EDITORIAL: Sensitive Price Index (SPI) computed weekly comprising prices of 51 essential items collected from 50 markets in 17 cities witnessed a year-on-year increase of 12.28 percent in the week ending 8 July and a rise of 0.7 percent in comparison to the week ending 1 July 2021 – a reflection of the continued failure of the government to arrest, leave alone reverse, the rise in prices of commodities whose impact on the poor and vulnerable is greater than on the rich.
Federal finance minister, Shaukat Tarin, constituted a committee while chairing the weekly National Price Monitoring Committee (NPMC) meeting comprising relevant provincial and federal officials as well as representatives from the Pakistan Bureau of Statistics (PBS) and Competition Commission of Pakistan (CCP) tasked to formulate and take action after fulfilling all codal formalities against those engaged in price fixing and anti-competitive activities. Two concerns with regard to membership of the committee need to be highlighted.
First, PBS itemized the price differential between the Utility Stores Corporation (USC) and the open market, but did not mention the amount of subsidy, if any, that accounted for the price differential – a fact which may compromise the determination of the actual reason for the price rise of specific commodities. Also of relevance would be the applicable taxes on inputs (electricity and petroleum) and whether they were taken into account when setting the price at USC. In addition, while the price difference between the USC and open market was noted as being 28.7 percent for atta (wheat flour), 32.4 percent for sugar, 38 percent for ghee Manpasand and ghee Handi, 21.9 percent for white gram, and 17 percent for daal masoor but the price at USC was factored in when calculating the SPI. In other words, the actual inflation would have been higher for those Pakistanis who were not able to access the USC, either due to location or perhaps to the fact that the item was not stocked or was of poor quality.
And secondly, there are complaints of conflict of interest against responsible officials of a regulator by a trade body that has yet to be addressed. The regulator’s response released to the media is unsatisfactory as it does not indicate an independent investigation had been carried out and simply stated that: “All accusations are false and baseless and have been denied by the accused person in a statement in relation to the conflict of interest issue.”
There is no doubt that unscrupulous mill owners collude to raise prices through supply manipulation with the objective of realizing windfall profits; and equally relevant is the fact that aarthis (middlemen) and retailers also contribute to a rise in prices of essential commodities over and above what is considered a reasonable profit margin. However, the government’s reliance on indirect taxes, on petroleum and products as well as on utilities, and the heavy reliance on borrowing to meet the budget expenditure priorities are also factors that contribute to inflation and which remain largely ignored. Yet another factor that is impacting on domestic prices in recent weeks is the rupee erosion that has once again gathered momentum. Thus prices of imported cooking oil can be sourced to this factor.
It is important to note that the analysis for inflation remains partial with the NPMC focused on taking appropriate administrative measures whereas a more detailed analysis would show that the government itself is responsible for a general price rise due to its monetary and fiscal policies. It is high time these are reviewed.
Copyright Business Recorder, 2021