Addressing price gaps can arrest inflation

The Bangladesh Bank (BB) carried out a study on five kinds of essential agricultural produce in 14 districts of the country in January this year to know about the reason behind the atrocious price gaps between farm and consumer levels. Even without any study, the reasons are common knowledge. But the BB study has only confirmed what common people know from experience. The demand-supply theory is not applicable for Bangladesh because the process is deliberately distorted by means fair and foul in order to maximise coterie interests.

Usually commodity market ought to be dictated by production and supply. If there is a glut of any produce particularly a perishable one, its price is sure to fall because of supply superseding demand. But not all countries pride themselves on producing all the essential commodities---or if they do, not in sufficient quantities--- their peoples need. Yet an importing country can maintain steady supply of imported goods if it has authentic data at hand and make arrangement for procuring those essentials well in time. In a market economy, a government has to be smart enough to keep a tab on domestic production, storage, transportation and timely release from warehouses.

On all such counts, successive governments in Bangladesh have given a poor account of themselves. The interim government is no exception to this. Although it took over at a crucial time following a violent political changeover and had to be busy with more pressing issues, it got the signal of what were to be expected of businesses. Business syndicates have been reigning supreme for long in this country. Additionally, immediately after the interim administration was installed, the country faced severe floods in its north-eastern and south-eastern zones, which caused devastation not only to homesteads, livestock, and other moveable and immoveable property but also to the standing Aman crop.

The government took a long time to reduce import duty and issue licences for import of rice when it was cheaper in the international market. Rice importers also adopted a go-slow policy to import rice. The upshot of all these is that rice price went up abnormally by that time. Similar things happened before with potato, onion and other essentials. But what is particularly concerning is that produce the country at times grows more than it requires can be used or better say abused by actors other than farmers to serve their unholy interests at the cost of both growers and consumers.

This is exactly where Bangladesh has earned infamy by allowing the social parasites to proliferate and eat the cream. Working in cohorts with business syndicates--- the main players to distort supply chain and manipulate the market, they form a nexus of unholy business regime impenetrable by even the most honest entrepreneurs and businesspeople. The BB's study confirms this beyond doubt. Of the five commodities on which it carried out the study, rice, potato and onion have more or less the same stories. Consumers are compelled to pay twice the price or more than the production cost for the staple rice. The irony is that growers seldom enjoy the opportunity of the soaring prices of these three crops. All three important essentials registered atrocious prices last year and this year farmers are credited with reaping good harvests of those with the weather favouring cultivation.

There has, however, no change in the controlling mechanism the middlemen and wholesalers use. While paddy farmers are not facing losses because this crop is not as perishable as onion and potato, the growers of these two crops are incurring losses because of more yields this year. Consumers are also not the beneficiary of the lower prices at the growers' level. Potato farmers dispose it at Tk 12-18 a kilogram but it is priced at Tk25 in Dhaka. Onion fetching Tk 20-25 a kilo at farm level had a retail price of Tk 45-50 a few weeks earlier but it has already registered a hike by Tk 10-15 by this time. This means business intrigue has already come into play.

The BB has made a casual suggestion for stabilising potato market without going deep into the problem. It suggests for step by step release of potato from cold storages. This will be of no use because the cold storages are in the private sector which is not bound to oblige any such instruction. There has to be a comprehensive view of the entire system of production, storage, transportation and marketing.

Authentic data of national needs for rice, potato and onion have to be prepared and the agriculture ministry will plan for required lands to be brought under cultivation of each crop through the agriculture extension department. There is no alternative to eliminating the middlemen and other social parasites engaged in extortion. To make this happen, the government needs to build a chain of cold storages in order not only to prevent waste of potato and onion but also other kinds of perishable produce. Thus it can intervene when there is a crisis in the market.

Similarly, the government can develop a pool of trucks preferably under the management of the Bangladesh Road Transport Corporation (BRTC) to press into service for direct transportation of not only the essential commodities but also other perishable crops from growing areas to different urban destinations. The trucks can even be handed over to farmers by forming their cooperatives which will pay instalments over a reasonable period of time to own those vehicles after clearing the total price. This is how the outrageous price gap and profit made by business syndicates through manipulation of market can effectively be addressed

The other two items under BB scrutiny, egg and broiler chicken have a different problem mainly linked to feed and hatching costs. Production cost has to be lowered by study and research in this area. Until this happens, duties on import of raw materials ought to be waived.              

nilratanhalder2000@yahoo.com