Md. Joynal Abdin
The Financial Express on August 26, 2009
INFLATION has been disturbing Bangladesh for years. Initially, global inflation, oil price hike and bio-fuel causing foodgrain shortage were blamed. But tackling the prices remains a major challenge for the government.
It could be debatable, what factor or factors were contributing to price escalations, manipulation by traders for profit, extortion or imbalance between demand and supply? But there could be no debate about the role of the government to regulate the market. For this the government has to go after the extortionists and the profiteers alike.
The definition of essential commodities is also debatable. The basket of essential commodities could be different for the wealthy and the average citizen.
Essentials could be different for a beggar and a middle-class person. A list of common essential commodities should be published by the government to identify the reasons for the prices to go up. The reasons cannot be the same for the products produced at home and the imported products.
The causes of price-hike in Bangladesh could be production cost, transportation cost, production scale in a particular season, middlemen’s intervention and lack of information at different stages of the supply chain.
The prices of products, that are imported as well as produced locally, depend upon the local production scale, production cost at home, international market price, exchange rate, cost of transportation, international production volume, intervention by the middlemen and lack of information at different levels of the supply chain. The prices of imported items depend on international production, international market price, exchange rate, intermediaries, and lack of investigation by the designated authorities.
Duties and other government charges also have an impact on imported product pricing.
For regulating essential prices it is important to identify total demand in the country for each product in each month of the year.
It is also relevant to know how much of these products is produced at home and how much is imported.
For local products Bangladesh needs to have a clear picture about production performance during the pick season and the other time of year. For the imported goods the government can allow duty free import of essential items during a crisis.
It can also collect the price information from the international market, as well as information on a transportation cost and bank interest for determining market price every two months.
Increasing cost of transportation from one end to the other in the country is a factor contributing to price escalation. Usually transportation by truck costs more than by train and businessmen have to bribe the police for safe passage by road. Other forms of extortion also contribute to the escalation. Transportation by train, which cannot be stopped everywhere, could reduce the costs and the prices.
Government should develop a trade database of producers, importers, wholesalers, and retailers to track the movement of products and prices at each level of the supply chain. Access to the database through the internet could keep the consumers posted with the price line and why it should or should not fluctuate.
It can be a good way to regulate the essential prices. The government should also take steps to ensure steady and timely supply of water, fertilisers, electricity and other utility services at fair price for supporting farm production. Storage system should be ensured for preserving such goods in peak season or for a crisis. Train and river transportation would also reduce the transportation cost as well as the prices.