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Price hike: Where to go?

  1. Capital market reforms
  2. NetSol launches the fastest internet service
  3. Micro-credit banking in Pakistan 
  4. An interview with Zaheer A. Kidvai of BITS
  5. Price hike
  6. The increase in gas tariffs
  7. Bank privatization in Pakistan
  8. PTCL new tariff policy
  9. Marketing and its potential

The victims are poor and the salaried class


Aug 14 - 20, 2000

Widespread resentment is gaining ground against government policies allowing increases in the tariff of utilities like gas, electricity, petrol and telephone charges. This has partly led to increase in the prices of large number of essential food items making the life of common man more miserable during the past few months. The agony of this scenario has been multiplied by the ongoing exercise of downsizing in almost every government and semi-government organizations where again the majority of the victims belong to lower classes.

Anger is brewing up slowly amongst the poor and lower middle classes who were in the forefront to welcome the  new government from whom they expected some relief for those who were finding difficult to survive in their honest income. Even Nawaz Sharif government was scared of public reaction and hesitated to allow increase in prices of petrol and gas, levy of GST on electricity bills, increase in local call charges and line rent which directly hit poor and lower middle classes. All these unpopular decisions have been taken by the present government which thinks itself immuned from public reaction. As against this government has found many reasons to be soft on bank defaulters and holders of tax evaded black money in billions. Government whitened black money to the tune of over Rs.100 billion against a payment of just 10 per cent while honest tax payers had been paying upto 25 per cent of their incomes as taxes. Bank defaulters are being treated softly because of the consideration of revival of economy. Wealth tax has been abolished altogether to favour the moneyed class. As against this rates of profit on small savings has been reduced by over 25 per cent from 17/18 to 12/13 per cent during the last six months. As a result, hundreds of thousand of retired and old people who are living on the profit of their life long savings have been subjected to untold misery as their monthly income has fallen by about 25 per cent while the cost of living is constantly on the rise. Adding salt to their wounds these people are told that it was necessary to reduce the rate of profit on their savings as the government was keen to advance loans to industrialists at reduced rate of interest to promote its economic revival programme.

The poor and the salaried class was getting buried under the heap of rising cost of utilities, and direct and indirect taxes, which have left substantially less to pay for eatables, education, healthcare, clothing, etc. Amid rising cost of living and increasing unemployment, those who were unable to bear the burden, either committed suicide or were being sucked into criminal activities. Many of the low-income families have withdrawn their children from educational institutions.

According to the latest survey of various markets reveal that prices of large number of essential food items have shown sharp rise in the past few weeks. A random market survey show price surge in sugar to Rs.27 per kg from Rs.25 per kg due to falling rupee value against dollar in the inter-bank market and rising global prices. Its wholesale price is now tagged at Rs.2,550 per 100kg bag.

Shortfall in onion crop in Balochistan and N.W.F.P. can be blamed in price flare-up to Rs.8/10 per kg from Rs.6-7 per kg, while in Subzi Mandi its wholesale price ranges between Rs.6-7 per kg compared to last month's Rs.3-5 per kg. Wholesalers in Subzi Mandi said that onion is also being exported to UAE, Singapore and Colombo.

Consumers have now started sipping costlier tea as almost all the leading tea packers have jacked up prices of their various brands on account of spurting global prices coupled with rupee depreciation against dollar in the inter bank market. According to General Secretary, Karachi Retail Grocers Group (KRGG) the price quoted for Lipton Yellow Label 200gm and 100gm is at Rs 54 and Rs.28 per pack as compared to Rs.52 and Rs.27. Brooke Bond's Supreme 250 gm is tagged at Rs.65 per pack as against Rs.63, while its 125 gm now sells at Rs.34 per pack compared to Rs.33 per pack. An official in Tapal Tea Limited said the company will also increase its rates by Rs.15-20 per kg from August 15.

Egg prices rose to Rs.24-25 per dozen from Rs.20 per dozen, while prices of broiler live bird and poultry meat also soared to Rs.64 per kg from Rs.54 per kg and to Rs.112 per kg from Rs 95 per kg respectively. A poultry dealer attributed the price hike to shortage of birds at the poultry farms.

Various varieties of wheat flour like fine atta and atta No. 2.5 posted a rise to Rs.12 per kg from Rs.11 and Rs.11-12 per kg from Rs.9.50-10 per kg, respectively due to what shopkeepers describe as shortage of wheat flour.

The spurt started with the increase in the prices of wheat and wheat flour, followed by sugar, tea, pulses, vegetables etc. The count, according to latest reports, goes up to 60, mainly edible. The causes of these increases are many and varied, but the most important of these is the absence of an integrated policy on prices. Prices of individual items are generally considered in isolation without taking into account what effect the rise in the price of basic item will have on those of others.

The government seems to be indifferent to the whole situation. It does not appear to be doing anything to bring about a halt to the continuing rise in prices. The prices of tea and pulses are said to have risen as a result of an increase in the prices of these in the international market and also because of the creeping depreciation of the value of the rupee. The increase in prices of vegetables are said to be due to short production resulting from drought and an increase in transportation costs resulting from a rise in diesel prices. The general spurt in the prices of food items is bound to have an adverse effect on the government's efforts to alleviate poverty. The erosion of the purchasing power of the common man, who spends the major portion of his meagre income on food, will squeeze and impoverish him still further. Increases in the prices of petroleum and its products and utility charges along with the imposition of heavy sales tax on goods and services have further added to the burden of lower and middle classes. In order to face up to the challenge of a combination of factors, both national and international, contributing to the unprecedented hike in the prices of essential items of daily use, the government must adopt an integrated policy on prices and this policy should be an integral part of the poverty alleviation programme.