Price spiral again: What needs to be done?
PRICES of essentials that are usually consumed during Ramadan have shot up as usual beyond anybody's imagination much before the month of Ramadan. Even the commerce minister's assertion of keeping the prices of these commodities under control through import by the TCB, and asking the traders to keep profits within limits, did not have any impact on the market mechanism. Evidently, some unscrupulous traders were tracking the activities of the TCB, and when they sensed that the efforts had not gained momentum and what the TCB had done during the last seven months was just a trickle compared to the requirement they started playing the foul game. The explanation given by the commerce minister that the quantum of import by the TCB is not enough and business community does not have any confidence in TCB will not satisfy the people. What hope is there that this organisation will douse the fires of the price spiral? The commerce ministry should have assessed the ability of this organisation to contain the price spiral during Ramadan. Moreover, TCB does not import goods directly, it just works as an outsourcing agent. That means there may be many a slip between the cup and the lip. Then comes the food and disaster management minister's revelation of his personal experience of the extortionists' vile game in shooting up the transportation cost. As the minister explained, transportation cost, which shot up to Tk.28,000 from Tk.7000 actually received by the truck owner, has added to the woes of the consumers -- bringing in the extra burden of Tk.21,000 on the consumers through cost adjustment in the form of price spiral. And the minister knows who these extortionists are! He has diagnosed the ailment and if the government fails to apply the medicine it will mean governance failure. Added to this is the popular perception that there is a hidden extortion business in the transportation sector indulged in by a section of law enforcers, which has kicked up the prices of goods. The fact is that every crisis calls, not for controls or for elimination of the snags but for more reforms. The problem with the policy machinery is that there is debate as long as the crisis lasts. The odds are that as prices even out, government will return to "business as usual" mode. Worse, ad-hocism would rule policy. But price spiral and food security are not issues that a nation with a huge population and low productivity can take lightly. What is needed is a long-term view of needs and engineering of solutions that survive the test of price cycles. As Dr. Debapriya Bhattacharya the CPD said: "Issues like the capacity-constraint of the TCB, its weaknesses, its management capability in a fight against organised business groups who are least willing to loosen their control of the business world, and the trend in the international market, were visible long enough for the government to act." The fact is; nobody acted, apart from indulging in rhetoric. The problem is that when the government does decide to import, it takes too long -- driving prices further up. Take the case of pulses. We don't produce enough. We need to increase acreage in pulse cultivation or invest in technology that will deliver higher yields. As some eminent economists in the country revealed: "There has been no breakthrough in output efficiency during the last three decades." Neither is there any attempt to move the farmers away from crops that add to water stress towards produce that we necessarily import. The price rise of perishables like fruit and vegetables may be seasonal but, like in grains, it has a structural issue. Thanks to the absence of distribution links and processing, several thousand tonnes of fruit and even vegetables are wasted, which adds to losses and prices. This is because the traditional distribution chain from field to fork is too long. It involves too many middlemen, resulting in consumers paying as much as four times what the farmer gets paid for his produce. Retail chains world over invest in logistics, warehouses, and delivering value to both consumers and to farmers. The problem is that when a crisis strikes, we resort to ad hoc measures that create more problems. Agriculture is the mainstay of our economy and a vital sector that brightens our lives, but it remains as neglected as ever. With the winding up of the BADC, no branch of the administration has replaced it to meet the accelerating needs of a growing population. In a bid to bring down the prices in the month of Ramadan, the government has undertaken some belated measures like cutting import duties on certain items and launching OMS by the TCB in Dhaka that people, in light of their past experience, speculate would just be cosmetic measures. Firstly, the import duty on sugar and fruits has been reduced at a time when it is most unlikely to bring any relief to the consumers during Ramadan. Secondly, nobody knows when the sugar will be arriving, because of the inefficient handling by the TCB. Family budgets in urban homes have seen the expenditure on food and groceries going up by about 50% much before the advent of Ramadan. While BTV and print media have raised the concern of the urban consumers, the agonies of the rural folk who spend about 60% of their income on food items remain unheard. Expectedly, with Sk.Hasina ushering in various reforms, people in the country were bubbling with new hope for reconstruction in all sectors of public life and development activities. But with prices of essentials soaring, extortionists having a field day, and with rape, murder and violence increasing by the day, sensible citizenry are afraid that their hopes might be belied again. Sadly true, with the country having one crore and sixty lakh hectare agricultural land, which is about sixty percent of the total land area, agricultural production is nowhere near international norms in yield per acre. Even though agriculture employs more than 50% of the labour force, and GDP earning from agriculture comes to about 20%, investment in the sector is abysmally low. Investment must be made in agriculture and technology, including irrigation, to enable multiple crops and high yield seeds. Higher credit must be allowed to farmers, who till now have no access to bank funds. Farmers also need advice, which the death of BADC has denied them. The present crisis gives indications of what needs to be cultivated. For instance, it needs no genius to understand that we need to urgently increase acreage for pulses. It is also clear that, given the level of water stress, cropping pattern has to shift from water intensive crops to those that deliver higher returns per litre rather than per acre. Given commitment, it should not be too tough for the government to focus on a new blueprint on agricultural production which functions on incentives based on national needs. What all this adds up to is a new vision statement for agriculture as the food minister, while speaking in a MOU signing function arranged by Agora and rural co-operatives sale of agricultural products from the producers to the Agora, stressed the need for setting up agro-based industries and such co-operatives. This is, in fact, one of the promises of the government. Investment in distribution and food processing will deliver value to farmers and consumers. What needs to be recognised is that agriculture is losing its viability. At the same time, it has to be stressed that the present crisis in the month of Ramadan stems more from sinister market manipulation than actual shortage. To increase the prices of essentials in the month of Ramadan is somewhat a business culture of a section of the unscrupulous traders in the country. On the other hand, while analysing the supply side constraint, one can see that the middle is too long and too many are living off it, depriving both farmers and consumers. The practice just initiated by some entrepreneurs like Agora needs to be expanded. As farmers get better value for their produce, they will be able to invest in quality inputs, learn from the market, and use technology to improve their lot. Greater common good -- of farmers and consumers -- dictates that the government utilise the potential of the masses by opening up investment in this sector. Presumably, it is not that the government lacks the economic vision to foresee the shortage, or an increased demand of certain commodities, in the month of Ramadan, then why are things going awry? Md. Asadullah Khan is a former teacher of physics and Controller of Examinations, BUET. e-mail : aukhanbd@gmail.com
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