HIGH PRICES AGAIN AT BUDGET TIME

Hoarders and profiteers reign supreme

SYED M. ASLAM
June 04 - 10, 2007

The signs of the 'budget season' are all over Pakistan. This is the season of the hoarders and the profiteers to make tons of money in the shortest possible time of just a few weeks. The 'season' starts a few weeks before the announcement of Annual Budget each June during which the hoarders and profiteers create an artificial shortage of essential items as well as some of the most used products to earn a premium over and above fixed prices. It is also a calculated move to give the producers a head start whether or not the budget has a impact on a certain product or not.

One of the most evident sign of the 'budget season' is the sudden shortage of all best selling brands of cigarettes. The retailers blame this sudden 'shortage' on the distributors and its ultimate cost is borne by the smokers. The price of the 20-cigarette pack of Gold Leaf, the benchmark status symbol in the country, with printed price of Rs 43 but was retailing for Rs 44 started going up about two weeks ago touching Rs 52. The same was the case with 10-stick version of the same brand.

The menace has become such a routine that people have started to take it in stride with no complaints and no protests. They have been conditioned to expect this, and in fact have become used to look forward to it, as a part and parcel of budget. The media has also started to take it as routine which has no newsworthiness whatsoever.

Over the years many more have realized the importance of 'budget season' as the time of 'strategic positioning' that give them a head start over consumers who never really had a choice, nor enjoy any power, in this country. The 'strategy' begins with seemingly temporarily, but in fact a calculated, price increases that is really aimed at permanent price increases simply because prices once increased never come down in Pakistan no matter what. One of the best example of this is petroleum and products: The domestic prices were linked to international prices and a small clique comprising members of oil marketing companies were given the task of fixing the prices twice every month. The prices were increased at the slightest increase in international prices to ultimately touched record Rs 58 a litre. In 2005 alone the petroleum prices jumped from Rs 37 a liter to Rs 53 a liter when international price of a barrel of crude oil touched the highest ever level of $ 71. Though the international prices came down to $ 51 a barrel and hovered around that level for some time the only token reduction in domestic prices were offered to the consumers.

Just how widespread the abuse of the 'budget season' has become is evident form the increase in flour prices just recently with the announcements of record bumper crop of wheat at 23 million tons. The price of the wheat flour, most staple diet of Pakistanis which has already registered a near 50 per cent increase in last two years, went up further by as much as Rs 2 per kilogram despite the bumper crop. The export of wheat was blamed for the increase in the price of wheat flour in Sindh whose requests to the federal government to slap a ban on wheat export was only heeded by the federal government after several refusals by the ministry of food, agriculture and livestock. The increase in flour prices despite bumper wheat crop, and its timing, should be seen in the backdrop of 'budget season' because it is, as already stated, is the time to give the unscrupulous elements to give them a head start at the cost of the consumers and customers.

In addition to wheat, the federal government has also suspended the export of gram and gram pulse with immediate effect on May 24. And pleasantly it has also finally taken notice of export of large volumes of another staple, rice, going on over the last many months that pushed the domestic prices to unaffordable levels for the extreme discomfort of the people. The massive export of rice has pushed the domestic prices of the various variety of rice substantially from Rs 28 to Rs 35-40 and from Rs 40 to Rs 60. It has taken the government months to realize that massive rice exports have pushed the prices of the commodity to unaffordable levels to consider a proposal to slap a temporary ban on its export of rice.

The prices of packaged milk and imported dry milk are also being substantially increased ahead of the announcement of annual budget. These increases has come in the wake of Sindh High Court's decision of fixing the price of loose milk at Rs 32 per liter, though in many areas around Karachi, milk is being sold above the fixed prices. The price of milk curd has touched Rs 48 a kilo. The City District Government Karachi which took the milk sellers to the court for arbitrary increasing the price of a liter of much at Rs 34, and even more in many areas of the city, failed to enforce its writ to make the milk sellers sell milk at its prescribed rate of Rs 28 per liter. No where in the city milk was available at Rs 28 per liter and even with the decision of Sindh High Court it is still being sold at above Rs 32 per liter in many localities of the city.

The Governor of the State Bank of Pakistan, has repeatedly blame the food inflation as the major reason for the high core inflation that has persistently refused to come down due primary to food inflation. She has also said that controlling the food inflation is not the responsibility of the central bank despite the fact that food inflation heavily influences the core inflation. The fact, however, remains that high food inflation and the rising cost of living hampers the growth of the economy because like elsewhere a strong middle class is a pre-requisite for the economic well being of any national economy.

Similarly, the price of another essential commodity, edible oil, has been on a constant rise ever touching new unaffordable levels almost on a weekly basis over the last few months. The most repeated refrain to blame the incessant, and substantial, increase in all essential and everyday items is the 'international prices' despite the fact that consumers in Pakistan are never offered any relief if and when 'international prices' decline. For many 'international prices' is only used as a pretext to justify an otherwise unjustifiable price hike that does not lists high on the priority of the government to check.

And by the why, how many of you afforded to taste the delectable Pakistani citrus fruit Kinoo this past winter when its massive exports pushed its domestic prices by fourfold to six fold from Rs 20-40 a dozen to anywhere between 100-160 a dozen?