We need an agricultural price commission to regulate prices
"Child mortality rate rises" – this headline in this newspaper caught my eye last month, and I read the news report with a sense of dismay. The data came from the Bangladesh Sample Vital Statistics (BSVS) 2022, conducted by the Bangladesh Bureau of Statistics (BBS). The first question that crossed my mind after reading the report was: are we facing a setback to the phenomenal progress made in reducing child mortality rates in the country since the 1970s? The report shows that different indicators of child mortality have registered marked increases since 2021. In the span of just one year, under-five mortality has gone up by almost 11 percent while post-neonatal mortality rate (mortality between one month and less than a year of age) has increased by more than 13 percent. The causes are reported to be morbidities (such as pneumonia, diarrhoea, acute respiratory infection, etc), malnutrition, and drowning.
Earlier this year, the Bangladesh Demographic and Health Survey (BDHS) 2022 found that the under-five child mortality rate had reduced from 43 to 31 per thousand between 2017 and 2022. Although the under-five mortality rates in 2022 are identical in the two reports, the SVS report provides the most recent development, while the BDHS provides a five-year change.
That these results have much to do with the lack of access to quality health services is well-understood. But let's focus on another factor – one that relates to malnutrition. What we eat primarily depends on what we can afford. Affordability, in turn, is a function of incomes and prices. Prices, of both food and non-food items, have been spiralling in Bangladesh, as in many other parts of the world. The BBS-computed food inflation in the last month of FY23 stood at 9.73 percent, while average inflation in the year was a 12-year high, at 9.02 percent. In May, general inflation was close to double digits (9.94 percent). Not just the poor, but everyone in society is now feeling the pinch of escalating prices.
The reason for these persistent price hikes has been largely attributed to the disruptions in supply chains caused by the pandemic and further aggravated by the Russia-Ukraine war. As witnessed earlier this year, global and regional prices have dropped. But in Bangladesh, prices continue to remain high, given the depreciation of the taka against the US dollar, and the constrained foreign exchange reserves.
The current situation that has led to rising inflation is an unusual one, much beyond our control. But a look at the pre-pandemic scenario will reveal that food prices in Bangladesh have been rising faster than non-food prices for more than a decade. In particular, prices of nutrient-dense foods have been escalating much faster than those of energy-dense foods, primarily rice. A 2019 World Bank study found that, relative to staples, the prices of nutritious foods such as pulses, meat, fish, eggs, milk, fruits, and vegetables were much higher in Bangladesh than in India, Nepal, and Pakistan. Given the high costs of a nutritious diet, people have been unable to afford a diversified food basket. Thus, although many people may not be hungry as such, they still remain deprived of quality food. Such scarcity of food is bound to have a negative impact on children's normal growth and development. The consequences of this on our human capital development, which defines our demographic dividend, can be damaging.
The suggestion to set up a price commission is not new. In the past, we have heard from experts, including policymakers, about the need to set up an independent price commission. Never has the need for a price regulatory body been so direly felt than now. The enormity of such an exercise is well-understood, and one could hope that the government can successfully undertake this endeavour.
The FY2023-24 budget is the concrete manifestation of the government's choice of policies to deal with the issues it faces. But while ambitious in certain sectors, the budget seems to engage little in addressing food inflation, apart from the increased support for marginalised people, subsidised food distribution among low-income groups, and a scale-up of subsidy spending. These measures are temporary relief efforts, some of which often exact substantial time and energy costs on the recipients. One entity that is currently mandated to keep prices of essentials stable is the Price Monitoring and Forecasting Cell under the commerce ministry. Several other bodies such as the Department of Agricultural Marketing and the Directorate of National Consumer Rights Protection also have price control as a direct or indirect responsibility. We even have a Competition Commission. But, as is evident, these institutional mechanisms are yet to live up to their mandates.
Temporary relief measures must be backed by meaningful long-term initiatives that will put a check on the unaccounted-for rises in essential food prices. Unaccounted, because we have been privy to many reports that point to a rise in prices well beyond cost-push inflation. Predominant factors include cartelisation, "greedflation" (price rises dictated by higher profit margins) and a lack of enforcement of existing rules and regulations. Between May 2022 and March 2023, soybean oil prices registered a 29 percent fall in the international market, but in the local market, the fall was less than 10 percent. Broiler chicken prices went up by almost 70 percent in 45 days, when the production cost did not register any significant change. Onion prices, despite going down by 25 percent in the global market, continued to rise in Bangladesh under the pretext of a shortfall in supply. In early June, when the government allowed onion imports, onion prices fell by Tk 10-15 in the local market the next day. Interestingly, data from the ministries of commerce and agriculture showed that domestic onion production is 36 percent more than the demand.
While there is little we can do about unforeseen occurrences beyond our control, there is much we can do to check the locally-generated factors causing price hikes. A meaningful step towards this could be setting up an agricultural price commission. Such a body, through its critical role of maintaining a stable price environment, would look into the interests of producers, consumers and the overall economy. In India, for instance, the Commission for Agricultural Costs and Prices has been operating since 1965 to ensure a remunerative and stable price environment for 23 agricultural commodities.
Given the vagaries of nature, the agriculture sector is inherently volatile with no guarantee for the quantum of produce, even with the uptake of best available technologies. When prices escalate, the sad and unfair part is that the farmers who grow the food do not benefit from the high amounts coughed up by the helpless consumers, often resigned to the machinations of middlemen. The disincentivising effect of this on the vulnerable farmers is obvious and with recurring losses, farmers may be forced to abandon commercial crop production and produce only for subsistence. Such an artificially induced phenomenon, coupled with the omnipresent external threat of climate change, would be destructive for our society and economy.
An independent agricultural price commission, entrusted with the responsibility of recommending viable prices for all commodities under its mandate, is something the government must seriously consider. This technical body would be able to adopt a scientific approach to provide its recommendations by considering a comprehensive set of factors in the domestic market as well as in the international market, keeping in mind the consequences on both producers and consumers.
The suggestion to set up a price commission is not new. In the past, we have heard from experts, including policymakers, about the need to set up an independent price commission. Never has the need for a price regulatory body been so direly felt than now. The enormity of such an exercise is well-understood, and one could hope that the government can successfully undertake this endeavour. It would help to bear in mind that setting up an agricultural price commission is essential for a 52-year-old, largely agrarian country on the brink of LDC graduation. Even if the latest budget did not touch upon this, some of the extensive work needed for this must start now.
Dr Firdousi Naher is a professor of economics at the University of Dhaka. She can be reached at [email protected]