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Price regulation half the battle, supply-side measures key

The government sets maximum prices for eggs, onions and potatoes
Miraj Shams with Talukder Farhad
14 Sep 2023 23:47:56 | Update: 14 Sep 2023 23:47:56
Price regulation half the battle, supply-side measures key

The government on Thursday fixed the maximum prices for three kitchen essentials – eggs, potatoes and onions – at the production, wholesale and retail levels, as part of its measure to keep commodity prices within public reach.

It should be noted that the government back in May this year had set the maximum retail price of loose sugar, but the move has been ineffective in curbing market rates so far.

At a press conference, Commerce Minister Tipu Munshi said the maximum price of egg per piece at the retail level is Tk 12 with immediate effect. The government has also decided to allow egg imports if the kitchen essential’s market price fails to align with the government rate.

Similarly, the price of potatoes has been set at Tk 35 – Tk 36 per kg, and onions at Tk 64 – Tk 65 per kg.

Besides, maximum potato prices at the cold storage level has been set Tk 26 – Tk 27, local onions at the wholesale level at Tk 53 – Tk 54, and per piece egg price at the production level at Tk 10.50.

The minister further announced that the price of soybean oil has been reduced to Tk 169 from Tk 174 per litre, and this particular pricing will come into effect on September 17.

These prices were set at a meeting on Wednesday, presided over by the commerce ministry Senior Secretary Tapan Kanti Ghosh, and attended by representatives from the Bangladesh Trade and Tariff Commission, Department of Agricultural Extension (DAE), Federation of Bangladesh Chambers of Commerce & Industries (FBCCI), and Cold Storage Association.

Raising questions on whether the latest government move would give the consumers a much needed breather, experts and economists say price regulation is not a solution under a free market economy such as Bangladesh, and the authorities must take supply side measures.

Besides, the government should take more effective measures to monitor markets, and ensure exemplary punishment against market manipulators and syndicates.

Price regulation ineffective

Government set pricing of essential commodities has a history of largely being infective in local markets. For example, the authorities had set the price of loose sugar per kg at Tk 120 this May, but the commodity is being sold for Tk 130 – Tk 135 per kg in the retail market.

Economists say the government should ensure smooth and adequate supply of products rather than just regulating the prices. If there are any shortages of supply and subsequent price hike of a commodity, the authorities should take effective measures to address the issue.

Speaking to The Business Post, agro economist and former Research Director of Bangladesh Institute of Development Studies (BIDS) Dr Asaduzzaman said, “If price regulation had been an effective solution, the commerce minister would not have brought up the syndicate issue in parliament.

“Commodity prices depend on supply and demand. If there is a supply shortage anywhere in the chain, and the government should find out why.”

Dr Asaduzzaman continued, “Another key issue is that many people have turned to cheap food items due to the economic headwinds created by the Covid-19 crisis and high inflation. As a result, there is more pressure on potatoes, pulses, and eggs.

“That is why the demand for these essentials is increasing. This issue should be investigated by the government. The problem is that the government does not acknowledge that production has gone down.”

Centre for Policy Dialogue (CPD) Distinguished Fellow Dr Mustafizur Rahman said, “Regulating prices of eggs, potatoes and onions will not work that well in the current context. If syndication is behind the price hike of essential commodities, then breaking those should be the priority.

“The government should conduct a thorough analysis of supply and demand. This study will help the country decide when to import essential commodities, and when to utilise tax measures to stabilise the market.”

During Thursday’s press conference, the commerce minister said there will be no negative impact on the market due to the current price regulation.

“We have taken this initiative so that people can buy essential commodities at fair prices. Strict legal action will be taken against anyone not selling at government rates,” he added.

Bangladesh is currently facing high inflationary pressure. General inflation was 9.92 per cent in August this year, while food inflation was 12.5 per cent – the highest recorded since FY11.

What do stakeholders say?

Commerce ministry Senior Secretary Tapan Kanti Ghosh said, “Previously we had set maximum retail prices for edible oil and sugar, which are import-dependent goods.

“Now, for the first time ever, we had to set maximum prices of three kitchen essentials, in a bid to tackle the price hike if domestically produced goods. The country produced an adequate amount of eggs and potatoes. If prices remain high, we will allow imports.”

He continued, “There is some shortage of onions, but imports continue to cover the gap. We will strengthen the market monitoring process to ensure that eggs, potatoes and onions are sold at government set rates.”

Bangladesh Cold Storage Association Director Fazlur Rahman said, “The government set prices of potatoes is reasonable. Maintaining this pricing will depend on farmers and traders. Monitoring should be boosted to prevent anyone from charging higher prices.

“The cold storages have an adequate amount of potatoes stockpiled. Yesterday, potatoes were sold from cold storages for Tk 36 – Tk 38 per kg. But the sales have dropped after the government regulated the price.”