Waiving of L/C margin only a palliative

And, if the aim of the government is to stave off price hike during the holy month of Ramadan only, the decision came too late. The stock for Ramadan has already reached retail outlets, which the retailers brought at previous price tag.

Short term gains can be expected by importers planning to import in future. By declaring that the aim is to combat price hike during the month of Ramadan the government has indirectly acknowledged the situation's artificiality. In economic terms, it is the consumers' psychology that encouraged the evident price hikes of recent weeks. Reasonable expectation guided traders to control the supply switch.

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The waiver provides importers certain per cent of relief in not paying to the exchequer the amount waived by this decision, but the loss incurred by the public exchequer must be weighed against the relief such a reduction would ensure for the consumers. Consumers' mood runs against anything short term as their back is already against the wall.

The price hike has been a concern for some time now, especially over the last 12-14 months. But none expected it to hit the crescendo. Herein lies the problem.

In the long term, however, the revenue being sacrificed by the government must bring relief to the consumers. But much more is needed to reinstate the equilibrium between demand and supply of items on which the waiver is not applicable.

A major aspect of this waiver is exclusion of rice, wheat and sugar, which together exert the central pressure on the overall food prices. The waiver is presumably on auxiliary items like lentil, onion, spice, date, etc, which are favourite edibles of the fasting month.

While as a short term palliative we endorse what has been decided, our concern for bolder moves to put the horse of food prices under rein remains unclear. The crisis is an artificial one created by an ugly cabal assumably of bureaucrats and merchants.