Government Intervention in Price Fixing and Price Hike of Commodities in Bangladesh- A Bizarre Kind of Business
Demand and supply two key elements for fixing up of price. When Government interfere in price fixing, it becomes questionable whether the free market economy is running or not.
Government intervention in price fixing and Price hike of commodities in Bangladesh- A bizarre kind of business.
Md. Rezaul Karim, Assistant Professor, Southern University Bangladesh
The Ministry of Commerce, apparently, is about to enact yet another drama over the fixation of prices of a few essential commodities, including sugar and edible oil. The ministry will re-fix the mill gate, wholesale and retail prices of, at least, two commodities-sugars and edible oil shortly at a meeting of the price committee, headed by the chairman of the Bangladesh Tariff Commission. Though it is not known whether the prices of both sugar and edible oil would be revised upward or downward, the consumers view the latest government move relating to price fixation as yet another mockery for people had witnessed similar futile actions in the recent past. Such official actions on prices proved to be counter-productive. The possible effect of the latest meeting of the government’s price committee is already evident. As the decision was taken to revise prices of sugar and edible oil at a meeting between the high officials of the commerce ministry and the importers and refiners of sugar and edible oils, the prices of both the items increased at the retail level. Wholesalers claimed that a good number of refiners and importers had stopped marketing of the items mainly sugar, indicating that the price of the items might be revised upward.
The futility of the official exercise to keep the prices of essential items is time-proven. For instance, the government immediately before the last Ramadan held a series of meetings with the importers and refiners of sugar and edible oil and fixed the prices of the items at Tk 60 per kg and Tk 109 a liter respectively at the retail level. But the consumers had to buy both the items at prices higher than the government fixed ones- sugar between Tk 65 and Tk 70 a kg and edible oil (soybean) at Tk 122 a liter. The government raised a lot of hullabaloo over higher prices but the situation has remained unchanged until now.
Consumers have reasons to be apprehensive about yet another hike in the prices of the items following today’s meeting of the price committee which might decide to extend the exemption of 5.0 per cent value added tax (VAT) on both sugar and edible oil. The duration of the VAT exemption, reportedly, expired on August 31 last. The Ministry of Commerce has a long list of failures on the price front, a notable one being the introduction of the much-hyped distributorship system for sugar and edible oil marketing replacing the age-old and controversial system of ‘delivery order (DO)’. The government scrapped the latter on June 21 through framing appropriate rules. But the ‘DO’ system is still in place as many millers and refiners are yet to appoint their distributors throughout the country.
However, consumers have ample reasons for becoming skeptical about any positive results of the distributorship system in the absence of proper monitoring and supervision by the authorities concerned. Even if networks of distributors are established by the millers and refiners, there is no guarantee that the consumers would get sugar and edible oil at prices fixed by the government. Moreover, there are doubts about the efficiency level of the price committee constituted by the Ministry of Commerce. The committee is supposed to recommend prices of essentials on the basis of proper analysis of a host of factors, including international prices. But the prices of sugar and edible oil fixed by the government before last Ramadan did not match the international prices. The committee succumbed to pressure from the millers to fix rates on the higher side when international prices of both the items showed a downtrend.
Yet those prices apparently, were not enough to appease the insatiable appetite of the traders for making high profits. They created scarcity of sugar in particular under different pretexts and made windfall gains during the holy month of Ramadan. In fact in a market-driven economy, the system of price fixation by the government can hardly work, particularly in the marketing of daily necessities. The government should look into the marketing system in its entirety. Any piecemeal effort to straighten the market operations is unlikely to produce the desired results. The government can make new laws and update the existing ones involving the marketing of essential items. But what is most important here is the enforcement of laws. The government appears to be shy of taking any punitive actions against errant businessmen for fear of a backlash. Then again it is hard to rule out any underhand deal between the traders and the powerful quarters in the government to create opportunities for fleecing the innocent consumers. The Regulatory bodies, Regulations and implementations are seemed like in the whims of political elites! In all respects the doctrine of necessity formula applied, what is true today and claimed to be needed today, tomorrow it is denied by the same quarter!
One of the major flaws in the country’s marketing system is the existence of a large group of middlemen between producers and consumers. This is equally true in the case of both agricultural and industrial products. The government should try to reduce the number of hands involved in marketing of essential commodities. One important factor-consumers’ resistance- is virtually absent in Bangladesh, is due to rights of consumers are not protected well by laws. When prices go abnormally up, the consumers in most cases blame the government. The government deserves criticism for its failure to rein in prices. But the consumers do need to build their own resistance. However, it cannot be done alone or in isolation. Consumers can exert pressure on the trading community as well as on the government by organizing themselves under different banners. Unfortunately, the Consumers’ Association of Bangladesh (CAB) has failed to perform as a strong consumers’ rights group. More consumers’ resistance groups need to emerge to protect their own interests.
To be practical, in the perfect competition demand and supply will fix up prices not regulatory bodies. Regulatory bodies will take care if anything unfair practices or illicit collaboration with regard to price fixing are going or not. Now, people believe that Ministries themselves are involved in profit scamming, since they are also dealing commodities and have business enterprises. Question derives- who’ll bell the cat?