Difficult to curb soaring prices of essentials

In the first week of January 2023, the price of potatoes per kilogram was below Tk 25. A year later, the same potatoes are now being sold at Tk 50 to Tk 60 per kilogram in the market, more than double the previous rate.

The prices of various daily commodities, such as potatoes, are high in the country. Inflation is also on the rise. The fourth consecutive term of the Awami League government has begun amid such circumstances.

Awami League's election manifesto emphasises price control. However, at the beginning of the year, prices of various products, including rice, began to rise in the market. Economists and market analysts state that achieving price control will be challenging due to three main reasons.

Firstly, to reduce production and transportation costs, the government needs to lower prices of gas, electricity, and diesel, which is a difficult task.

Secondly, increasing market competition through higher imports is essential. But due to a shortage of US dollars, traders are facing difficulties in opening letters of credit (LC). Additionally, the increased value of the dollar has raised costs.

Thirdly, certain products face high rates of customs duty. However, providing concessions is challenging for the government as it is currently in a revenue deficit.

Around May 2022, the price of the US dollar in the country was approximately Tk 86. However, the fixed price for imports has now increased to Tk 110. Traders contend that they need to pay Tk 124 to acquire dollars for imports. Consequently, the cost of importing goods has surged by 44 per cent due to the rising dollar price alone. This increase in the dollar value has significantly impacted the cost of importing raw materials for essential items and consumer goods, such as wheat, lentils, edible oil, onion, garlic, ginger, and cumin.

Economists argue that achieving price control will be challenging unless the new government takes special initiatives.

Ahsan H Mansur, the Executive Director of the non-government research organisation Policy Research Institute (PRI), expressed to Prothom Alo that reducing prices might not be feasible. However, he suggests that it is possible to keep inflation under control.

According to him, the country is experiencing price hikes beyond the appreciation of the dollar, primarily due to low supply. This situation is providing significant opportunities for large businesses to make extra profits, affecting various commodities, including wheat, edible oil, sugar, and others.

Ahsan Mansur further suggested that there could be only one strategy to control inflation: increasing the interest rate of bank loans to 16-17 per cent. Additionally, the government should consider reducing its budget expenditure by Tk one trillion. He emphasised that this requires a strong political will.

On 7 January 2019, the cabinet of the Awami League government took oath in the 11th National Parliament. Back then, inflation was low, and there was no dollar crisis like the current situation. The world market was stable, and fuel prices were also low. However, the current scenario presents a different picture with high inflation and a dollar crisis. Even if prices decrease in the world market, the benefits in the country are limited.

The escalation of prices for daily commodities began in early 2020 at the onset of the pandemic. Following Russia's attack on Ukraine in February 2022, global prices, including those of energy, witnessed an increase.

In contrast, Bangladesh's foreign exchange reserves are decreasing, and the price of the dollar continues to rise. This has a cascading effect on the prices of almost all products. During this period, the government also raised prices for fertilizers, electricity, gas, fuel oil, and water.

According to the government agency Trading Corporation of Bangladesh (TCB), on 7 January 2019, the price of sugar in the Dhaka market ranged from Tk 48 to Tk 55 per kg.

Presently, it has surged to Tk 140 to Tk 145. This upward trend is not limited to sugar; prices of essential commodities such as rice, lentils, flour, edible oil, spices, milk, eggs, meat, soap, and toothpaste have all experienced significant increases. Inflation has been hovering around 10 per cent.

The newly appointed State Minister for Commerce, Ahsanul Islam, stated to Prothom Alo that, upon taking charge, he plans to conduct a series of meetings with stakeholders. His primary focus will be to ensure a well-functioning supply system without shortages. Ahsanul Islam aims to rationalise the price difference between production and consumer levels, prevent hoarding, and promote healthy competition.

The state minister also highlighted that his initial challenge is to control the market dynamics during the holy month of Ramadan.

At the beginning of the year, the prices of certain products have seen an increase. According to the Trading Corporation of Bangladesh (TCB), the prices of 13 products rose in the Dhaka market from 8 January to 11 January. These include coarse rice, packet flour, refined flour, lentils, and four types of spices including onion, garlic, ginger, and broiler chicken. The price changes range from Tk 2 to Tk 50, with potato and cumin experiencing a decrease in price.

Upon investigating the wholesale markets of Bogura and Kushtia, it was found that the price of rice is higher in those markets.

Zainal Abedin Pradhan, the General Secretary of the Kushtia District Branch of the Bangladesh Auto, Major, and Husking Mill Owners Association, informed Prothom Alo that the price of rice has increased by two to two and a half taka per kg in just a few days.

The increase in the price of rice has also impacted the capital's market. Mehdi Hasan, a grocer in Shah Ali Market, Mirpur Section 1, Dhaka, informed Prothom Alo that the price of rice has gone up. Representatives of companies have hinted at an upcoming increase in the price of edible oil, and packaged spices are also becoming more expensive.

According to Hasan, the price of medium BR-28 rice variety has increased by Tk 3 per kg, while other rice prices have seen slight increases. However, they have not implemented additional charges on buyers as of yet.

Additionally, the price of beef has witnessed a hike. In an early December meeting of traders with the National Directorate of Consumer Rights Protection, the price of beef was fixed at Tk 650 per kg, and sales began at that rate. However, in some markets, beef is now being sold at Tk 700 per kg.

As winter begins each year, the prices of seasonal vegetables, onions, potatoes, and other products typically decline. However, traders are reporting that this year, the prices have not decreased as they did last year. Onions, in particular, follow a similar pattern. Last year, in the first week of January, onions were priced between Tk 30 to Tk 45 per kg. This year, they range from Tk 80 to Tk 100 per kg.

Cauliflower is another example of a vegetable whose prices have not decreased. Sellers claim that a medium-sized cauliflower now costs around Tk 60 in the retail market, whereas it was below Tk 40 at the same time last year.

Zakir Hossain, a seller at Karwan Bazar, explained to Prothom Alo, "The prices of vegetables are much higher than last winter. All costs have increased, and as a result, we cannot sell at a lower price."

Even as the prices of daily commodities increase in the market, people's income is not rising proportionately. From the fiscal year 2018–19, wage growth exceeded inflation in the subsequent three fiscal years. However, in the subsequent years, inflation has surged at a much higher rate than wages.

As of last November, inflation has reached around 9.5 per cent. In contrast, wages have increased by 7.24 per cent.

The government has hinted at adjusting the prices of electricity, fuel, and water ahead of the election. Following the National Economic Council Executive Committee (ECNEC) meeting on 9 November, former Planning Minister MA Mannan told reporters that the government aims to shift away from the idea of subsidies.

Initially, subsidies for electricity and water will be removed. The pricing for electricity and water will be determined by considering three factors – area, income, and family status of the customer.

On the other hand, the price of fuel was supposed to be market-based last September to meet the conditions of the International Monetary Fund (IMF) loan. To achieve this, the ministry has established a formula for automatic price determination. However, its implementation was deferred before the election. It may be put into effect now.

All in all, there is no relief expected in the cost of living. Ashfaq Islam, a resident of Tolarbagh, went shopping at Shah Ali Market in Mirpur yesterday afternoon. Working in a private company, he mentioned to Prothom Alo that due to the unfavorable business situation, his company did not raise salaries. However, the price of everything has increased in the market.

Ashfaq expressed that the situation has reached a point where there seems to be no alternative but to cope with the rising market prices. He doesn't perceive effective government measures to reduce the prices of daily commodities."

*This report, originally appeared in the Prothom Alo print and online edition in Bangla, has been rewritten in English by Farjana Liakat