Measures that are imperative to control market prices

The abnormal increase in the prices of essentials was one of the major reasons that the angry people took to the streets in the July uprising. And so one of the main expectations that the people had from the interim government that came to power through the uprising was control of the price of essentials. But the government has not been able to display much success in this regard, though two months have passed since it took over. Quite to the contrary, the prices of rice, edible oil, eggs, chicken, sugar, etc, have been spiralling.

In order to reduce inflation, Bangladesh Bank has lifted control of interest rates and taken steps to stem the supply of taka to the market. But the demand of everyday essentials does not depend that much on cash supply and so the prices of essentials cannot be controlled in this manner. What is required is certain specific market management measures to be taken up by the government.

In the meantime, the government has formed a special taskforce to monitor the market is the various districts. Duty has also been reduced on certain items. These are essential measures but not enough. There are certain imperative measures to be taken for an effective and sustainable solution to the inflation of the prices of essentials.

In market economy, demand and supply are supposed to determine commodity prices through "invisible hands" of the market. In Bangladesh, "invisible hands" do determine commodity prices, but in many cases these hands do not belong to the market but to a larger business coterie. This is true both in the case of locally produced as well as imported commodities.
For example, there is the matter of determining the price of locally produced chickens and eggs. Thousands of people sell chickens and eggs. Yet it is only a few huge corporate companies that control the chicken and egg market. These companies produce most of the poultry feed and chicks. Also, a large part of the chicken and egg market is in their control.

Alongside their own production, these companies are also contractually hiring farmers to rear their poultry. In this manner, the companies have established a monopoly over the poultry market by controlling the production of poultry feed, chicks, eggs and chicken meat. Thus the companies can increase or decrease production and prices as they please.

The companies must give an account of their actual expenditure on the production of chicks, poultry feed, eggs and chickens, and how much they sell these for in the market. The prices they submit must be scrutinised and, if needed, audited too. At the same time, keeping the interests of marginal farmers and consumers in mind, competition in the poultry sector must be ensured by means of specific laws and regulations so that control of poultry feed, chicks and chicken meat production is not restricted to a handful of companies.

Also, initiative must be taken to reduce the dependency on the import of corn, soymeal and other raw materials for the production of animal feed, including poultry feed so that the increase of prices in the international market can't be used as an excuse to create fluctuations in the local market.

During the rule of the last government, a few business syndicates did not only control locally produced commodities, but controlled the import of essentials too. Rather than competition determined by the market, they worked in collusion to establish their control in every step of importing goods.

According to investigations by BBC Bangla, the companies that import commodities in large volumes join hands to create such conditions that the mid-level businessmen cannot procure commodities as they wish. If a businessman wants to purchase certain goods, he will have to approach the bigger businessmen and they will determine the price at which he has to buy the commodity. If he does not agree and decides to import the product himself, he will soon find that the banks are unwilling to open any LC in his name, there are all sorts of obstacles in the shape of customs, VAT, etc, and various offices set up various hurdles in his way. Even lighter vessels required to unload goods from the larger vessels to bring them to the port, are found to be unavailable. Despite all these obstructions, if he still goes ahead and imports the goods, it will be seen that the larger business syndicate sells the commodity in the market at prices less than him, thrusting him into loss (How syndicates control everything from imports to sales, BBC Bangla, 12 August 2023).

The reason why a handful of business syndicates could establish their control over the market in this manner is that the ownership or management of big importing houses and commercial banks was in their hands and they or their associates owned the lighter vessels required to unload goods from larger vessels and take these to the port, and the dealership of the commodities was also controlled by persons of the syndicate camp.

If prices are to be brought under control, then such monopolised control of these large business syndicates on essential commodities and food products must be broken. The Bangladesh Competition Commission under the Competition Act 2012 must be strengthened and utilised to this end. The function of the Competition Commission is to uproot the practices that spread adverse impact on market competition. They must prevent the conspiratorial collusion, monopoly, oligopoly and authoritarian stand of the various business groups. During the past government the Competition Commission was non-functional due to political influence. Now is the time to render this commission functional and set it to task.

In order to determine whether the businessmen are in collusion with each other to control the market prices, the Competition Commission needs to tally the actual costs of production and import with the market prices. They need to look into how much the businessmen are importing unrefined edible oil or sugar from the international market for, how much is spent on refining and marketing, and how much they are selling it for in the market.

One of the reasons why the syndicates can continue their manipulations of the market prices is that the government does not have any accurate records of the actual production and demand of commodities. While government records show a surplus of potatoes, onions, eggs and other essentials in the market, in actuality there is a crisis of these goods. The businessmen take advantage of this and hike prices as they want.
While 1 million tonnes more potatoes were produced compared to the previous year, according to the cold storage owners at least 2 million tonnes less potatoes had been produced that year and so around 15 to 20 per cent less potatoes came to the cold storages (Record production and record prices of potatoes, Samakal, 5 September 2023).

Similarly, according to businessmen, the daily demand for eggs is 45 million eggs, but 40 million eggs are produced. Yet official records state that production is 30 per cent higher than demand (Egg production 30 per cent higher than demand, say govt records, 2 October 2024, Banik Barta).
There is also a lack of clarity regarding the demand and production of onions. According to the Department of Agricultural Extension, the annual demand for onions is 2.6 million to 2.8 million tonnes. And in the 2022-23 fiscal, over of 3.4 million tonnes of onions was produced (Why didn’t the decision to import onions come earlier? Prothom Alo, 6  June 2023).

Had production been higher than demand, there would have been no use to import potatoes, onions, eggs, etc, from abroad. But every year these commodities have to be imported from India and other countries.
So if the price of essentials is to be controlled, accurate figures of demand and supply must be determined. Production must be increased of the commodities that are produced less in the country or these must be imported in time to  meet the shortfall.

In order to rake in bigger profits during crises, many big businessmen hoard goods rather than selling them in the market. This creates a crisis in the market and prices shoot up overnight. And once the crisis sets in, importing goods makes no difference because the businessmen also stock up the imported goods.

That is why steps must be taken to increase supply of commodities in the market before the crisis is created. For example, the farmers sell the potatoes they produce mostly in March and April. After that the cold storage businesses and stockists take control. From June to December, they release the potatoes from cold storage. In order to ensure that the businessmen can't create an artificial crisis at this time, surveillance must be kept on the potatoes kept in cold storage, the supply of potatoes from cold storage to the market, and so on. If necessary, steps must be taken to import potatoes.

Similarly, since the onion crisis crops up more in September to December, monitoring onion supply and stock must be stepped up in this period too.

Another way to control prices is to build up a public distribution system under which produce is procured at fair prices directly from the farmers and sold at low prices to the consumers.  In this manner the farmers will get fair prices and the food security of the poor and lower income people will be ensured. Also, the market prices of these commodities will be in control. The scope and reach of TCB and OMS commodity sales is not adequate and this is also riddled with corruption.

In neighbouring India there is a compulsory public distribution system using digital methods under which low income people can purchase various food items at low rate by means of ration cards. They also have a Price Stabilisation Fund (PSF) to supply commodities at low prices in times of crisis. When the price of onions, potatoes, lentils, wheat, rice, etc, is comparatively low in the market, this fund is used to procure produce directly from the farmers sell these in the market during crises for comparatively low prices.

Other steps to be taken in order to control the prices of essentials include decreasing tariff duty and BPC's profit margins to significantly reduce the price of diesel used to transport goods, halting extortion in the marketplaces and on the streets, making it compulsory to use receipts in purchases and sales, and creating a structure to regularly monitor the production, supply, import, stock, sales in the market. And steps must be taken to ensure speedy trial and punishment of the individuals and syndicates responsible for market manipulations.  

* Kallol Mustafa is a writer and researcher
* This column appeared in the print an online edition of Prothom Alo and has been rewritten for the English edition by Ayesha Kabir