NO RESPITE FROM EVER RISING FOOD PRICES

SHAMIM AHMED RIZVI
Sep 15 - 21, 2008

It is almost six months that PPP led elected Government took charge of the affair of the country. During all this time, it had been involved in managing its other murky affairs and internal conflicts amongst the coalition partners and forgotten all the promises it made to its voters during elections. The one pledge which concerned majority of the people was to control rising inflation especially of the food items which have made the lives of over 50 percent of the population unbearable and of about 25 percent difficult.

The Government has totally failed to control the skyrocketing inflation. During the week before the commencement of holy month of Ramazan the prices of consumers items soured by about 33 percent which is not only affecting millions of fixed and low income house holds but also hurting the public image and popularity of present Government.

According to the Federal Bureau of Statistics (FBS) latest data, weekly inflation measured by the Sensitive Price Indicator (SPI) covering 53 daily-use kitchen items for the week ended on September 4 is creased by 31.55 percent compared to the corresponding week of the last fiscal.

The data revealed that inflationary pressure during the under reviewed period was higher on the lowest income group earning below Rs.3,000 per month. For them the SPI registered an increase of 33.18 percent. For the income group of Rs.3,001 to Rs.5,000, it stood at 32.02 percent, and for those earning more than Rs.12,000, it stood at 31.54 percent as compared to the same week of fiscal year 2007-08. It is worth mentioning that the government's huge borrowing form the central bank to bridge the gap between its revenue and expenditures was instrumental increasing aggregate demand and ultimately high inflation, which has become an apparent threat to the country's economic health. The State Bank of Pakistan has recently also increased its discount rate by 100 basis points to 13 percent aimed at curtailing demand pressure in the economy and ultimately capping inflation. The governor of the bank Dr. Shamshad Akhtar blamed the government for heavy borrowing form the SBP, which pushed up inflationary pressure in the economy.

Trend of the weekly SPI based inflation with base year 2000-2001 during the last 12 weeks as compared to their corresponding weeks of the last fiscal shows a steep trend. As at the week ending on June 19, 2008, it stood at 26.79 percent, June 26 (26.03 percent), July 03 (28.37 percent) July 10 (28.30 percent) July 17 (30.36 percent), July

24 (32.22 percent), July 31 (31.92 percent) August 7 (31.72 percent), August 13 (31.48 percent), August 21 (31.69 percent), August 28 (30.90 percent) and on September 4, 2008, it stood at 31.55 percent.

According to the SPI bulletin, year on-year, the rise in the prices of some necessities and kitchen items was exorbitant, These items were bananas, onion, chicken, potatoes, LPG tomatoes, guru, firewood, eggs, beef fresh milk, rice, wheat flour, ghee, wheat, petrol, diesel and all types of pulse.

The bulletin on SPI, based on the date collected for about 53 items form 17 centers, showed that 16 items registered an increase whereas 14 items showed a decline while prices of 23 items remained unchanged in a span of one week; prices of bananas went up by 31.55 percent. Price of consumer items increased sharply in the markets of Islamabad and Rawalpindi on the first day of Ramazan, reflecting the helplessness of the price regulators and the lust for profit of the business community. Items particularly in demand during Ramazan were available at government fixed prices only at the Sasta bazaars (fair price markets) set by the local administrations in the two cities but at the cost of quality according to buyers. In the retail markets, however, prices of vegetables, fruits, poultry and other kitchen items were determined by wholesalers who saw an opportunity in the greater demand for these items during Ramadan to maximize their profits. Local administrations to control such profiteering turned out to be tall claims of vegetables and fruits jumped by as much as 50 percent in the open market in Rawalpindi and Atta was in short supply all over the city. Compared to last Ramadan, the prices of almost all the essential items have raised by almost 100 percent on an average. In prices of items of fruit and milk and beverage for which the demand increases during Ramazan the level of increase is still more.

The Ramazan price hike is attributable mainly to hording and profiteering, which is rampant in our country. Most traders wait for this month to get rich in a short period. Ironically, prices register decline on the eve of national festivals. In the western countries where eatables and items of clothing register a downward trend respecting the consumers need during Christmas and prices are 25 percent to 50 percent lower at a time when sales are in abundance. This is just opposite to what happens in our country in the holy month.

Business and trade community in this country loses no opportunity to raise the prices of items in demand. Prices of essential commodities go up at the approach of the holy month of Ramazan, Eid-ul-fitr and Eid-ul-Azha. In the monsoon season in July & August also, the traders take full advantage of the interruption in supplies of essential commodities, resulting form heave downpour and floods, by raising the prices of items such as fruits and vegetables etc. Over and above all, prices of edibles soar when off-season starts. The hoarders of essential commodities take full advantage of such a situation, particularly when they know that the socks of the items available with the government are insufficient and imports can not be made at short notice.

The government, on its parts, takes a number of measures hoping that the items of daily use are available to the consumer at reasonable prices but it fails miserably. Government has set up corporation to manage outlets as the Utility Stores and bazaars on selected days, which do play an important role but it is organized haphazardly and due to lack of control people face difficulty in getting the right price. Due to poor governance and weak budgetary position of the government the effectiveness of price stabilization measures has remained ineffective. Little success has been achieved in providing relief to the poor and protecting them against the surging food inflation at a time when the rising food prices are pushing more and more people below the poverty line. Besides, with the passage of time, the business and trade community in this country has become so powerful that it dose not even allow the government to achieve its procurement target of wheat, which is so vital to maintain the price of this basic food item at a reason able level throughout the year.

Due to the ineffectiveness of government's price stabilization measure in checking the surging food inflation, it has become necessary for the consumers to make an effort to safeguard their own interest. Economists the world over have been of the view that consumers awareness and consumers resistance are the most powerful weapon to combat inflation. Let us see what a consumer can do to increase his purchasing power and make the best use of his limited income in 'prices being hiked' circumstances.

Last but not the least, prices of certain items on daily use such as fresh milk, yogurt, meat, fish, fresh fruits and vegetables etc have registered marked increase over the last few years. All these items are highly perishable in nature, while cold storage facilities in this county are also scarce. In such a situation, prices of items which are highly perishable in nature should, as a rule, be available at a reasonable level. This is because if a large number of consumers stop the consumption of such items even for a week the wholesalers/retailers of these items may be forced to bring down their price due to the possibility of these items going bad or rotting. Unfortunately, such a culture has not yet developed in Pakistan, due to which the consumers are being continuously exploited by the wholesalers/retailers of these items. The need is to form consumer organizations and consumers societies on the line of foreign countries. Such consumer societies can negotiate with the wholesalers/retailers and persuade them to bring down their prices to a reasonable level.