Written by: Zahrah Rahman and Sayma Akhter Jafrin
The increase in the price of essential food commodities has a significant influence on food security, particularly on Bangladesh’s underprivileged population. The current increase in domestic food production costs, along with high prices in the global market, may lead to more food inflation, negatively impacting the poor. When most prices rise, there is inflation, as long as other prices do not fall too sharply. People become poorer if inflation is not compensated for by nominal increases in income.
Factors for which the situation is getting worse-off and people’s never-ending sufferings:
Dishonest businessmen have taken advantage of the rising price of oil in recent years. A supply order (SO) which grants the dealers permission to buy a certain amount of oil for supplies is being provided to the dealers, but this order is instead passed on to a third party, causing the oil price to rise above the market price. In such a situation, oil users, particularly the country’s middle class and lower-income citizens, face major difficulties, as go-betweens make a profit of at least 50 takas for every 37.32 kilograms of oil sold. Along with edible oil, the price of daily consumption items such as rice, lentils, and sugar has also seen a price surge. According to a report by Trading Corporation of Bangladesh (TCB), the price of rice went up by 31%, lentils by 30%, flour increased by 33%, and sugar being the highest went up by 50% when compared to the prices of 2020. Almost 39 other food ingredients consumed on a daily basis have also seen a shoot up in price.
Inflation has taken off around the world since due to the pandemic recovery which has led to a mismatch between supply and demand, leading to a supply chain crunch. Recently it has become more visible because of the Russia-Ukraine war as oil prices have overall increased in the international market. But experts are in denial of this as the prices started to rise just after the war started and such a great difference is not merely possible within a span of three weeks. As a whole 179 items are imported from Russia but there are certain goods that have not been imported from Russia or Ukraine but still have faced price inflation. The president of the Consumers Association of Bangladesh (CAB), mentions war is just being dragged in to make additional profit out of the system. He also mentions the market not being in regular monitoring which is one of the possible reasons for this inflation.
The ingredients sold at a retail price in trucks are the only hope for people earning a minimum wage for living. The middle class and lower lower-income people have to stand in long lines in the unbearable heat to buy the common food ingredients to consume on a daily basis. The overprice of the basic items has made inflation look much more in the country than it originally is. People had just started to cope with the losses of the pandemic, the loss of losing their family members or dear ones, the loss of their job or health. With this uncontrolled price expansion, the poor people of the country have again started to fall below the poverty line or by the poverty line. The situation of people can be understood in a picture which got viral on women’s day of a woman hanging on a TCB truck to buy the essential food items for herself and her family which questions the value of people in this emerging economy of our country.
Government’s Step-In and Consequences:
In this problematic situation for people, the government has implemented policies to help both sides of customers as well as businessmen in the market. 15% of VAT (Value Added Tax) has been waived off by the government at the production stage of edible oil. Furthermore, for the import of edible oil, a duty-free rate of 30% has been imposed. There is now no tax on edible oil, with the exception of a 5% import duty. Despite this, the high cost of edible oil and other essential components remains unacceptably high. Despite the government’s demands, consumers continue to pay roughly 26-30 taka in VAT. Despite the fact that the price of oil was managed to reduce as a result of the tax cut, due to supply order issues in the market, it was not able to completely eliminate the high price.One of the possible causes is the erroneous use of supply orders in the market, which results in an artificial price increase in the market, with customers bearing the brunt of the consequences.
Policy Proposals:
As the measures taken by the government did not bring much change in the price setting, the focus should also be given on the administration part and different monitoring committees can be set. But since in most cases the committees do not work in a proper way, the common citizens of the country become the ones to suffer the most. Different organizations have a different price set for the ingredients which indicate the mismanagement of the government institutions. Accordingly, the price catalog given to Trading Corporation of Bangladesh (TCB), City Corporation, and Department to Agriculture Marketing are different then each other and each of them follows a different price set, as a result of which the identical products in each area or market are being sold at a different price. If there can be regulations regarding the management of price, the price set up, and moderation then people might grasp a difference.
References:
- Muhammad Jahid, A. and Suman, M., 2022. Edible oil prices: Hike on despite the tax cuts. [online] The Daily Star. Available at: https://www.thedailystar.net/health/food/price-essentials/news/edible-oil-prices-shooting-despite-the-tax-cuts-2985211?fbclid=IwAR2d3me2b7tNu4XfukuQndWsZHzEXAzY7UKCq_Io3uICKqy8Owe9Ab2yebU [Accessed 18 March 2022].
- The Business Standard. 2022. VAT on cooking oil imports cut to 5%. [online] Available at: https://www.tbsnews.net/economy/vat-cooking-oil-imports-cut-5-386118 [Accessed 17 March 2022].
- The Business Standard. 2022. VAT on cooking oil imports cut to 5%. [online] Available at: https://www.tbsnews.net/economy/vat-cooking-oil-imports-cut-5-386118 [Accessed 17 March 2022].
- Suman, M., 2022. Edible oil price hike: Manipulation merry-go-round. [online] The Daily Star. Available at: https://www.thedailystar.net/news/bangladesh/news/soybean-oil-price-hike-manipulation-merry-go-round-2980076 [Accessed 16 March 2022].
- Pandit, H., 2022. Uncontrollable commodity prices choke the middle class. [online] Dhakatribune.com. Available at: https://www.dhakatribune.com/commerce/2022/02/12/uncontrollable-commodity-prices-choke-the-middle-class [Accessed 17 March 2022].
- Barua, D. and Suman, M., 2022. Price hike of essentials: Is war the real cause?. [online] The Daily Star. Available at: https://www.thedailystar.net/news/bangladesh/news/price-hike-essentials-war-the-real-cause-2977771 [Accessed 17 March 2022].
Featured Image Courtesy: United News of Bangladesh