Containing price hike: A challenge

With prices rising almost every day and incomes remaining the same, all classes of people excepting the affluent section are in dire straits. The rise in the price of petroleum products for the fourth time has pushed them to the brink. The government handout explaining the rationale behind the hike, in a bid to save the exchequer of the subsidy burden and transfer the burden on the people already living on the margin, seems to be very unkind.
According to one government handout, 3.8 million metric tons of petroleum products were imported in the last fiscal year, which has gone up to 7 million tons this fiscal because fuel oil was supplied to rental power plants. Fiscal analysts opined that the price hike of fuel oils caused by the depreciation of Bangladeshi taka against US dollar would contribute further to the already soaring inflation and price escalation. Sectors and services relating to energy consumption, like transport and agriculture, will be costlier.
The government must understand that if there is anything that sends shock waves and unnerves people as much as politics, it is unbridled price hike of essentials, especially food items. And if there is anything challenging in running the government, it is controlling the business world.
Notwithstanding all unpredictable and capricious market forces, there is certainly a large amount of analysis and statistical information available on many intricate issues. To ignore such information or to remain oblivious of production mechanism, supply situation, connectivity issues, population growth, and last of all people's sufferings and resentment, and to live by slogans and rhetoric, is to court disaster
The problem is that in spite of the fact that agriculture is the mainstay of our economy, it has remained neglected for the last three decades. With meat, chicken, fish and vegetable prices touching the roof, the poor and middle income groups do not look for anything beyond dal bhat for their survival. But commodity production has fallen drastically in absence of logistic support and shrinking arable land. Even when the population has crossed 150 million from 130 million in just about five years, the administration remains with the statistics of demand and supply it had decades ago.
Prices of some commodities most needed during Ramadan went up suddenly without any discernible reason. For instance, do we have to accept that the price of masur dal registered a sharp rise of Tk.20 per kg because the demand has surged up suddenly? Moreover, why should the price of sugar sold by TCB be Tk.60 per kg when it is available at Tk.53 -55 in the open market? How can the government restore stability in the market when its own actions are at variance with what it preaches?
With the introduction of e-governance in the country, data and statistics related to production, stock situation, and consumption vis-à-vis population growth data need to be put in the government website on day to day basis like "e-choupal" in India. The government could have reformed the public distribution system by better supply chain management at the retail level.
The fixed income group, retired persons, employees of private firms and daily wage earners find themselves in a bind. Abdul Karim, a retired government employee now living in a rented house, with four members dependent on him, faces a grueling battle with his savings, a small monthly pension and the pension benefit he has put in the post office through purchase of Sanchaypatra (savings certificate). The returns from these instruments have not increased but his family expenditure continues to shoot up every day. These days he does not include pulses and milk in his monthly grocery purchase list. For the last six months he could not buy even a kilo of meat or chicken.
Amirul, a 30 year old car driver with two children, wife and old mother finds it almost impossible to make both ends meet with a monthly salary of Tk.8,000. After paying the house rent he is left with Tk.6,000. He says: "I have withdrawn my daughter now studying in class seven as there was no way I could afford the cost of her schooling, especially the conveyance to and from school."
Ironically, during the last decade, wages or incomes rose less than the prices of essentials, putting the taxpayers in higher brackets and forcing them to pay higher bills on gas, electricity, water and municipal taxes. Business groups and transport owners continue to hike the prices of goods and transport fares citing increased expenses in goods production and transportation due to oil price hike.
How much can people cut down on consumption of onion, gram and edible oil during Ramadan? Milk has now become a luxury not only for lower income groups but for all classes of people.
There has been spectacular rise in rice production in the past year but the cost of production has increased manifold because of the increase in the price of irrigation water, fertilizer, pesticide and seed. Even though the Tariff Commission or other monitoring agencies rule out the possibility of any shortfall in supply of the commodities people need most during Ramadan, there is no scope to be complacent.
It must be taken into consideration that population is growing by two million every year, and arable land is shrinking further. With fall in production due to drought and inadequate monsoon rain, speculation drives up the price through all the hands the produce passes.
As for containing price spiral, two policy measures or suggestions seem pertinent: containing inflation and improving the supply situation. Inflation is defined as too much money chasing too few goods. With remittance flow and export earning increasing, raising forex reserve to about $11billion during the last fiscal year, the economic future of the country still looks very bleak.
With increased borrowing from banks to meet the budget deficit, and absence of facilities to absorb this money flow in industrial sector expansion, it is not surprising that inflation crossed the double digit figure during most of last year. Fiscal managers in the government might say that the economy is growing because of the increasing remittance flow from Bangladeshis working abroad and increased earnings from garments. But our inability to put this money in sound investment project and accelerate industrial growth has put the nation in a quandary. That means our economy has swelled incomes and put money in people's hands to pay for goods and services that are in short supply.
A combination of supply side bottleneck and arbitrary increase in transport fare due to oil and power price hike has fuelled a sustained rise in prices of primary goods -- food grain, vegetables, and pulses. Unhappily, this rise has never been consistent and proportionate with the fuel price hike. Compounding the crisis is the extortion on the roads by political party activists, union leaders, and some unscrupulous police personnel.
In such a context, as capacities are created and supply situation improves, competition will drive inflationary pressure down and prices will even out. One might accept inflationary trend in a growing industrial economy but this is not so with Bangladesh economy. The most important factor causing a 40 to 45% increase in the prices of primary goods may be attributed to market manipulation by interested groups and coteries
The government, despite achieving spectacular success on the food front, especially rice production, failed to initiate steps to crack down on hoarders and market manipulators, and ban forward trading in primary goods. There has been poor perception management, ranging from indiscreet statements about imports, stock situation and price stabilisation. All these have left consumers confused and profiteers delighted.

The writer is a columnist of The Daily Star.
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