April 09, 2007	Monday	Rabi-ul-Awwal 20, 1428

HOW to crack the backbone of hoarders, profiteers and black marketers in our country? Not literally, but to curb unfair trading.

Hoarding and profiteering along with soaring prices of essentials of daily life cannot be checked through a tight monetary policy alone. While such a policy is essential, the State Bank of Pakistan has come to realise its limits during the last two years after exercising an easy monetary policy to promote investment and stimulate growth which rose to 8.6 per cent in 2004-05.But for the tight monetary policy, the inflation might have gone up further; that alone is not enough to bring prices down because of many other factors at work to push prices up.

There is too much of money afloat in the market. Tax-evaded and corruption money are flooding the market and building up demand pressure constantly. Much of the home remittances are used for current consumption or invested in durable goods. Home remittances have been rising steadily since 9/11 and are expected to exceed $5 billion this year.

Foreign direct investment (FDI) has also been rising rapidly and is expected to exceed $6 billion this year. The vast fund spent through the Annual Development Plan (ADP) has exerted an inflationary impact which is all the more so in respect of the vast funds being spent on the Kalabagh dam and the Bhasha-Daimer dam.

State Bank Governor Dr Shamshad Akhtar says that consumer credit has gone up to 50 per cent of the private sector credit which includes the money spent on house-building and buying cars. All these add to the demand pressure and aggravate the impact of inflation and make goods and services costlier.

The supply chain should be improved and expanded to cut down prices. The retail network should be made large and strong enough. To increase the supplies, we are importing a large number of essential items from India despite the fact that it adds to our adverse balance of payments. Meanwhile, the Macro shopping chain of Germany is opening its network here, but it will cater to the need of bulk buyers and wholesale shoppers, and doesn’t take into account the average shoppers or the low-income consumers.

Last year the government made a desperate attempt to crack the backbone of hoarders and profiteers of sugar. When the price of sugar was skyrocketing, the government ordered import of over half a million tones of the commodity through the Trading Corporation of Pakistan (TCP). By that time, the price of sugar in the world went very high and it cost the TCP Rs39 per kg.

When the foreign sugar arrived, the indigenous supply also began coming to the market. The TCP had, therefore, to store what it had imported and by now the cost of storage and interest rate has pushed the price of the stored sugar at Rs45-47 a kg.

The TCP cannot hold on the old stock for long as it has to buy and accommodate new stuff from the mills. Therefore, it has been directed by the government to sell 12,000 tonnes of its stock at Rs24 per kg - almost at half the price of the imported sugar.

Earlier the TCP had called for tenders, but two or three tenders had to be cancelled as they came up with low quotations. The TCP will soon need money to buy fresh stock from sugar mills and find place to store it.

The utility stores cannot sell more than 30,000 tonnes a month at Rs27 a kilo as popular belief is that utility store sugar is not as sweet as the sugar sold in the market.

The mill-owners, who have great political clout, want the government to increase the ex-factory price of the commodity. As a pretext, they will blame the high price of their product due to the high cost of sugarcane, whereas the growers with their political clout will blame it on the high cost of input. The government will lose heavily in the process and eventually the consumers.

As long as consumers don’t resist buying things at arbitrary prices and check the profiteers, they and the country as a whole will have to pay a high price for these commodities in every sector. This is not free enterprise but fouled up enterprise for unlimited profits.

The instant victim of the profiteers is the consumer who has to organise itself and resist the evil designs of the profiteers. Otherwise the influential growers, the rich middle-men, the mill-owners and the stockists will exploit the situation to their advantage and create shortages at will.

They do not believe in competition but in collusion and when they compete it is in raising prices. The chambers of commerce come very handy in this strategy.

New agencies are coming up to promote competition and rational trade after the monopolies commission has utterly failed in its purpose and has remained a dummy. Now will the new electronic national commodities exchange, which is due to open in Karachi next month, have a salutary affect on commodity prices or will it follow the recent unhealthy trends in the Karachi Stock Exchange and other exchanges.

Can the utility stores have a larger role and serve a large number of consumers all over the country? The problem is the rural and urban consumers who ought to be served better to reduce their poverty.