KARACHI, Jan 25: Steep rise in prices of almost all daily-use items including wheat flour, cooking oil, vegetables, bread, fresh milk, sugar and pulses is crossing all limits, but policymakers seemed unconcerned with this alarming situation.

Even the State Bank of Pakistan (SBP) in its first quarterly report for 2006- 07 has expressed concern. It said that instability in food prices was stemming from supply side disturbances on account of rains, floods and the impact of increase in international prices of some key food items.

According to the SBP report, this sharp acceleration is mainly attributed to supply disturbances for minor crops as well as sustained strong demand. Another important source of food inflation is the rising international prices of edible oil as a result, prices of ghee, cooking oil, prepared meal and bakery items registered increases.

It said the consumer price index (CPI) inflation was still close to the 8 per cent levels by November 2006, which was significantly higher than the annual average inflation target of 6.5 per cent for FY07.

Moreover, it is a source of disquiet for monetary policy as well since inflationary expectations are based on overall inflationary trend. There is a need for effective administrative measures (as exercised in Ramzan) to discourage profiteering on food items.

It is said that price-hike, including food inflation, is the result of high fuel costs that increase production costs. The oil prices in the international market has been on a decline since last many months, but saving the recent cut of Rs4 per litre in petrol and Re1 in diesel prices, the citizens are not given proper and proportionate relief of massive cuts in oil prices.

Some political observers also believe that poverty and price-hike might be the central issues in the upcoming general elections.

Another interesting observation is that the administration despite all powers seemed unable to take visible and concrete actions to control prices.

In the past, the city government always blamed price-hike as a result of no magisterial powers to its officials, but when these powers were conferred on them nothing visible could be achieved and the much-publicized drive against profiteers and hoarders during last Ramzan failed to achieve the desired results. The issue of fresh milk price in city is also not hidden from citizens. These things indicate a lack of political will to take on profiteers and hoarders.

Improving market mechanism to stabilise prices should be a focal point to check price-hike. It is necessary to open utility stores at UCs level, besides widening range of items sold by them on cheaper prices.--PPI