Why the government can’t control commodity prices
People wandering from shop to shop at kitchen markets is nothing new; what is new, however, is these very people failing to find that cheap deal. If one visits five to 10 vendors, whether it be the ones selling rice, onion or brinjal, they will find the exact prices, no room for negotiation. At a time when prices of essentials are sky-high, such deals mean more savings for the children, more food on the table, and more room to breathe. So now, how will these unfortunate individuals make ends meet?
The situation was not like this even some years ago. Not all shopkeepers sold their items at the same price; bargaining would do wonders, bringing per kilo prices down a few taka. So, what changed? An ugly atmosphere has developed in retail markets, including those in the villages, thanks to syndicates, which have formed everywhere for the sake of profits.
On September 14, the commerce ministry fixed the prices of potatoes, onions, and eggs in the retail market. Each egg from the poultry farm has been priced at Tk 12, a kilo of potatoes at Tk 35-36, and Bangladeshi onions at Tk 64-65 per kilo.
Since fixing the prices, the Directorate of National Consumer Rights Protection (DNCRP) and other government agencies have been monitoring the market daily for over a month. Raids have been frequent at small retailers and large business establishments. Many companies have been significantly fined, while small traders have been charged and jailed. Even eggs are being imported to stabilise the market. But all this has brought no good news; prices have no sign of going down. According to the Department of Agricultural Extension (DAE), in the 2022-23 fiscal year, more potatoes were grown than the national demand, and yet their price is rising.
Now the question is whether the government wants to control the market. The answer is, apparently yes, but the government actually can't. Because Bangladesh's business and trade are mainly standing on liberal economic policies, which means the laws and regulations work in favour of business and trade.
In the past few years, many large food-processing companies that previously focused on luxury goods have ventured into the food-grain business, which is well known to the government. These corporations have started establishing their mills, factories and warehouses at the district level, investing a lot of money. Their investments and capacity are so high that they can buy all the paddy and rice grown in the districts in mere months.
Very soon, they will control prices of our main food items – like paddy-rice, potatoes, and maize – like what they are doing with eggs. As a result, farmers will not get a fair price for their crops, and consumers will never be freed from high prices.
On October 16, AHM Shafiquzzaman, director general of the DNCRP, said, "Corporate organisations have held the egg market hostage." Several food control officials, on condition of anonymity, said big companies are collecting aromatic rice from local markets. After packing it, they sell one kilo of Chinigura rice for Tk 100 to 145, when the production cost is less than Tk 70.
On December 23 last year, food control officials in Bogura Sadar upazila seized 2,000 tonnes of paddy from the under-construction auto rice mill of Tanveer Food Limited, a sister concern of Meghna Group, for hoarding.
Similarly, on January 19 this year, the Bogura Food Control Office filed a case against ACI and a local food warehouse in Sherpur upazila for illegally storing 4,510 tonnes of rice and paddy. The case statement stated, "According to the Control of Essential Commodities Act, 1956, no trader can store more than one tonne of food grain without having a storing licence from the government or government agencies. The ACI Foods Limited (rice unit) stored this sum of rice and paddy without such a licence." During this episode, the officials said seizing food from large companies is very difficult, as they are very powerful. They are right. Raids against big organisations have to deal with a lot of pressure from the upper echelons.
On September 19, Safiquzzaman went to Bogura and conducted a raid at a cold storage in Shibganj upazila. The DG found three unscrupulous traders and handed them over to police for hoarding. He then told journalists that the production cost of one kilo of potatoes is only Tk 12-13, and if a farmer sells it as Tk 26-27, they will make a profit.
On that day, when the DG left the cold storage, I spoke to some brokers and middlemen. The brokers said that the farmers had sold all the potatoes to middlemen, who were making profits of Tk 500-600 per sack. Even though the government had ordered the sale of potatoes at Tk 26-27 per kilo in the cold storage area, it is not possible, because all potatoes now land in the hands of middlemen, who have taken loans from several sources with high interest.
Talking to traders selling potatoes in the open market, they said at every cold storage, there are at least 100 to 150 middlemen and brokers, who are just sitting there to increase the price and make a profit.
For any major crop, there are local and national profiteers, who make plans to maximise profits way before the crops land in the markets. They also share the potential profits among themselves (in different stages) even before harvest. As a result, no matter how hard the government tries to control the price of goods at the time of crisis, it does not work. Although the government has collected biometric information of every adult citizen, it has no information about the thousands of large and small hoarders.
Again, millions of brokers who have no investment, no business establishment, and don't do any hard work are coming in the middle and making daily profits. Even though there is sufficient production and stock of food grain in the country, the price of everything is increasing.
So, what can be done? Firstly, legislation should be made in a way so that all types of traders are listed. Traders will automatically report to the local administration about their daily buying, stocking, and selling amounts. Next, the government should have accurate information about food production and the actual demand, so that the government can understand in advance about the potential increase in prices and how much food needs to be imported to stabilise the market.
Right now, there is no direct contact between consumers and farmers. Numerous small and large corporations, brokers, and middlemen have come in between the two groups. These entities need to be driven out from this space to revive producer-consumer relationships.
If such measures are taken, coupled with strict monitoring and enforcement of the law, there is hope of getting back to the markets of the past, where bargaining brings respite and groceries don't weigh on your whole life.
Mostafa Shabuj is the Bogura correspondent at The Daily Star.
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