View with images and charts Report on price hike
1.0 Introduction “Price is the amount of money charged for a product or service”.[Philip Kotler and Gary Armstrong, Principles of Marketing,11th edition,2006,p-307]. When the cost of something becomes far more expensive than its original price is known as price hike. Price-hike means the unusual increase in the price of the price of daily necessaries. Nowadays, it is a common phenomenon in Bangladesh and the problem is gating worse day by day. Market syndicate is mostly responsible for this price-hike in Bangladesh. Besides, some dishonest people store essential commodities with a view to making huge profit and thus contribute to increase prices. With the price increase of essentials capturing headlines of our national newspapers and TVs almost everyday. Because this price hiking problem has become the main social problem in Bangladesh. People are suffering most in this problem specially the poor peoples. There are many reasons behind this problem. According to The finance and planning adviser, Mirza Azizul Islam, “international price hike of essential necessities as being responsible for high domestic prices.” Of course, international market price is also responsible for domestic inflation, but only partially. The adviser’s statement simply ignored other domestic factors, many of which created by the action by the caretaker Government, and also some of which created by the previous government.
According to the study we identified some supply-side factors as being responsible, such as hoarding, and loss of business confidence, administered energy price hike, international price hike of essential commodities, bribe and illegal toll collection, structural and institutional constraints etc. corruption of so called political leaders and different government officials etc are also responsible for this problem. And if the food price is not controlled, the inflation rate may reach double-digit level very soon which is currently 7.5%.
1.1 Statement of the Problem The main reasons behind this problem: 1The prices of commodities are almost uniform across the capital, which only implies that a group of people are fixing the prices and that they have enough clout in the market to be able to decide what the prices should be. 2 3Corruption of so called political leaders, corruption of different Government officials and law enforcing agency is the main reason behind this problem. These problem are related following question4 > What is the main reason behind this recent price hike in Bangladesh? > Is corruption and local syndicate only responsible about this price hike? > What are the impacts of recent pricy? > What should be the role of government to reduce this price hike? > How can we solve it?
1.2 Objectives of the Study The main objective of this Study is identifying the main causes of price hike in the basic commodities of Bangladesh and find out way of solving this problem. The specific objectives of this study were: 1. To find out the main causes of price hike. 2. To identify the syndicate groups 3. To find the nature of pricing policy. 4. To know about current market price of basic commodities. 5. Govt. rules and regulations to control price hike. 6. Find out way of solving this problem.
1.3 Significance of the study 1) Understanding the impacts of food price hikes on the vulnerability of children to food insecurity serves as the base for formulating pertinent disaster prevention and preparedness policies. 2) it has also the potential for relatively increasing the efficacy of external assistance particularly social protection programs (SPPs). 3) the two cases and the food price hikes reinforce our understanding on how deeply international food markets are globalized, easily wielding strong influence on domestic food production and access. 4) the cases and food price instabilities have brought to the fore long–standing debate on measurements of food security.
1.5 Definitions of terms used in study a)
Price “Price is the amount of money charged for a product or service”.[
b)
Price Hike When the cost of something becomes far more expensive than its original price is known as price hike.
c)
Inflation In mainstream economics, the word “inflation” refers to a general rise in prices measured against a standard level of purchasing power
d)
Advertisement Advertising is paid form of non personal communication about an organization, its products, or its activities that is transmitted through a mass medium to a target audience”. Advertisement increases production cost that leads to price hike.
e)
Syndicate
Syndicate means a set of businessman who create crisis of goods to sell the goods for making higher profit.
Review of the Literature & Hypothesis
2.0 Review of the Literature & Hypothesis 2.1 Review of the Literature The price hike of essential food commodities has a major impact on food security particularly on the marginalized section of the society in Bangladesh. Recent rise in domestic cost of production of food, together with high price in international market may boost further food inflation, leaving adverse effects on the poor. Most of the poor spend more than half their income on food. Price hikes for essential commodities can force them to cut back on the quantity or quality of their food as well as change their consumption patterns. This may result in food insecurity and malnutrition, with adverse implications in both short and long term. Such price hike might not only make the lives of the poor miserable but also could drag down a number of people below the poverty line.
Food price increases in Bangladesh in first half of 2011: Oxfam report After a year in which food inflation reached 10 percent, the price of basic food items in Bangladesh increased in the first half of 2011, according to a recent Oxfam report, reports UNB. The report said as a net food importer, Bangladesh depends on the international market for additional food imports, and changes in global prices are expected to have a local impact. Although the government has taken a wide range of steps to boost supply, stabilize prices and ensure the most vulnerable are protected, the price of food yet remains stubbornly high.
Campaign for Sustainable Rural Livelihoods (CSRL) and Oxfam jointly launched the report titled “Living on a Spike: is the 2011 Food Price Crisis Affecting Poor People?� at Oxfam Bangladesh office in the city on Wednesday. The report said the price hike of 2011 is affecting the poorest most, but it has been generally adverse on the wider society. Even well-paid government officials will find that their pay rises are nominal, as the cost of living has escalated so much. Small farmers do not always benefit from high food prices as is supposed, as many sell their outputs at low prices immediately after the harvest to repay loans taken for cultivation; many people believe instead that an increasing number of middlemen and large traders cream off the main profits from high rice prices. The report revealed that although wage rates for casual labourers and garment workers have increased in recent months, many people say the increases have been cancelled out by high prices. They demonstrate this by describing how their eating and other habits have changed for the worse. People talk about having forgotten the taste of beef or even lentils, of cooking pieces of chicken and types of fish they would never have previously considered; broken eggs and rotting vegetables are also eaten. The poorest and most vulnerable try to cope by working harder, eating less, living even more frugally, drawing down any resources and assets and managing on a day-to-day basis, the report said. People complain that even weddings are small affairs these days, and they can no longer afford the costs of socializing. Adults feel ashamed of their old clothes, and children of their second hand schoolbooks. Many migrate to large cities for work or feel forced to change occupation. The rising cost of living means a worsening quality of life for many people across the society, the report details. The study was designed to explore how poor people experienced the food price hike of 2011 in Bangladesh, Indonesia, Kenya and Zambia. It follows on from research in the same communities in 2009 and 2010.
The 2011 study focused on hearing people’s analyses of changes in the cost of living and wages, the effects on their everyday lives, the causes of the rising cost of living, and what action should be taken. The overall picture of the food price hike of 2011 seems more varied than during 2008. But in the aftermath of the global economic crisis, the study detected a growing difference between weak losers - informal sector workers and people in marginal occupations whose real incomes have declined as a result of price spikes - and relatively strong winners, mainly commodity producers and organized industrial workers, who have secured wage or income rises. People in all these communities generally held government responsible for a failure to protect them against food price spikes. Ahmed. T. (2007) said, obviously formation of syndicate and hoarding by them, corruption, power failure, traffic fames and load-shading, international price hike of essential commodities, bribe and illegal toll collection, structural and institutional constraints etc. according to Ahmed. T. (2007), the oil crisis of 1973, when oil prices increased in exponential proportions, was not so much due to shortage of oil supply as it was due to the decision of the major oil exporters, Arab states, to increase the prices. It was not that oil reserves had suddenly sunk through the floor or that its demand had shot through the ceiling. In strictly economic terms, a handful of oil exporters were in collusion, which led to dramatic increases in global oil prices. The entire western world was affected and the sudden price hike resulted in a long-term recession ending decades of economic boom. It was also the first time that the United States faced an oil shortage since the Second World War. The Arab states had succeeded in their intent to use oil as a weapon against those not friendly to their cause. It is perhaps a classic example of collusive oligopoly. The situation in the current-day Dhaka markets is similar except that the collusion does not concern one item but several — mostly such essential food items as rice, wheat, potatoes, lentils, edible oil, onions and milk powder. According to a report in Amar Desh (May 11, 2007), prices of essential food items have increased 25 per cent on an average in the past four months. According to a report in New
Age (May 11, 2007), prices rose between five and 50 per cent during the same period — most of it under the military-backed interim government of Fakhruddin Ahmed that assumed office after the proclamation of a state of emergency on January 11. According to the government’s own statistics, inflation increased from just fewer than six per cent in January this year to almost 7.5 per cent by March. While the government appears to be in denial suggesting that inflation is not really out of control and quite below the danger level, experts fear that it might, in fact, have crossed the double-digit mark driven by the soaring food prices. According to SLATE magazine (2007), about our very own mafia groups that group has come to be known, and often referred to in the media, as the syndicate. Despite the fact that academics, researchers and even politicians have acknowledged such collusion, its existence is denied upfront, both by government officials and businesspeople, in a manner that can be likened to that regarding the mafia. For the longest time, the existence of the mafia, or rather Cosa Nostra, was denied by insiders as well as government officials till misconceptions and myths were laid to rest by, what came to be known as, the Maxi Trial in a court in Sicily over a hundred years after its existence was officially reported. As for the syndicate, it has proved to be invincible and even immune to a state of emergency, which has not been able to curb its potential for collusion and thereby manipulation of the prices. The tenure of the BNP-Jamaat alliance government saw two changes of commerce ministers, each given the sack for the same reason, while the last one had utterly failed in his pledge to rein in the prices of essentials. The invincibility of the syndicate was perhaps never felt with such force as it was on July 25, 2006 at a monthly luncheon meeting of the American Chamber of Commerce in Bangladesh. The third commerce minister of the last government, Hafiz Uddin Ahmed, squarely put the responsibility of controlling the prices of essentials on other ministries and went so far as to suggest that the government should set up another ministry for the task. „The Consumer Protection Act is being scrutinized now and I have urged the food ministry to make anti-hoarding laws for checking unscrupulous traders‟ syndicates and hoarders,‟ he said. He also suggested that the finance and food ministries were better equipped to tackle the matter. It was just three months after Hafiz had taken up his new portfolio on April 26 with the pledge to reduce prices of essentials within a month. Barely a week earlier, at a meeting with businesspeople at his office, he assumed a dramatically different tone and harped on a different note, although, even then, it was obvious that his success in bringing down the
prices of essentials was at the mercy of the businesspeople. On July 19, Hafiz announced to the press — following the meeting — that the intelligence agencies had identified the members of the syndicate „who were involved in manipulating prices through hoarding and other means‟. But he only, hoped‟ that the relevant ministry would take necessary action. His comments about the meeting betrayed his helplessness and utter inability to hold sway over the businessmen. „They have given us assurance that they will not make any windfall profit by making the people hostage,‟ said Hafiz about the traders present at the meeting. With hindsight it appears that the minister did his best to divert attention from the syndicates citing a marked difference of prices between wholesalers and retailers, and the producers and wholesalers that he suggested added to the woes of the people. M Saifur Rahman, then the minister for finance and planning, and perhaps the most influential cabinet member of the BNP-led government, when approached with the possibility of reducing import tariffs on essential food items, told the press, it never paid off. He said the prices would decrease for a short while but resume their rising trend soon after. Instead, he suggested, the syndicates that manipulated the prices were the main reason behind the price hike and had to be dealt with decisively. But government officials deny their existence quite categorically despite overwhelming circumstantial facts that testify exactly the opposite. The commerce secretary was quoted in January as saying they are „yet to receive any conclusive evidence on the existence of syndicates‟. He went further to substantiate his claim asking, „When the prices went up everyone was blaming syndicates. But now that they are going down how come everybody is quiet? If there was a syndicate why are the prices coming down?‟ He did partially admit to their existence since former ministers had claimed that syndicates exist. But the rebuff of a prominent businessman, quoted in New Age‟s weekend supplement Xtra on January 12, smacks of the classic mafia disclaimer. „I read about this regularly in newspapers but I have never seen one or been a part of it,‟ says Mostafa Kamal, chairman of the Meghna Group, one of the leading importers of edible oil, powdered milk and sugar. „How, where and when are questions people who accuse us of syndication should answer,‟ he said. It is alleged that the Meghna Group is among the leading syndicate members in the country. Hossain. E. (2007), programme officer of the Consumers‟ Association of Bangladesh, echoed the general apprehension. „I have attended meetings at the commerce ministry where powerful and wellknown businessmen have directly threatened government officials with cutting out supply if they did not accept their chosen prices,‟ he told Xtra.
According to the Daily Star (May 18 2007), a report of the Centre for Policy Dialogue, a research organization, based on records of the National Board of Revenue, found that a strong cartel accounted for a substantial share of the imports. The report says the top five importers have accounted for importing 96 per cent raw sugar, 46 per cent refined sugar, 67 per cent crude soybean oil, 60 per cent crude palm oil, 49 per cent wheat, 37 per cent rice, 31 per cent lentil, and 31 per cent onion of national imports till March of this fiscal year. While the report did not mention any names, a number of reports in other newspapers have done so. For instance, according to a report of Amar Desh (May 11, 2007) the TK Group, the Meghna Group and the City Group account for 65 per cent of edible oil imports. The next three — the SA Group, the MEB Group and the Marine Group — account for another 25 per cent of the imports. Quoting sources, the report says traders of Dhaka and Chittagong are the major importers of lentils, ginger, garlic and other essentials that come from India. It goes on to mention the names of Shathi Enterprise, Seven Star and Banijjya Bhandar from Dhaka, Rumpa Enterprise of Bogura, Pahari Enterprise, AB Trading and Akhter Impex of Chittagong as significant market players. When the country is badly shaken by the unprecedented floods there is another alarming factor—the price hike of essentials that is slowly but very steadily engulfing the rural life of the common people. It is appalling that one kg of green chili costs you TK 200! There are no vegetables that cost you less than TK 30 per kg! It also creates shortage of foods. That also increases the price of essentials. Similarly other factors such as power failure, international market price, fuel cost, power crisis, natural disaster, transportation problem, illegal toll collection, action against corruption by the caretaker Government, street vendors and illegal construction drive by the joint forces, lack of communication and co-ordination in between different Government officers etc factors are also responsible for recent price hike in Bangladesh. By taking serious action and frame effective laws for the elimination of the middle men groups existing various trading circles and to control bribery in between law enforcing agencies and traders. By minimize the traffic jams and load shadings. By forming a strong co-ordination efforts and monitoring system, established for the co-operation, co-ordination and exchange of information in between different Government officials entrusted to check
price level. By identifying syndicate groups and taking appropriate action against them. The Government can control the price. By creating awareness against corruption and establish a price list for all kinds of goods to control price hike. And by electing an honest and stable Government, the general people can solve this problem.
According to “Monthly Development Focus-March 2008� of UNDP Price hike raises concern
Analysts have raised their concern over the continued increase in prices both globally and nationally. Dr Akbar Ali Khan highlighted that although 40 percent of the country’s populations are categorized as poor according to official statistics, the rate of poverty has gone up and a larger section is starving as prices of essentials have increased by 20 to 25 percent and income rose only by 5 percent. Other economists suggested that Government will have to take effective measures including safety net programmes to mitigate hardship of the mass, caused by the soaring prices of food items. Global food prices, based on United Nations records, rose 35 percent in the year to the end of January, markedly accelerating an upturn that began, gently at first, in 2002. Since then, prices have risen 65 percent. In addition, according to the Weekly Economic Times, Bangladesh Bank governor suggested that the country should prepare itself for a strong food reserve after the boro crop harvest to face any future adversities like floods. The World Food Programme says high global fuel prices coupled with an increased demand for food in wealthier Asian and Latin American markets and an increased demand for bio-fuel are behind food price rises around the world. The UN Food and Agriculture Organization have warned that rising prices have triggered a food crisis in 36 countries, all of which will need extra help. The Sunday Herald cited that high prices have already prompted a string of food protests around the world, with tortilla riots in Mexico, disputes over food rationing in West Bengal and protests over grain prices in Senegal, Mauritania and other parts of Africa. In Yemen, children have marched to highlight their hunger, while in London last week hundreds of pig farmers protested outside Downing Street. It also added that If prices keep rising, more and more people around the globe will be unable to afford the food they need to stay alive, and
without help they will become desperate. More food riots will flare up, governments will totter and millions could die.
2.2 Hypothesis of the study There are many reasons behind this recent price hike in Bangladesh. But I think formation of syndicate and corruption is the main reason behind this. But international market price, fuel cost, power crisis, natural disaster, transportation problem, illegal toll collection, action against corruption by the caretaker Government, street vendors and illegal construction drive by the joint forces, lack of communication and co-ordination in between different Government officers etc are also responsible for recent price hike in Bangladesh. And the rate of this price hike is very fast. Even the military back Government was failed to solve this problem. They were not able to find the root behind this problem due to lack of appropriate monitoring system. But just the Government can solve this problem by using his intelligence agency, by introducing effective monitoring system, by improving law & order and by identifying the evil syndicate groups. But it is not a very easy job. The support of general public is also needed to solve this problem.
Data Collection and Analysis
3.0 Data Collection and Analysis
3.1 Data Presentation CAPTION: A survey has been taken of 30 people for the topic of “The main reasons and public’s reaction about recent price hike in Bangladesh. Question No. Option A
Option B
Option C
Option D
1 2 3 4 5 6 7 8 9 10 11 12
3% 8% 44% 4% 60% 19% 12% 3% 13% 40% 38% 59%
* * 5% 15% 25% 21% 26% 15% * * 5% 8%
* * 2% * * 13% * 18% * * 37% *
97% 92% 49% 81% 15% 47% 62% 64% 87% 60% 20% 33%
TABLE: THE SURVEY RESULT
3.2 Data Analysis Recently I have done a survey for about 100 people to find the main reasons behind this recent price hike in Bangladesh. For this survey I prepared a set of question consisting of 13 questions. According to my survey here I analysis some of the important questions from my questioner. Question No: 1 The product price of
A
B
Increasing
Decreasing
essential commodities is …… day by day. 3%
A. Increasing B. Decreasing
97%
According to my survey, in reply of my first question 97% people said the product price of
essential commodities is increasing day by day. While only 3% people said the product price of essential commodities is decreasing day
by day. So, the price hike of essential food commodities has a major impact on food security particularly on the marginalized section of the society in Bangladesh. Question No: 2 A "The Price hike of essential commodities is a major problem Yes
B No
in our Bangladesh." Do you agree?
100% 90% 80% 70% 60% 50% 40%
Series1
92%
30% 20% 10%
8%
0% A.Yes
B. No
In reply of my second question 92% respondents said The Price hike of essential
commodities is a major problem in our Bangladesh. While only 8% respondents are disagree on the statement. The increase in food and non-food prices erodes the purchasing power of the poor. The poor women both in urban and rural have to suffer a lot due to high food and non-food prices. The urban women slum dwellers, female headed households and rural poor women are more vulnerable.
Due to price hike of essential commodities in the local market, the poor has to suffer a lot resulting into high dropout rate of boys for helping their families in income generation. The dropout rate of boys was 6.11 percent higher than girls in 2005 and 6.88 percent in 2010. Among the non-poor families, only 8.89 percent boys dropped out in 2010 from the age group of 11-15 years, however, 17.48 percent dropped out from poor families. Question No: 3
A
B
C
What do you think about the main reason behind this recent price hike?
Formation of Syndicates
Corruption
Extortion Taking bribe from traders
D
A. Formation of Syndicatyes
5% 2%
B. Corruption 49%
44%
Extortion Taking bribe from traders
According to my survey, in reply of my third question 49% respondents said formation of Syndicates is the main reason behind this recent price hike. While 44% people said corruption is the main reason behind this. But only 5% people said Extortion and 2% people said taking bribe from traders are main reason behind this recent price hike. In my survey most of the people think the syndicate groups are mainly responsible for this problem. These syndicate groups controlling the price by hoarding. Hoarding by businesses has been widely blamed by many as being main culprit behind the current crisis. Indeed, if we let aside moral issues, hoarding markets perfect economic sense to businesses and that is why they build up stocks to make larger profits.
But the syndicates, for all their collusion, manipulation and public denial, are not entirely responsible for the price hike. There are other related factors some of which are compelling, even more than syndication. To begin with, production costs have risen and so have the prices. But it gives an impression that the farmers are linked to the market and thereby benefit from the price rises at the consumer end. That is hardly the case. They are paid the bare minimum below which the farmers cannot afford to cultivate crops the next year. And prices at their end have increased only marginally over the years. The real value addition (pun intended) to agricultural produce begins with the middlemen who buy from farmers. Along the supply chain there are warehouses, wholesalers, retailers and micro-retailers often with several more layers of middlemen sandwiched among them. Reports in the media indicate that prices, especially those of vegetables, appreciate by up to 500 per cent between the farmer and the end-consumer. That is how the middleman also controlling the market price. And the Government is not able to identify them, catch them, and even control them. Even the Government has blamed international market price hike of essential commodities as being responsible for high domestic prices to cover their failure. The Government has failed to solve this problem due to the corrupted Government officers and corrupted law enforcing agencies. They are not willing to monitor the market price. They are just willing to take bribe. Again lack of communication and co-ordination in between different Government officers and lack of communication system in between different Upozela and districts head quarters with the capital is also responsible for this recent price hike. Question No: 4
A
B
C
Do you think there is any Syndicate group involved in price hike?
Yes, because the government can’t control the price.
No, there is no syndicate groups exist
May be, not sure
15% A.Yes
4%
B.No C.May be, Not sure 81%
In reply of my second question 81% people said syndicate groups are involved in price hike because the government can’t control the price. While people said No, there is no syndicate
groups exist and 4% people said May be, not sure . Syndicate groups are a set of businessman who create crisis of goods to sell the goods for making higher profit. Question No: 5 Which political factors are responsible for price hike?
25%
A
B
C
Blockade and strike Corruption of so called political leaders
15%
Conflict between political parties
A.Blockade and Strike B.Corruption of so called political leaders
60%
C. Conflict between political parties
According to my survey, in reply of my fifth question, 60% of people said corruption of so called political leaders is the main political factor behind this price hike. And only 15% of people said blockade and strike is responsible for this and 25% people said Conflict between
political parties is responsible for recent price hike.
Political leaders are not actually political leaders. Actually they are political business man. They invest there money to own the party nomination and also own the election. Actually they bought there place in Parliament. After wining the election they start to gain black money as much as they can. And they gain it by corruption. And that’s why the price of essential commodities is increasing day by day. This political don’t care about the general people, they just care about themselves. Even they don’t know how much black money they have gained by corruption. The current anti-corruption drive by the Caretaker Government clearly shows the statistic how much black money they have gained through corruption. That’s why the corruption of so called political leaders also responsible for recent price hikes.
Question No: 6 What structural & institutional constraints are mainly responsible for this recent price hike?
A Bribe & illegal toll collection
13%
C
D
Traffic congestion
Power Lack of failures storage capacity
A. Bribe and illegal tool collection 47%
21%
B
B. Traffic congestion C. Power failures
19%
D. Lack of storage capacity
According to my survey, in reply of my sixth question 47% people said bribe and illegal toll collection is the main structural & institutional constraints that are mainly responsible for this
recent price hike. And 21% people said power failure is also responsible for this problem. But I think this both factors are equally responsible for this problem The illegal practices of bribes toll collections and associations greatly influence in raising the price of essential commodities. The traders has to paid toll and bribe at each entering point of a town. And this increases the transportation cost of goods. As a result the price is increases. And the Government has failed to stop this because of the involvement of corrupted law enforcing officers. While the Scarcity increases the opportunity cost of any service and provides opportunities for corruption. The acute shortage of generation capacity and its consequent effects - frequent load-shedding, low voltage and low frequency - on different economic sectors, as well as on essential services such as water supply, hospitals, and telecommunications, have opened up doors for many types of corruption. That is also responsible for this recent price hike. Why that is happening? Because of the corruption of the employee of DESA and PDB. According to the Transparency International Bangladesh (2006), 1A Ledger Keeper in DESA, a very low level employee, became the envy of many when he purchased a house in a middle-income residential area of Dhaka for Tk 3.8 million and an allotment in a shopping arcade. 2Many Assistant Engineers of BPDB own private cars, which they cannot afford to buy and maintain on their official salary. 3A particular Assistant Engineer, with close links with the Collective Bargaining Agent, comes to office in a luxury four-wheeler, while another mints money by making various interventions in the name of a minister. 1A meter reader who was placed under suspension joined the ruling political party, got his job bank, became a CBA leader, and is now the happy owner of two houses and a shop. 2A corrupt and overweight meter reader, who employed agents to do his job and concentrated on eating instead, was transferred from Dhaka to an outstation by an overzealous DESA officer. Fretting and fuming, the reader came to see a very senior DESA official and told him in no uncertain terms, "Sir, I have been working for 25 years in one place and nobody dared to touch me. You have not done well by transferring me. I will see how you can move me." Sure enough, he stayed where he was, with the help of his cooperative union leaders. And due to this corruption load shading occurs frequently, as a result the price of essential goods is increasing rapidly.
Question No: 7
A
Yes Do you think natural disaster, street vendors and illegal construction drive by the joint forces are also responsible for recent price hike?
70%
B
C
No
Partly responsible
62%
60% 50% A.Yes
40%
B. No
26%
30%
C. Partly responsible 12%
20% 10% 0%
1
According to my survey, in reply of my seventh question 62% people said natural disaster; street vendors and illegal construction drive by the joint forces are partly responsible for recent price hike. And 26 %people said no and 12% partly responsible. But I think it is responsible and why? You will find your answer right now. When the country is badly shaken by the unprecedented floods there is another alarming factor—the price hike of essentials that is slowly but very steadily engulfing the rural life of the common people. It is appalling that one kg of green chili costs you TK 200! There are no vegetables that cost you less than TK 30 per kg! It also creates shortage of foods. That also increases the price of essentials. And that’s why I think natural disaster is directly responsible for price hike, but the others are partly responsible. Question No:8
A Do you think Advertising advertisement increase the has any effect price of the on the product product price?
B
C
D
Advertisement lowers the price of the product
Advertisement Advertisement settles the has no effect price of the on price product
A. Advertising increase the price of the product
18%
B. Advertisement lowers the price of the product.
15% 64%
3%
C. Advertisement settles the price of the D. Advertisement has no effect on price.
Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods or services by an identified sponsor (Kotler et al. 2006, p. 536). Advertising is the powerful tool of modern business. Advertising is assumed to inform consumer about product and services as well motivate them to purchase particular brand. According to my survey, in reply of my eight question 64% respondent said Advertising
increase the price of the product, 18% respondents said Advertisement has no effect on price ,15% respondent said Advertisement settles the price of the product and only 3% respondent said Advertisement lowers the price of the product.
Question No: 9
A
B
Is the government of Bangladesh responsible for the price hike?
Yes
No
B. No
13%
Series1 87%
A.Yes
0%
20%
40%
60%
80%
100%
Government is the important element of the state which is changeable and can rule over the whole country. In reply of my ninth question 87% respondents said Yes, the government of Bangladesh responsible for the price hike and No, the government of Bangladesh is not responsible for the price hike. Question No: 10
Does the government of Bangladesh take any necessary step for removing price hike problem?
A Yes
B No
60% 60% 50% 40% 40% In reply of my tenth question 60% respondents said the government of Bangladesh takes a Series1 30% necessary step for removing price hike problem but 40% respondents said the government of
Bangladesh does not take any necessary step for removing price hike problem. So the 20% 10% 0%
A.Yes
B. No
government of Bangladesh should take all necessary steps for removing price hike problem tactfully also. Question No:11 How can the Government control the price hike?
A By taking necessary steps to stop cross border smuggling of fuel and fertilizer
B Identifying the syndicate groups
C By improving traffic congestion
D By improving law & order
A. By taking necessary s teps to stop cross border smuggling of fuel and fertilizer B. Identifying the syndicate groups
20% 37%
C. By improving traffic congestion 38%
5%
D. By improving law & order
According to my survey, most of the people said we can able to control the price by identifying the syndicate groups and by improving law & order. If the government framed strong laws to improve the law and order we can able to identify the syndicate groups and also able to control the price of essential goods. To improve this situation the personals of different law enforcing agencies should immediately be deployed in different trading centers, sea port, river ports, and land ports to check up and down of price level due to hoarding black marketing of essential food grains and other food items. Thus we can improve the current situation. Question No: 12 Which methods can be most applicable to reduce or improve this problem?
A
B
C
By framing appropriate law by the Government to eliminate middle classes in trading
By introducing effective monitoring system.
By re-introducing old rationing system by the Government to stable the prices
According to the survey, in reply of my twelve question 59% respondents said by introducing effective monitoring system we can able to reduce this problem. And 33% people said we can
solve this problem by framing appropriate law to eliminate middle classes in trading and 8% people said we can solve this problem by re-introducing old rationing system by the
Government to stable the prices. We are passing through a revolutionary communication and contract system due to the introduction of most modern computer and mobile communication system in our country. It is now very easy for the Government to established scientific monitoring systems and cells to keep constant observation data collection and exchange of information’s about the causes up and down, price level of important food items and essential commodities. According to my survey most of the people said the rate of price hike is quite fast. And the general public’s can help the Government to remove this problem. Most of the people in Bangladesh can afford to meet their family essential commodities, but they said it was very tough. Surprisingly the upper class people are also by price hike. Most of the people agree to that if laws and regulation enforced properly, it is practically possible to reduce this price hike. And the general peoples can also play a big role to solve this problem.
5.0 Findings and Analysis
5.1 Causes of price hike: Price hike is the main problem in Bangladesh. It is alarming to see that price of essential items moving up by the day. According to my survey, the causes behind price hike are given below Formation of Syndicates Syndicate means a set of businessman who create crisis of goods to sell the goods for making higher profit. Formation of syndicates is the main reason for recent price hike. Basically, few corrupted/syndicated businessmen manipulated the markets in Bangladesh. Corruptions
Corruptions of so called political leaders lead to price hike. The prices of essential commodities are increasing day by day because of corruption. Political leader’s takes bribe from producer that leads product price. According to the report of Transparency International (TI)-2011, the position of Bangladesh is thirteen in corruption. This report shows following statistics-
2012
14
2011
12
2010 2009
10
2008
8
Series2
2006
6
Series1
2005
4
2007
2004
2
2003 2002
0 1
2
3
4
5
6
7
Source: The daily Prothom Alo, December 02, 2011 This report explains that , the position of Bangladesh in corruption is first in 2005, thrid in
2006, seventh in 2007, tenth in 2008,thierteen in 2009 and 2011. Increasing Demand Due to increasing demand, the food stock is becoming less. According to the statement of International Food Policy Research Institution (IFPRI), there is no possibility of reducing food price in the upcoming years. As a consequence, like other importing countries Bangladesh is also affected by this adverse situation. Advertisement Steven J. Skiner said, “Advertising is paid form of nonpersonal communication about an organization, its products, or its activities that is transmitted through a mass medium to a target audience”. Advertisement increases production cost that leads to price hike. Reducing Production According to the report of IRRI, in 2025 the demand of rice globally will be 880 million ton which is 70% more than present production. But simultaneously production is not increasing accordingly. In Bangladesh many agro lands are converted into fisheries that have lessened the production of food grains. In Bangladesh the great impediment of production is insufficient supply of power and fertilizer in time.
Natural disaster, street vendors Floods, street vendors and SIDR also helped to increase the commodity price in Bangladesh. Conflict between political parties Lack of unity between so called political/looter parties which help to increase the essential items price more than international markets. Price Hike of Energy-fuel The skyrocketing price of energy-fuel affected the world food market. As a consequence, this price hike of energy-fuel also affects Bangladesh. Import Dependency Bangladesh is one of the prime rice importing countries. Since crops were destroyed due to floods and cyclone Sidr, the expenditure of importing has been raised dramatically. For instance, 28.99 lakh metric tons rice and wheat were imported during July 2007 to February 2008. On the contrary, 13.87 lakh metric tons rice and wheat were imported during the same period of the previous financial year. Declaration of Export restriction Since the demand of rice has been raised so rice exporting states are taking various strategies in terms of exporting rice to ensure their own food security. They have imposed some terms and conditions or stopped exporting rice. For instance, India has now raised the price of rice per ton $ 1000. As a result, Bangladesh is passing ominous Situation. Bio-fuels Another reason for price hike of food is increasing demand and production of bio-fuels. Extortion Taking bribe from traders Blockade and strike Bribe & illegal toll collection Traffic congestion Power failures Lack of storage capacity
Soft Law & order Price hike of essential items in the international markets.
5.2 Impact of Price Hike Food insecurity in Bangladesh According to the definition of Food and Agriculture Organization (FAO),” Food security exists when all people, at all times have access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life.” When people cannot get sufficient food according to their demand, it is called food insecurity. For a man, 2000-2200 kilocalories is required daily on an average and where people intake below this threshold, they are food insecure and tend to experience the symptoms of malnutrition, unable to learn or to work, and have reduced resistance to disease. The present situation of Bangladesh is miserable for low and middle income people. In Bangladesh, 40% people live under poverty and they spend 80% of their total income for buying food. FAO included Bangladesh in the list of 36 food aid crisis countries. FAO has identified two key reasons for prevailing food crisis in Bangladesh, one is 2 floods and another is cyclone ‘Sidr’. WFP seeks $ 15 million for Bangladesh’s food shortage. Josette Sheran (executive director of WFP) warned, without sufficient food aid, WFP would have to reduce its global food aid operations because of rising food and oil prices. The acting country director of WFP Edward Kallan added that WFP has received only $37 million in response to the $ 52 million for emergency appeal in the aftermath of Sidr . On the contrary, the USAID was forced to cut $ 120 million from future aid programmed to pay for emergency aid needs. Recently International Food Policy Research Institute (IFRI) remarked Bangladesh’s political and social unrest due to price hike “a serious security issue”. Inflation In mainstream economics, the word “inflation” refers to a general rise in prices measured against a standard level of purchasing power. Previously the term was used to refer to an increase in the money supply, which is now referred to as expansionary monetary policy or monetary inflation. Inflation is measured by comparing two sets of goods at two points in time, and computing the increase in cost not reflected by an increase in quality. There are, therefore, many measures of inflation depending on the specific circumstances. The most well known are the CPI which measures consumer prices, and the GDP deflator,
which measures inflation in the whole of the domestic economy. The prevailing view in mainstream economics is that inflation is caused by the interaction of the supply of money with output and interest rates. Mainstream economist views can be broadly divided into two camps: the "monetarists" who believe that monetary effects dominate all others in setting the rate of inflation, and the "Keynesians" who believe that the interaction of money, interest and output dominate over other effects. Other theories, such as those of the Austrian school of economics, believe that an inflation of overall prices is a result from an increase in the supply of money by central banking authorities. The inflation rate in Bangladesh was last reported at 11.3 percent in August of 2011. This page includes a chart with historical data for Bangladesh's Inflation Rate. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy.
“Inflation is always and everywhere a monetary phenomenon” said by Nobel Prize winning economist Milton Friedman. Reduce purchasing capacity Bangladesh is a developing country. Per capita income is not well. When product price is increased then poor men are not able to purchase necessary things. Since CPI influences people of different income levels differently, it cannot reflect the real predicament of the poor. However, Consumer Price Indexes (CPI) in April 2011 were 246.24 (general), 275.02 (food) and 207.23 (non-food). Hampered standard of living The impact of price hike of essential commodities on high and low income groups is different because of different consumption levels and patterns. The main cause of the high inflation today is cost push, fuelled by rise in prices of food, which accounts for the largest part of poor people’s consumption. Poor people are not able to standard of living. Impact on poverty Poverty indicates lack of income and deprivation of all fundamental rights. It is complex because poverty has many dimensions and the scope for education is being affected by it. Due to price hike of essential commodities in the local market, the poor has to suffer a lot resulting into high dropout rate of boys for helping their families in income generation. Impact on GDP Price hike of essential items in the international markets create money crisis to import raw materials from abroad that hampered Gross Domestic Production(GDP) Increase cost Price hike leads to increase cost of living.
ďƒ˜ Reduce value of money When product price is increasing day by day and money price is decreasing day by day that is called inflation. Price hike reduce value of money.
5.3 Market price of essential commodities General people's sufferings and buying capacity have gone beyond their control. Government has no monitoring and control on the retail markets. According to retail shop-keepers, the reason of price increase was mainly insufficient supply of products. They also said that some dishonest businessmen were busy stocking oil, sugar and pulse (dal) for the upcoming Ramadan. On the other hand, due to inadequate supply of vegetables and fish supply in the kitchen market, price of essential edibles have increased considerably compared to that of last week.The following table shows the comparison of the price hike rate of the daily essential commodities:
Trading Corporation of Bangladesh Retail Price of some Essential Commodities in the Dhaka City Market: Date: 30 November 2011,
Sl Items # Description Fish,Meat&Rice 1 Mola Fish
Unit Price: KG/LTR-TAKA
Last Current % Of Unit Month,Mrp Week,Mrp Variance Variance In Tk In Tk Kg
220
350
130
37.14
2 3 4 5 6 7 8
Rui Medium Local(1.5-3) Kg Pangash (Medium) 1 Kg + Kg Shrimp - 25-30pcs Kg Kg Koi Kg Nola Kg Batashi Kg Elishi 1kg+ Pcs Telapia Fish Small(200-450 Kg 9 Gm) 10 Telapia Big(500gm) Kg 11 Bele Fish Kg Meat 1 Beef Kg 2 Mutton Kg 3 Boiler Murgi Kg 4 Egg Per D. Rice 1 Rice (Miniget) 2 Rice (Nazirshil) 3 Rice (28) 4 Irri Rice (Mota) 5 Atab Rice 6 Kalijira Rice(Loose) 7 Chinigura Rice(Loose) 8 Atta 9 Maida 10 Dal Mushiri Deshi 11 Dal Mushiri Indian 12 Chola 13 Ahnchor Dal 14 Moog Dal 15 16 17 18 19 20 21 22
Soyabeen Teer Soyabeen Rupchanda Soyabeen Plum Oil Elichi Cumin(Zira) Daruchini Labonga
Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg I Kg Pac 5 Ltr 5 Ltr 1 Kg Kg Kg Kg Kg
210 110 450 220 150 300 1000 125 150 400 250 410 125 70
45 46 37 31 31 70 70 31 35 90 80 62 32 110 112 570 570 108 2650 370 210 950
280 120 550 240 180 350 900
70 10 100 20 30 50 -100
25.00 8.33 18.18 8.33 16.67 14.29 -11.11
135 165 550
10 15 150
7.41 9.09 27.27
270 430 150 84
20 20 25 14
7.41 4.65 16.67 16.67
53 54 43 36 35 80 80 33 37 105 90 85 42 120
8 8 6 5 4 10 10 2 2 15 10 23 10 10
15.09 14.81 13.95 13.89 11.43 12.50 12.50 6.06 5.41 14.29 11.11 27.06 23.81 8.33
123 595 605 118 2900 480 280 1500
11 25 35 10 250 110 70 550
8.94 4.20 5.79 8.47 8.62 22.92 25.00 36.67
23 24 25
Salt Sugar Milk Vita
Kg Kg Kg
Vegetable 1 Begoon- Goal White 2 Begoon -Long 3 Begoon-Goal Black 4 Kakrol 5 Mula 6 Bitter Gourd(Usta) 7 Lebu Long 8 Lau 9 Shasha 10 Gajor (Carrot) Local 11 Garlic (Multi Cell) Loose(China) 12 Ginger China Loose 13 Green Papaya 14 Kacha Morich(Green Chilli) 15 Onion Indian Loose 16 Jhinga 17 Chichinga 18 Onion Local Loose 19 Potato Loose 20 Tomato 21 Potol Fruits 1 Apple Red 2 Apple Golden South Africa 3 Banana Sagor 4 Grapes-Red 5 Malta -Yellow 6 Sofada Big 7 Khajur 11 Kazi Payara
Kg Kg Pcs Kg Kg Kg Kg Kg
20 63 50
Kg Kg Kg Kg Kg Kg Pcs Pcs Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg Kg 120 140 5 380 110 90 250 140
22 74 52
35 35 35 35 25 40 3 40 25 40 130 90 25 40 25 35 35 26 12 40 30
2 11 2
50 60 55 45 30 60 5 50 60 45 70 70 25 80 35 40 40 40 18 90 40 150 160 8 420 120 115 220 80
15 25 20 10 5 20 2.5 10 35 5 -60 -20 0 40 10 5 5 14 6 50 10 30 20 3 40 10 25 -30 -60
Conclusion and Recommendation 6.1 Conclusion
9.09 14.86 3.85
30.00 41.67 36.36 22.22 16.67 33.33 50.00 20.00 58.33 11.11 -85.71 -28.57 0.00 50.00 28.57 12.50 12.50 35.00 33.33 55.56 25.00 20.00 12.50 37.50 9.52 8.33 21.74 -13.64 -75.00
Given the scenario in Bangladesh, any measure to control prices, barring one that addresses the syndicates, is bound to be band-aid-like — a bit of eyewash. That is perhaps the first area where the government should focus in its bid to reduce the prices of essential items. But it is not possible for the Government to reduce this problem alone. The general people, the mass media everybody should came forward to help the Government to reduce this problem. Other wise the price of essential commodities will increase day by day. And nobody will able to control this problem. After all of this analysis and survey I conclude that my hypothesis is correct. Most of the general people will agree with my hypothesis. Most of the people agree with me that formation of syndicate groups and corruption is the main reasons behind this problem. And everybody should come forward to solve this problem.
6.2 Recommendations Bangladesh can overcome price hike problem if proper measures are implemented. Some important recommendations for solving this problems are represent below-
1. By applying effective monitoring system. 2. By identifying syndicate groups and taking appropriate action against them. 3. By taking serious action and frame effective laws for the elimination of the middle men groups existing various trading circles.
4. By framing effective measures to control bribery in between law enforcing agencies and traders.
5. By taking bold measures to control the illegal role of “mastans” in trades and commerce’s.
6. By minimize the traffic jams and load shadings we can reduce this problem. 7. A strong co-ordination efforts and monitoring cells should be formed to observe and check price level of essential commodities in different trade center of the country.
8. Committees should be established for the co-operation, co-ordination and exchange of information in between different Government officials entrusted to check price level.
9. By re-introducing old rationing system by the Government to stable the prices 10. Need greater unity among all political parties.
11. Stop complaining and blame game but put forward the solution. Do not bring past issues to delay the current issues.
12. I have massage for the syndicate/corrupted businessmen in Bangladesh, please do not play with people lives, you are killing general poor people by artificially making all essential items price hike. Have some feeling for poor people, you won't take your wealth in your grave after you die. Think more about life after you die and have compassion for the poor people in Bangladesh who are silently dying in hungers because of you making more profits by artificial price hike.
13. By increase domestic food production at any cost. 14. For increasing food production what is mostly important is to ensure proper supply of power and energy in time so that farmers can easily cultivate there their lands.
15. The agro-based agencies like BADC, BARI should be strengthened as well as government should give more emphasize in agro-based research and scientific cultivation.
16. Last of all people of Bangladesh have to be aware about price hike. 6.3 Public’s Recommendation By reducing oil price and introducing old rationing system can help the price hike problem. By arresting corrupted political leaders and removing them from future Government formation. By electing an honest and stable Government in the Bangladesh. Purely on consciousness, just don’t go for degree; be educated as a human and as a proper citizen.” The Government alone with the different social groups should create awareness against corruption and establish a price list for all kinds of goods to control price hike. Moreover, every citizen should help the Government as much as their ability.
End Matters
7.1 Referrence List • • • • • • • • • • • • • • • •
Skinner, S. J. (1998), “Marketing”, 2nd edition, Houghton Mifflin Company, P-462 Boyd, H. W., Westfall, R. and Stasch, S. F. (1999), “Marketing Research”, 7th edition, A.I.T.B.S, Delhi Ahmed, T. (2007, July). Free market predators. SLATE, 4- 5. Transparency International Bangladesh. (2011). Rashid, M. (2007). Price hike, inflation, and price control.
Update
Bangladesh Economic Update, January-2011. Bangladesh Economic Update, June -2011 Trading corporation of Bangladesh.(TCB) Bangladesh Bureau of Statistics, http://www.bbs.gov.bd/ FAO Food Price Index, http://www.fao.org/worldfoodsituation/FoodPricesIndex/en/ The Daily Star Newspaper, 9-11 Jan 2011, http://www.thedailystar.net/newDesign/archive.php?date=2011-01-09 WFP Sub-Offices, Information on agricultural wage data for January 2011 GLOBAL FOOD PRICE INDEX Kothari, C.R, (2005), “Research Methodology”, New Age International (P) Ltd, New Delhi. Kotler, P. and Keller, K. L. (2006), ‘’Marketing Management’’ 12th edition, Pearson Education, Inc., P-536 Malhotra, N. K. (2008), “Marketing Research: An Applied Orientation”, 5th edition, Prentice Hall of India Pvt Ltd, Internet
Website and Newspapers Asian Development Bank, Quarterly Economic Update, Bangladesh, September 2007 <http://www.adb.org/Documents/News/BRM/brm-200705.asp> Bangladesh Bank, Economic Trends, Various Issues <http://www.bangladesh-bank.org/>
Bangladesh Bank Quarterly, Various Issues <http://www.bangladesh-bank.org/>