CARTELISATION: A ROOT CAUSE OF PRICE HIKE

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)
Oct 11 - 17, 20
10

Cartelisation is what seems to be out of control of the state machinery as prices of daily items remain highly volatile and often they are following no rules and under no regulations. Cartelisation occurs when group of undertakings with interlocking relationships put on sale their products at prices in the market by keeping unjustifiable margin between cost and sale price. It occurs also when certain group of companies make monopoly to upset competition, which is vital to give price advantage to customers in the market. This phenomenon is common in this part of the world and makes it difficult provision of product at suitable prices even when it is easy. For example, when cost of production is not a trigger of price hike, it is alone profiteering and hoarding that give push to prices. Prices of commodities remained unstable during the recent past ensnaring importing countries in the battle with inflation. Pakistan that has imports twice its exports is not saved from price volatility in international markets. High import cost results in rise in prices of goods in the country majorly hitting end users and dragging a large number of population toward food insecurity. According to the UN task force on global food crisis, the price of food commodities has shot 83 per cent over the last 36 months in international markets. And, it is estimated that 854 million people are in a state of food insecurity around the world.

However, it is worthwhile to mention inept price monitoring and regulation system that in Pakistan is aggravating food crisis. Unfortunately, despite having knowledge of weird movements of prices and their stimulants state machinery or concerned government departments delegated with price monitoring and controlling authority keep blind eyes on market-spoiling and inhuman practices or do little to take actions against them. Uncontrolled prices exert across the board impacts over all products, but consumer items are enlisted in the cut-off list of low- and middle-income groups after unabated rise in prices of essential products. High price erode their buying powers and daily use products or items of necessary use such as groceries and vegetables become out of reach.

Incidence of poverty is on the rise because of essential products going out of reach of common persons. Grinding poverty has made several commoners in the country to commit suicides, which are nowadays becoming alarmingly common. Ever since, this government took the helm of affairs of the country, food inflation is seen not ready to come down. Global price volatility was one reason, but policy response to external and internal economic imbalances was also criticised for its ineffectiveness. Typically, overreliance on monetary policy response to curb inflation proved itself futile since hawkish stance of the central bank in monetary policy has failed to pull back inflation. As was expected, policy rate was increased 50 basis points to 13.5 per cent in recently announced monetary policy. Rising inflation was attributed to discount rate hike. Business community expressed their disappointments over the inflation-controlling approach irking unfaltering downfall of capital-starved private sector. Underdeveloped industrial sector holds back employment opportunities.

August inflation figure broke the record of last four-month surpassing 13 per cent over a year earlier. Consumer prices scaled to 12.9 per cent in the year through August, according to a Reuters poll. "Inflation has seen a rise primarily due to perishable items such as fruits, vegetables and poultry goods," the news agency cited Khalid Iqbal Siddiqui, director at Invest Capital and Finance Securities Ltd as saying. Food prices in this month jumped 15.6 per cent from a year earlier.

It is an irony that government is cramming fattish state-run enterprises with political appointees without caring a tad about economic fallouts of such a quick-fix solution to unemployment.

Interestingly government concedes that price rise is not due to shortage but because of cartelisation; that promotes artificial shortage in fact. Government is unable to remove artificial shortage, which actually is behind eerie price escalation of products. Economics validates rise in price of a product demand of which is more than its supply. Government seems to resign itself to law-flouting cartelisation forces, which sit on the corridor of power. A recent statement by the minister of food and agriculture puts weight to this viewpoint. Federal minister Nazar Mohammad Gondal dubbed cartelisation as key hurdle in price control. Else, he believed, there was no shortage of edible goods in the country.

Decidedly, the central government has also lifted hands off the responsibility of removing cartelisation and ensuring availability of products across the country by reintroducing magistracy system. According to media reports, parliamentarians-elect in upper houses are straightforward in exhortation that provinces should take on the task of controlling prices as central is tasked to distribution of essential commodities nationwide.

Until full autonomy is conferred on provinces from the federation, administrative affairs in federating units will remain unmanageable, said advocates of provincial autonomy. Magistracy is effective in checking prices of products on random basis. Nevertheless, the system has so far failed to curb malpractices of profiteering across the board. District officers-led teams are reported conducting raids on randomly selected stalls of vegetables and grocery shops to check rates of specific goods equivalent to periodically revised government price list across Karachi. There is no however other efficient mechanism to restrict prices within limits. Traders frightened of raids assure government officials of selling products at fair price. But, prices are charged whimsically and extremely disparate even around a narrow distance. Public representatives are elected by the public on the hope that they would implement legists in the highest interest of state. It is a high time that they do so above the personal expediency and take strict actions against profiteers inconsiderate of cronies' angers.