PRICE INFLATION UNDER NO STATE CONTROL
TARIQ AHMED SAEEDI
Apr 11 - 17, 2011
Price inflation scaled up to 13.6 per cent in March 2011. Prices are increasing incessantly and both food or non-food items are in the range. Only last month witnessed 1.5 per cent surge in inflation, according to the federal bureau of statistics. A price bombshell was thrown on public when the government raised the prices of petroleum products in the beginning of March. By pushing up prices of petroleum products, the government has to render no efforts to lift up prices of other products since former automatically causes an engulfing wave of price hikes far and wide. That is what reoccurred last month when raise in prices of petroleum products caused increase in the prices of household items.
According to the statistics, prices of vegetables, fruits, and chickens increased during the last month by 4.4 per cent, 18 per cent, and 8 per cent respectively. As it is an established fact that prices of petroleum products are the major stimulant of price inflation, obviously the price hikes were unavoidable. However, the impact was lessened due to the political pressures on the government. Analysts said had there not been tough stance against increase in petroleum prices and had the government not submitted to such pressures, the affects on price inflation would have rather been worst. According to the critics, this was just a political ploy by the government as it pushed up prices first and reduced them half to appease public angers.
Rise in petroleum prices caused increase in prices of electricity, liquefied petroleum gas, urea, and lubricants. LPG is a by-product of crude oil and extracted during the refining process. The crude gas is imported as well as produced domestically. Increase in local prices of petroleum products were attributed to the rise in international crude prices. The government has said the rise could not subside due to the excessive burden of subsidies given to petroleum products on the fiscal balance. Prices of LPG have been volatile since deregulation of the sector ruled by the cartels which increase and decrease prices whimsically and under no market mechanism. Rise in prices of fertiliser brought up the cost of agriculture production, which would translate into the rise in the prices of agri produces including staple foods. Sindh Agriculture Forum has condemned the rise in prices of urea saying the prices in Pakistan are already high as compared to the prices of fertilisers in India. Its chairman said the increase would make the lives of farmers miserable and put on them more financial burdens. When increase in agri production cost is passed on to the consumer products, the affect would become ubiquitous. Everyone is consumer. Yet, the unfortunate victims of price inflation happen to be from low-income group, which cannot afford two meals a day because of consistent weakening buying power.
Rise in prices of petroleum products gave transporters a leeway to increase fares. Transport fares of intercity and intra-city buses are weighing down the pockets of daily commuters who are already treated inhumanly during travelling on dilapidated vans running within city. A regular rise in prices of products leave pubic in the state of shocks and feeling deserted and despondence. Psychological ailments are on the rise due to insecurity, poor economic conditions, and power-hungry society. Analysts are fearing another surge in price inflation during the current month as a second spell of rise in the petroleum prices.
Tax collection of this financial year is expected to remain well below the target. Perhaps not above than Rs600 billion the federal board of revenue is expected to collect in taxes during July-April. What will be the total annual tax revenue of this fiscal year that ends at June 30, 2011 is easily calculable. The government expenditures may remain more than the revenue in the next fiscal year. In spite of that, National Assembly Standing Committee on Defence has approved 18 per cent increase in the defence budget for the next financial year (2011-12). A rough allocation for defence expenditures will be over Rs500 billion. In defence of such gigantic budget, chairperson standing committee said we would have to meet the expenditures of army waging war on terror. The war is assuming strength and if such is the logic to puff up the defence budget, will there be any ceiling?
Nobody fusses over the pains a common person feel when found himself unable to buy food for his family, get himself and kids good health services, and get his children educated. Tax evaders are aversive to tax collection system or insensitive to the public issues. Businesspersons have their own grievances. Trade bodies demand incentives to encourage investments and loath any proposal of new industrial taxes. They have right to demand the government of grabbing evaders. What is absent is comparison about who should be helped primarily: common persons who are financially strained or relatively wealthy businesspersons who at least are not deprived of necessities of life-food, health, and education? Corruption in government department is yet to be rooted out. Recession prompted wealthy businesspersons in a developed nation to help their country get out of the financial mess by doling out taxes. In Pakistan, the fear of funds exploitation is the society's writ large.
United Nations has already warned Pakistan of growing incidence of poverty because of mainly artificial rise in prices of food items. Prices are subject to increase because of mainly unsystematic and unmonitored distribution channels nationwide. Hoardings and cartelisation are common practices to set unfair prices. Federal and provincial governments have failed to ensure fair price structure. Prices are unequal within a short distance. No system has been developed to monitor price determination methods of small and big manufacturing companies. Legislations in this regard are weak. The parliamentarians should be active to revise price control laws to tighten noose around hoarders and profiteers. Regulatory body like competitive commission of Pakistan should be established on provincial level to expand realm of price control power.