FLOODS MAY SPEED UP FOOD PRICE ESCALATION
TARIQ AHMED SAEEDI
Sep 12 - 18, 2011
Rainfall-triggered floods have once again wreaked havocs to the lives and livelihood of people of Sindh with observers anticipating further rise in food price inflation. The weekly inflation until August 30 was hovering around over 16 per cent due to high food prices in the local markets.
Experts attributed the hike in food prices to increase in prices of commodities in the international market including palm oil and crude oil. Fuel prices have telling impacts on the food inflation in the country. International institutes have already warned the Asian economies of spectre of stubborn food inflation.
Destruction caused by the recent floods to standing crops has intensified the risk of price escalation in food items including but not limited to vegetables, meat, etc. According to National Disaster Management Authority, the rainfalls and subsequent rampaging floods have unleashed forces of destructions in almost all agriculture districts across the province.
Initial report has estimated losses to standing crops spreading over 1.7 million acres. The loss estimate is not final as rainwater is still damaging the provincial agriculture economy. The losses to human lives and properties are also significant. At least, 700,000 houses are reported reduced to rubbles.
Until end of last month, rise in food inflation was seen in food items such as pulses, rice, vegetables, sugar, and edible oil. Shortage of production was reported as the main cause of price escalation. Petroleum prices as usual pushed up the prices to higher degree.
According to the federal bureau of statistics, price of tomato shot up 49.81 per cent to Rs47.97 per kg in week ended on August 30 from Rs32.02, onions 19.64 per cent to Rs28.20 per kg from Rs23.57, potatoes by 7.43 per cent to Rs32.69 per kg from Rs30.43 and chicken 3.89 per cent to Rs164.39 per kg from Rs158.23.
Wheat price also rose 0.98 per cent to Rs28.87 per kg from Rs28.59, beef 0.61 per cent to Rs241.69 per kg from Rs240.22, diesel by 0.59 per cent to Rs93.47 per litre from Rs92.9 and sugar by 0.46 per cent to Rs77.14 per kg from Rs76.79.
Price of red chillies increased 0.29 per cent to Rs253.43 per kg from Rs252.69, rice basmati (broken) 0.27 per cent to Rs253.43 per kg from Rs252.69, gur 0.26 per cent to Rs89.90 per kg from Rs89.67 and LPG 11-kg cylinder 0.21 per cent to Rs1419.71 each from Rs1416.76.
Low-income groups remained the prime victims of recent wave of rise in prices of food items. As per the sensitive price index (SPI), 14.24 per cent increase was recorded for households with income brackets of up to Rs3,000 and 14.11 per cent for income group drawing income from Rs300,1 up to Rs5,000. For higher income groups with income brackets of Rs5,001 to 12,000, the increase was recorded at 20.14 per cent and people with income of up to Rs12,000 the inflation growth was 21.60 per cent.
The price disparity is also a major reason of variable impact of price inflation on people living in different localities. Prices of vegetables particularly show strange difference in two different locations. For example, retail prices of vegetables in posh areas are higher than that in the suburban localities. Interestingly, prices are higher even when transportation cost is apparently low. Wholesale vegetable market in the suburb of the city is the general marketplace of purchasing farm produces for the retailers across the city. It is observed that vegetable vendors selling produces near the hub have high retail prices than those who are located relatively at distance.
Inefficient price control mechanism is the obvious reason of price disparity that enables vendors to fleece consumers. Civil administration system is oblivious to blatant violation of consumer rights. Government price control teams are said to monitor the prices of vegetables and other edible items sold without price tags and issue price list to the retailers periodically. Evidently, vendors do not sell products at prescribed rates. Out of fear of visits by the monitoring teams, they however display lists to public. It is not humanly possible to depute price-controlling staff permanently at the scattered markets around mega metropolis to check unfair prices. At least, what the government can do is develop an alternative enforcement system. Strict legal actions should be taken against the purveyors of unfair price mechanism.
It is also observed that profiteers and hoarders also get cover for their illegal acts because of incidences such as floods. They get the justification to promote artificial prices at the pretext of shortage howsoever they have copious supply from the backend.
Recent floods would likely give rise to prices of foods produced in the flood-hit areas of Sindh. The production will not be at par with the targets set in the beginning of the current fiscal year. The province will be dependent on the food supply from the upcountry.
Since the province has substantial share in the major crops such as cotton, rice, and sugarcane, the agriculture growth will also be hampered to the detriment of exporting sector. The province has almost 50 per cent share in rice exports. Irri is the major exporting item produced across the province.
External stimulant of food price inflation is uncontrollable. However, the government can at least put down the local factors that cause price rise.