Price hike of essentials: We should avoid a Sri Lanka-like situation

The recent price spiral of essential commodities in Bangladesh, especially in the capital, has dealt a double blow to the poor and low-income classes. On top of their sufferings through the Covid-19 pandemic, they are also finding it increasingly difficult to meet their daily necessities. 

The Covid-19 Pandemic has halted economic activities and quite understandably, affected livelihood as well. The South Asian Network for Economic Modelling (SANEM)  reports that 42% of the population has fallen below the poverty line during the span of the pandemic.  

The recent surge in prices of essential commodities forced people to rush to TCB trucks and stand in long queues under the scorching sun.  Prices of onions, lentils, broiler chickens, eggs and vegetables have also gone up in the past few weeks. 

Where a consumer could buy local onions at Tk40 per kg, now it costs Tk60-65. Despite there being no festival or occasion, the price of broiler chicken has reached 170-180 per kg, which is between Tk120 to Tk140 in usual times. 

The price of coarse rice in the market has reached Tk50  and medium quality costs 54-58 a kg. The price of LPG has been rising by Tk100 on average over the last few months. If the price of an item goes up, its effect on the lower class is several times higher. Human life and the price of essentials are closely related. When the prices of essentials become incompatible with the financial well-being of the people, there is no end to the misery of the poor and ultra-poor families.

Meanwhile, the price of diesel and kerosene suddenly increased by Tk15 per litre to Tk80 on Wednesday night. Earlier, the price of kerosene and diesel was Tk65. The Ministry of Energy says that it is so because the price is rising in the international market. In protest of rising diesel prices, owners of public transport and freight vehicles decided to go on strike from Friday morning. The owners of public transport claimed that they are not able to afford the current fare. They withdrew the strike only after the government increased bus and launch fare by a whooping 27% and 35%. 

Most of the fuel imported from abroad is refined. If crude fuel was brought, the price would have been much lower. Besides, the cost of imports would have been much lower if more refineries had been set up as planned.

Apart from transportation, a huge amount of diesel is also used in agriculture. In that case, if the price of diesel increases, the production cost of agricultural products will also increase a lot. If the government reduces import duty and VAT, it can bring fuel prices to a more tolerable level.

Why the surge in prices?

Every country has a mainstay of its economy. Paddy, jute, wheat, tea and sugarcane are some of the income crops of the present-day farmers of Bangladesh. Fertile soil and favourable climate are the sources of this diverse crop production.

Despite that, the production cost of paddy remained higher than the market price for the past three years. On the other hand, even though the import duty on rice has been reduced every time, the price of rice has not come down.  

On top of that, the corrupt profiteering intermediaries who benefit off of the back of hard-working farmers started stockpiling necessities in this crisis time, causing the condition to deteriorate even further. 

The prices of food items go up naturally in September-October and November. This time there was no exception. However, this time the rise in commodity prices has broken past records. Floods, coronavirus, turmoil in the world market and tariffs in many countries have exacerbated the trend.

Around the world, the prices of food products have been rising steadily.

In October, the FAO's food prices rose for three consecutive months. At present, the price of food products has reached its highest since 2011. 

High prices of food products are being felt at all levels. This year, new restrictions were imposed for the control of Covid-19 in many countries. As a result, supply crises and limitations are manifesting. Due to these reasons, the global prices of food products have increased more than usual this year. Production shortages and the recent rise in fuel prices have also contributed to food inflation. 

Recently a famine took place in Sri Lanka. Their market situation was dire and so the food crisis reached an extreme level. Vegetables, rice, pulses, sugar and even the prices of baby food and dairy products were beyond the reach of people. Gas cylinders were sold at inflated prices. In the first week of this month, the country declared a state of emergency. They have reached out to different countries of the world for help. 

The main reason for the recent crisis in Sri Lanka is intermediaries. Money has gone to a handful of capitalists. As a result, people lost the balance between purchasing power and income. Meanwhile, unscrupulous syndicate traders have created artificial problems on the pretext of an epidemic crisis. The food system was in the grip of stockpilers and the black market. As a result, the state system has lost its way. It's almost similar to the artificial salt and onion crisis in our country just before the pandemic. 

To prevent any untoward situation, the accounting of warehousing and stockpiling of daily commodities by the mill owners, and government control, have become urgent. However, no effective measures are being taken to control the rise in commodity prices. Activities to stop the black market are not visible in the whole country. There is no alternative to modernising the market monitoring system. 

Failure to provide the necessary food to the people and create a balance between income and purchasing power can lead us to bad days like Sri Lanka. Having purchasing power over essential commodities is a right of the masses. 

It is time to crackdown on corruption, black market and hoarding in Bangladesh. If we focus on agriculture by saving the farmers in this fragile situation, we can survive the economic crisis.  

 The writer is a student of Economics, University of Dhaka, who can be reached at ahmaduam198@gmail.com