and pulses to Bangladesh which we have urged them to lift.
Nevertheless, in the first three months of the current fiscal, import of rice rose by 170 percent to 8.64 lakh tonnes, yet there has not been the desirable favourable impact on the market. In this context, the advisory committee on purchase has sanctioned purchase of Tk 1,400 crore worth of rice, and fertiliser, to boost boro production. 1.18 lakh tonnes of rice will be imported at Tk 302 crore and rest will go into buying urea fertiliser. With the onset of boro season the farmers have already started agitating for fertiliser as evidenced in blocking of Dhaka-Aricha highway on Thursday and assaulting the UNO and confining a fertiliser dealer.
As far as the private sector import of cereals goes, more LCs have been opened, but they seem to be still hesitant in bulk purchase because of price fluctuations in the international market and a lingering lack of confidence. The cut on import duty notwithstanding, some more confidence building measures are required to be taken.
Basically, whatever impediments remain in the supply chain and the distribution channels will have to be removed in consultation with business leaders. The middlemen's rings will have to be broken. Most of all, as the economists have been harping -- the VGF, VGD and test relief outlets should be fully used to reach food to the millions of people below the poverty line. This will have an easing effect in the overall market situation coupled with the fact that increased import of foodgrain will dampen the inflationary expectation of potential hoarders seeing little reason for stocking goods.