FOOD inflation in 2006-07 rose to 10.3 per cent from 6.9 per cent in the preceding year despite the protestations of the government to fight the rising prices of essential goods. A price committee was appointed earlier with the advisor to the prime minister on finance Dr. Salman Shah as the chairman by the Economic Coordination Committee of the cabinet.

But the committee failed to bring down prices, particularly of wheat and wheat flour which shot up to record levels in spite of a bumper crop of 23.5 million tones with an impressive surplus.

The government suspended its move to export up to 1.5 million tones of wheat, yet the prices did not come down significantly. It appears that some persons had secured large bank loans to buy wheat for export and when the export was banned, they began local trading in wheat and wild speculation.

The EEC has now asked the State Bank to take effective action against such hoarders and profiteers but that is easier said than done.

At a recent meeting of the EEC it was reported that a textile mill owner of the area has stuffed his mill with wheat instead of cotton and was making a daily profit of Rs4.5 million. Another report to the committee said that 40 per cent of the petrol pumps in the area were also stuffed with hoarded wheat. Widespread hoarding and smuggling of gram channa was also reported. And that made Sheikh Rasheed Ahmed, the voluble railway minister suggest that some four or five wholesalers of the Jodia bazaar in Karachi should be arrested and the problem would be solved very quick. But the prime minister did not agree to the suggestion as he believes in the kid glove approach and soft handling in respect of businessmen, however deviant they are.

Now a top-level committee of the cabinet has been appointed with the prime minister as the chairman and with commerce minister Humayun Akhtar, industries and production minister Jehangir Tareen, food and agriculture minister Malik Sikander Bosan as its members. Also in the committee are the State Bank governor Dr Shamshad Akhtar, the vice-chairman of the planning commission Dr Akram Sheikh and Dr Salman Shah.

It would be a kind of permanent standing committee which will immediately tackle the issue of high food inflation but the prime minister who is politically busy has not enough time to devote to fight inflation in an election year but it is also imperative that he fights effectively to brings it down instead of high prices spoiling the prospects of the ruling coalition. So having taken upon himself a rather Herculean task, will he succeed while the committee headed by his advisor has failed?

It was said earlier that since the price control included penal administrative measures, it will not be effective against profiteering and hoarding unless the supply side is taken care of and smooth flow of essential goods ensured. So the government opened trade with India in vegetables and in wheat and permitted substantial inflow of such goods from India. But the profiteers grabbed the supply channel too and made large profits and would not let the prices come down.

The government wanted two sabzi mandis in each town and encourage a number of cash and carry stores with foreign assistance but it couldn’t succeed in either so the government encouraged some businessmen to come up with wholesale stores like the Makro which became popular with the rich. And yet the prices shot up.

Finally we had the bumper wheat crop of 23.5 million tones leaving a substantial surplus for export to India for the first time. And yet shortages occurred in many places because of hoarding and wheat flour prices shot up and the government suspended its programme for export. And it appears that instead of formally exporting wheat, some of the hoarded wheat was smuggled out and about half a million tones of wheat went out in this manner. And nobody has been punished so far, not even severe penal action prepared against any group.

The government does not want to act against such anti-social elements, however damaging their action is. That has been made amply clear to the businessmen during the last six years.

Now the government is hoping that if the banks withdraw the large loans to the hoarders and profiteers the wheat prices will come down. But the government is likely to be disillusioned. The anti-social elements know very well the government will not take stern action against them because it is an election year. And the government’s policy of free trade is to let the businessmen do trade to make as much profit as possible.

There is plenty of money afloat in the market and if the credit given to the hoarders is withdrawn, they can raise the capital from anywhere else, pay higher interest rates and charge the wheat higher prices. Shortage of cash is no problem for the profiteers in Pakistan when they are sure that no action will be taken against them even if they play with something as basic as food.

This is a war which the government has been losing and will lose in future as it does not want to fight because of its policy of passivity. The hoarders and profiteers are too happy with such a policy despite odd official suggestions like that of Sheikh Rasheed Ahmed with his grass root connections. The businessmen also know the government cannot afford to invest more in food items when it is already spending 2.5 billion dollars on food imports and 7.3 billion dollars on import of oil so it is a field day for the profiteers in the name of free trade and open economy. So the poor and the low income people suffer and will continue to suffer as they are not able to organise effective consumer resistance. The government’s sympathies are with the people but without active support and effective administrative measures. Hence suggestions like that of Sheikh Rasheed Ahmed get scoffed at high level meetings.

The issue is how to convince the traders that the government is serious in countering their anti-social measures. That can be demonstrated only through real and sustained action which is not forthcoming. If the election year demands substantial relief to the people, politically the government feels the businessmen and industrialists should not be disturbed.

Three members of the cabinet committee are appropriate for the task. They are ministers for commerce, industries and production and food and agriculture. The Governor of the State Bank can help with managing the money supply to reduce excessive bank credit which stimulates demand pressure and Dr Salman Shah will serve as the shadow of the prime minister when he is not there. Together, they can keep the prices down if they are ready to take the essential stern action and not give the hoarders and profiteers a longer rope in the name of the elections.

The food and agriculture ministry under Malik Sikander Bosan is too unwieldy a ministry with major and minor crops in his charge as well as livestock, dairy farming, poultry farming and fisheries. This ministry should be broken up and a separate ministry of livestock , dairy farming, poultry farming and fisheries should be created to make them more productive and useful to the country.

President Musharraf says Pakistan is the 6th milk producing country. Where is the milk going? And who is drinking it. All we hear about the milk is when the prices go up after every few weeks, so dairy farming should be properly organised and the country should benefit by its status as the 6th milk producer and by the import of powdered milk in plenty. Lumping all these departments under one minister is not good for these departments.

IS Iran luring the Americans into a deal that would concede its domination of the oil-rich Persian Gulf? The speculation has been fuelled by the recent US-Iranian talks on Iraq.

“The Iranians are carpet sellers,” said Mustafa Alani, programme director at the Gulf Research Centre during my visit to his think tank in Dubai. He suspects that Iranian President Mahmoud Ahmedinejad’s anti-American and anti-Israeli tirade masks a tough bargaining counter. Didn’t Ayatollah Ruhollah Khomeini, the Iranian revolutionary leader, “buy American-made arms from Israel” while breathing fire at America and Israel?

The Iraqi mess has heightened Gulf Arabs’ leeriness about Iranian hegemony. The states centred on what is now Iraq intermittently served as Arab shields against Iranian power. Thanks to the US invasion, Iraq is no longer a military rival to Iran, which has cultivated close ties with Iraq’s Shiite majority. And America, the only other challenge to Iran’s geopolitical ambitions, is agonising in the Iraqi quicksand. Hence, the Iranians feel free to flex their muscles in Iraq, Lebanon, Syria and Palestine through pro-Iranian guerilla and political forces in these countries.

The Saudis would normally have challenged Iran’s expansionist policy from behind the US security shield. But the plight of US forces in Iraq has shattered their faith in that shield, and they have begun courting Tehran instead. On March 4 the Arab world was mesmerised by TV bulletins showing Iranian President Mahmoud Ahmedinejad and Saudi King Abdullah holding hands and smiling warmly in Riyadh.

The Saudis’ antipathy for America has been growing since 1991 when US troops were stationed in the kingdom. During a trip in October that year several Saudi youths in Jeddah and Madina told me on condition of anonymity that their king, Fahd, had made their country an “American colony” guarded by American troops.

On my next trip four years later my interlocutors no longer requested anonymity as they criticised America and its military presence in their country. In April 2003 when the United States was abandoning its Sultan City airbase under Saudi pressure, underground Saudi militants celebrated the event as a “victory for Osama” bin Laden, who had called 9/11 part of his jihad to expel American troops from “the land of Muhammad.”

An unprecedented level of anti-Americanism among the Saudi public is the main reason the monarchy is reaching out to Iran and expanding relations with Asian nations. Smaller Gulf Arab sheikhdoms, following in the Saudi footsteps, are also mending fences with Iran, with which they have had frosty relations. Oman and the UAE have had Ahmedinejad over for state visits. The foreign ministers of Kuwait and Qatar have announced they wouldn’t let the Americans attack Iran from their soil. The lower house of the Bahraini parliament has passed a resolution expressing the same intent.

All these states host US military bases and are treaty-bound to let America use those bases for military operations. Their statements are meant to mollify Iran, which would respond to a US or Israeli attack by raining its Shihab missiles on those bases. That would “destabilise the whole region,” said the UAE legislative affairs minister, Anwar Gargash.

The animosity between “the Great Satan” and the member of “the Axis of Evil” will eventually give way to the new realities. Washington needs Iranian cooperation to end its disastrous occupation of Iraq, and Iran can’t afford further economic sanctions, which US opposition to its nuclear programme would entail.

Iran’s likely acquisition of nuclear weapons capability – not the actual manufacture of the weapons – could become a catalyst for a deal. Domestic public opinion wouldn’t let any Iranian regime stop enriching uranium under western pressure. Yet Iranian leaders should be taken on their word when they insist that they don’t intend to make the bomb.

They know that using a nuke against the United States or Israel would mean their national suicide. Either of these countries can devastate Iran in a massive nuclear counterattack. The only reason they would want a bomb is to deter a foreign invasion, which the capability to produce one would achieve to a large extent.

In fact, the Islamic republic is letting the word out that it would freeze uranium enrichment at 80 per cent (at which fuel can be used to make the nuke) under a comprehensive agreement with the West. The International Atomic Energy Agency’s recent report that Tehran has slowed down its enrichment programme seems to signal such a strategy.

The Bush administration should see this as a good basis for a deal. Some intelligence suggests that Iran, if allowed to continue its nuclear programme, will be able to build the bomb by 2009. Of course, a detente with Iran would require America to recognise Iranian preeminence in the Gulf, which it did during the monarchy of Muhammad Riza Shah Pahlavi (1953-1978). Getting Tehran to help police the Gulf’s oil lifeline, rather than threaten it, wouldn’t be a bad deal for the United States.

The writer is a Washington-based journalist.