FeaturedNationalVolume 14 Issue # 19

The vicious cycle of price hike

A massive hike in fuel prices has added to inflation, which had already surged to an unprecedented level before Ramazan. The first nine months of the government have only piled misery on the common people and they have reached the conclusion that it has no qualms about overburdening them and leaving them at the mercy of profiteers and hoarders.


It is a common phenomenon in Pakistan that prices of all essentials increase before Ramazan and they do not come down throughout the year despite raids by price control magistrates. However, the start of Ramazan this year was even harsher than the previous years for the common people, as the government allowed a massive increase in the prices of petroleum products a day before the holy month. Petrol has increased by Rs9.42 and kerosene by Rs7.46 per litre. The new prices of petrol and kerosene are Rs108.31 and Rs96.77, respectively. The Oil and Gas Regulatory Authority (OGRA) had suggested the price of petrol be increased by Rs14.37 per litre, but the Economic Coordination Committee (ECC), headed by Adviser to the Prime Minister on Finance, Dr Abdul Hafeez Sheikh, approved an increase of Rs9.34 per litre. Prices of crude oil in the international market are on the rise and more hikes are expected in coming months in Pakistan.


The devaluation of the rupee by almost 33pc and a constant rise in international oil prices forced the government to increase fuel rates. Higher fuel prices mean a surge in rates of food, because diesel and petrochemical-made fertiliser are used to grow it and petrol and diesel are used to transport it. Electricity costs will also jump because furnace oil is used by most power generation plants. Prices of vegetables and fruits will increase further as power bills of agriculture tube-wells would swell.


Unlike other countries, where prices are reduced on festive occasions, the people of Pakistan face the ordeal of soaring prices ahead of Ramazan every year. In the absence of an effective price control mechanism, rates of all essential commodities, including fruit and vegetables, are jacked up and the government’s threats of crackdown on profiteers prove hollow claims. Prices of all essentials had already gone through the roof when the government was finalising the Ramazan package. The price of sugar rose from Rs65 per kg to a new retail peak of Rs70. The price of sugar stood at Rs55 per kilo at the beginning of the year, rose to Rs58-60 per kilo in February, while in March it was being sold at Rs63 in retail markets.


Under the Rs2 billion Ramazan package, essential items are being provided to people at low rates at the Utility Stores. Subsidy is being given on 19 items, including flour, ghee, cooking oil, pulses, chickpea flour (bason), dates, rice, milk, soft drinks and spices. Rs59 subsidy is being provided on a 20 kg bag of flour, Rs5 on per kilogram of sugar, Rs15 on ghee, Rs10 on cooking oil, Rs30 on dates, Rs10 on spices, and Rs15 on milk. Besides, all provincial governments have set up Ramazan bazaars to provide essentials to people at subsidized rates. The expenditure on the bazaars runs into billions of rupees. However, shoppers complain of low quality and overcharging at the bazaars. Prices of all fruit and vegetables had increased by 50pc to 100pc, weeks before the beginning of Ramazan. Profiteering and overcharging is rampant in all markets, including Ramazan bazaars, but the provincial governments have failed to take effective measures.


Consumer prices, influenced by faster rupee depreciation and hike in energy prices, increased to their highest level in five years in March, according to the Pakistan Bureau of Statistics. Inflation, measured through the Consumer Price Index (CPI), surged to 9.4pc in March 2019, the period when global oil prices started rising, undermining earlier gains in the country. Over the past three months, prices of vegetables, fruits and meat have posted persistent increase in major urban centres. The average inflation during the July-March period rose by 6.79pc on a yearly basis. While the government had projected 6pc annual inflation for the current financial year, it crossed the figure in February.


The common people feel they are bearing the brunt of poor economic policies and immature decisions of the government. They say the artificial price hike is the worst example of bad governance. They question the utility of so-called public representatives, who cannot develop an efficient price control system. It is a general impression among the people that senior government officials, ministers and advisers, responsible for controlling and monitoring prices of essential commodities, visit markets and bazaars with their official photographers for photo opportunities only. In Ramazan bazaars, vendors are selling second or third-grade fruit and vegetables at a premium price. In most makeshift markets, the majority of seasonal fruit and vegetables are not available. Where available, they are sold at higher rates than fixed by the government.


Experts say the price pressure has overburdened poor families in the holy month, when the demand for food and other daily-use items goes up even more. It is feared that the people will have to tighten their belts further, as inflation spikes and families have to make hard choices between putting enough food on the table and giving their children a decent education. For those lower down the economic ladder, the situation is even more serious. Instead of wasting billions of rupees on the Ramazan package and bazaars, the federal and provincial governments should adopt an effective mechanism to check prices if they aim to provide relief to people. After the 18th Amendment, price control is the duty of the provincial governments. They should come up with an effective mechanism to break the cycle of price hike, which intensifies ahead of Ramazan every year. It will earn them blessings of people round the year.