Quest for price stability

PRIME MINISTER Shaukat Aziz announced the Ramazan package well before the onset of the holy month promising price reduction in most items of daily use sold by the government-run utility stores. Total subsidy to these items will be Rs 650 billion. Vanaspati ghee is to be sold at Rs 6 per kilo lower than market price, atta at two rupees less per kilo and rice and a large variety of pulses at 10 per cent below the bazaar prices.

The prime minister is taking personal interest to ensure that his package promise is fulfilled in toto and that the hardships of the poor are reduced. He has appealed to the traders to abide by the spirit of Ramazan and not take to profiteering as usual.

He has asked the provinces to come up with their own packages and asked for the personal intervention of the chief ministers. He wants Sunday and Friday Bazaars to be promoted avidly. He has also urged federal ministers to visit markets and monitor any rise in prices. Members of parliament have also been asked to do like wise.

In Sindh, chief minister Dr Arbab Ghulam Rahim says he wants stability in prices round the year and will take stern action against price manipulators. The city government has also come up with its own price list to which the traders should conform.

Will all that produce a trick the prime minister hopes for? But before the Ramazan package was announced, the utility stores had raised prices of 450 items by 8-10 per cent so that new prices after the subsidy could be almost the same as the old prices. And it has been reported that the utility stores raise their prices every year before the Ramazan package brings them down in varying measures. It is more of a one step forward, one step backward price shuffle which the utility stores play every year.

Despite the fact that the utility store prices are usually about 10 per cent lower than the bazaar prices, the quality of the products is not usually as good as that of the goods available in many other stores. But the utility stores are small in number (550), compared to the general stores. It has now been suggested that the utility stores cannot be a success if they confines their activities to the retail market. The Utility Stores Corporation should also enter the wholesale and middle level market and have 450 new stores and 16 more warehouses at an investment cost of Rs 812 million. Now at a time, when the government is opting for privatisation of public sector enterprises, is it proper for it to enter the retail market in a big way and if it does, can it succeed? The ministry of industries and production which has suggested such an expansionist move has asked the planning commission to consider its feasibility and the possibility of carrying out the expansion successfully and the PC is taking its own time to decide.

The Utility Stores Corporation was in fact marked earlier for privatisation, but the process was delayed as other projects got a higher priority. But now it may be expanded and asked to play the role of a price stabiliser to checkmate the profiteers in the private sector. The government faces a Hobson’s choice when it comes to seeking price stability. It cannot successfully persuade the traders to sell goods at fair prices as the businessmen habitually opt for maximum profits.

And it cannot manage the utility stores very competently. Even if 450 more stores are added to the existing list of 500, to make a total of almost 1000, that will still be a drop in the ocean, compared to the actual need of the masses. Except in the case of the low income consumers, living close to the utility stores, others have to spend money on transport which is high now and that makes them lose what they gain by shopping at a distant utility store.

When it comes to the Sunday and the Friday Bazaars, the low income groups may not have enough money to do bulk buying but when they follow the long queues at the utility stores, there are complaints about inordinate delays in buying anything from there and of the rude behaviour of the stores staff.

Prices rise in Pakistan is a constant factor because of the ever-widening gap between demand and supply. The government tries to make up this gap through liberal imports. Food imports during the first 11 months of the last financial year cost the exchequer $1.7 million. A great deal of that was spent on importing sugar. Even when the supply is adequate or in surplus, traders manage to create a shortage by hording items and manipulating the prices. They manage to do that through a cartel system they operate in the economy. But now the monopolies commission which could not break the cartel system is to be turned into a competition promoting agency. And it is taking a long time to become active.

The same problem exists in India, in agricultural commodities. The mandis were created to help the farmers to sell their products at better prices, but these soon fell into the hands of the rapacious middle men. So major enterprises like the Reliance in India are setting up units to buy agricultural products straight from farmers and deliver them to supermarkets and other outlets and reduce the prices greatly by that process.

The prime minister sought to encourage some German cash-n-carry stores to do the same in Pakistan, but the stores have been slow in coming up. Meanwhile he has suggested there should be more than one wholesale market in a city. In such a context, the government is forced to fall back on the utility stores and instead of privatising them, it is expanding them to play a far larger role in a distribution chain.

In the past, the operations of the utility stores have been marred by massive corruption, for there is plenty of room for it there because of the nature of the trade. Will the expansion of the stores and their increase in number raise the possibility for corruption and what protective measures are proposed? Meanwhile, the provincial governments have created small brigades of price inspectors. They are 658 in all and include 225 in the Punjab, 138 in Sindh, 150 in the Frontier province and 145 in Balochistan. Why has Sindh got the smallest number of price inspectors, although it has the second largest population among the provinces.

Will the price inspectors be able to enforce the prices like those that the city government has come up with, or will they be prevented to do so by the strikes which the traders may resort to and hence calling off the whole inspection exercise. The issue is much larger than profiteering at the retail level. If the banks are encouraged to make 100 per cent profit or more why cannot retailers do the same, they ask.

Food inflation has registered a double digit rise — 11.12 per cent in August. Prices of many essential items went up in the month from 10 to 130 per cent. The sensitive price index for income groups up to Rs 3,000 has registered a double digit inflation compared to the same period last year.

Ramazan is usually a difficult month in terms of prices. It is a period in which the growers and traders seek as high prices as possible. For consumers, it is a Hobson’s choice. But they also contribute to this extraordinary price hike by opting for high-level consumption of essential items, particularly the food items which go up by about 50 per cent or more. As a result, shops are well stocked and the prices are high and as the demand increases, the prices go up still higher until the Eid.

Many consumers are not in a mood to squabble over prices particularly in respect of fruits and vegetables. So as Ramazan began, this time, the prices of milk, eggs and meat went up and the trend may persist during the whole month, particularly in respect of fruits.

One reason for the price hike is increase in demand created by the rise in money supply. Private sector bank credit increased by Rs 450 billion in the last financial year ending June, compared to the preceding year when the private sector credit was Rs 480 billion. It was less by 30 billion, but the overall money supply including easy consumer credit was large enough to give a push to inflation despite the State bank of Pakistan’s policy of exercising monetary restraint. Add to that the inflow of $4.6 billion as home remittances or (Rs 275 billion) and the demand pressure all round increases. The official policies pump up the private sector credit to sustain the economic growth level and that makes a higher level of inflation inevitable in place of the targeted 7.5 per cent.

In this context the All Pakistan Textile mills association has come up with an advertisement protesting against the high cost of the inputs for exports and the taxes on exports and lamenting the fall in exports. The exporters and the common man feel the financial squeeze and call for relief. The government wants to provide some relief to the common man but does not know how to do that effectively.

Consumers in Pakistan are not organized and are, therefore, exposed to various privations. Consumer protection is more of a slogan with the government as well as with political parties. No collective or sustained effort is made to protect the consumer’s interests so the government does not feel under great pressure to act decisively. Consumer interests suffer by default all around.

 -By Sultan Ahmed
 

Tortured by mistake

A COUPLE of years ago, President Bush might well have counted Maher Arar as one of the success stories of the CIA’s secret programme for detaining and interrogating suspected terrorists.

Mr Arar, a Canadian citizen, was arrested at New York’s John F. Kennedy International Airport in September 2002 because he was on a watchlist; Canadian police said they believed he had connections to Al Qaeda. Rather than being returned to Canada, Mr Arar disappeared into the CIA’s secret system — he was transported to Syria and handed over to its military intelligence service. For several weeks, Mr Arar was tortured by his Syrian captors. Eventually he broke and confessed that he had trained at an Al Qaeda camp in Afghanistan.

The problem with this story, as an official Canadian investigation reported Monday, is that Mr Arar was innocent. “Categorically there is no evidence” that Mr Arar was a terrorist or posed a security threat, the report stated. He never travelled to Afghanistan. The Canadian police intelligence about him was simply wrong. But after his coerced confession, he was held in a Syrian dungeon for 10 months and suffered “devastating” mental and economic harm before finally being released in 2003.

Mr Arar’s case vividly illustrates a couple of the points that veteran military and diplomatic leaders have been trying to impress on Mr Bush about the dangers of the CIA programme, for which the president is demanding congressional approval. From early 2002 until this month the agency held some Al Qaeda suspects in secret prisons and subjected them to harsh interrogation techniques that, though they don’t include beatings with cables, violate the Geneva Conventions and current U.S. law. Others, like Mr Arar, have been secretly handed over to foreign governments known to use torture in interrogations, including Egypt and Jordan as well as Syria — a practice known as “rendition.”

Mr Bush claims that the renditions, secret detentions and harsh US techniques — which most of the world regards as torture — have yielded important intelligence. But as the military commanders who oppose such methods have insistently and courageously pointed out, it is well known that the information they produce is unreliable. Many detainees, as Mr Arar did, will falsely incriminate themselves or others to avoid abuse. Over time, better intelligence can be obtained by working within guidelines mandating humane treatment of detainees.

—The Washington Post