Controlling prices be better left to market forces!!

[Silent Spectator]

CONTROLLING PRICES BE BETTER LEFT TO MARKET FORCES
By Dr. Gul Metlo

[This article first appeared in The Frontier Post.

Half of the holy month of Ramazan is over. As usual annual exercise of providing “adequate and cheap food” to fasting faithful was undertaken by all with religious zeal. This year also our governments posed over zealously to control prices of essential food items. Billion rupees of tax payers’ money was thrown in utility stores, food subsidies and on maintaining inefficient corrupt food administrative setup. Unaccountable time and other public resources were spent by thousands of government functionaries in deliberations, making dubious policies, enforcing prices and movement controls. Policies of providing wheat at Rs.10 /kg and Nan at Rs.2 were announced which was only an insult to the intelligence of the people.

Media also upheld the usual traditions. Most of the TV channels were seen filming retail markets and airing comments regarding pricing and supplies of essential items. Angry consumers were generously provided media space and time to vomit their anger. Public opinion makers, socio-economic experts, political leaders and other notables of the society were seen crying failure of the administration in providing “adequate supply of cheap food.”

We witness all these rituals increasingly every year. Has this done any good to consumers’ plight or made any improvements in price stabilization or in supply chain managements. Does this all contribute any good to our economy? Let us imagine for a moment that this whole exercise does not take place for few years. In that case at least we could save a lot of public money, time, resources and social energies wasted on these futile annual rituals. These controls only add to miseries of consumers, pilferage of public funds and resources.

Then, why all this hue and cry? Just to ensure that the beneficiaries remain the corrupt government functionaries and their non-governmental cronies who with the time are now working on the pattern of organized criminal mafias. Let us visualize a different scenario in which the current pricing controls of commodities are abolished. Curbs on free movement and trade are lifted. Inter and intra provincial movement of goods is allowed unhindered. Imports and exports are allowed to take place freely. Everything is better left to local and international open market forces. Utility stores are undone with. The subsidies and expenses incurred on the bureaucracy, Utility Corporation, utility stores and storage facilities are offloaded gradually. These measures will ensure smooth supply chain management, price stability and national food security, abolition of related corruption, smuggling, cyclic artificial food shortages, etc. Private sector would step in with confidence to take full responsibility to feed the nation smoothly at competitive fair prices. There would be phenomenal growth of our agriculture which will benefit majority population engaged in agriculture and there would be surplus food available for exports and earnings in term of foreign exchange.

Price controls benefit smugglers at the cost of producers. Fixing one price for different qualities and at various geographical locations is unjust and not maintainable. Since the abolition of governmental controls on rice trade there has been an increase in rice production and exports. Rice has remained in constant supply country-wide. More rice varieties and different qualities are available abundantly in market. The whole system from seeds to final exports is growing in a competitive healthy environment. This has been achieved without spending any public funds. Rather hefty amounts spent on the procurement of rice, maintaining storage facilities and maintaining corrupt administration has been saved. This year rice has brought record foreign exchange earnings and this is steadily increasing every year. Now rice is the number one export item for foreign exchange earnings.

Why this cannot be done for wheat and sugar. All food and nonfood items which are free from any government control are widely available in all parts of country through out the year with stable prices. There aren’t any shortages of poultry products, clothing, medicines, cosmetics, toiletries, etc. No public money is spent on these controls. Only those goods and services which are controlled or monopolized by the state are in crisis. Be it the supply of electricity, gas, water or the availability of wheat and sugar, etc. Government controls and monopoly to any of the services or goods has only brought immense miseries to the public. Previous year over 3.5million tons of wheat was imported costing more than Rs.60 billion to national exchequer. This year we are in the process of importing millions of tons of sugar from UAE --- a country which does not produce any sugar.

Country’s economy is being drained due to these policies which are based on the dual plight of poor farming community and consumers. When the supply and pricing of inputs are left to national and international market forces, what is the rational to control prices and movement of outputs? More over near to impossible access to other input instruments like fair credit lines, insurance, infrastructure facilities and more complicated scientific, technical, commercial, logistic and financial support. This dilemma is mainly responsible for the current sugar crisis and last year’s wheat shortage. If the prices, countrywide movement, imports and exports of wheat and sugar are deregulated, one can fairly estimate that the consumer will have a regular supply round the year at fair prices. No fuss about hoarding, imposing section 144 to control movement of food items. No intra provincial rows. No smuggling cries. No flour mill strikes or actions against sugar mills. District, provincial and federal governments can retire to other more demanding everyday governance issues.

Agricultural sector will prosper while getting fair prices of their products, which should in all fairness, be near to international open market prices. Currently a litre of bottled water is more expensive in retail market than a kilogram of flour. How unfair is this when one compares the cost of production of bottled water with that of flour. Why to deny agricultural sector from getting the fair market prices, when the same is allowed for imports and other local industrial products. Hefty amounts of national wealth have been wasted to feed corrupt food supply managers and government organizations they run. These have never succeeded to control their stated just or unjust objects. The most poor and majority population engaged in agriculture have subsidized relatively better off non agriculture less population at the expense of national economy.

Also price and free movement controls benefit smugglers, hoarders, middlemen, unscrupulous agents and profiteers at the cost of producers and consumers. Minimal regulated market policy will work wonders for the development of agriculture and national economy at large. Allowing fair prices and free movement of commodities will bring in economic improvements to majority population. This as a consequence will set in positive economic activities and growth to other sectors of the economy. This will render nonfunctional the food racket responsible for on and off food crisis. Minimum controls will result in much needed agricultural sector’s integration with national and international economy, reliable national food security, fair prices, smooth and stable supply chain management, building commercial brands, more varieties, different qualities, consumer confidence, healthy trading practices etc.

The government regulations should only be limited to health and safety measures, fair trading standards like product information, shelf-life, weights, measures, labeling, packing, contents details, storage and transportation standards, etc. Giving away government controls will reduce public plight to a great extent. Will the mafia benefiting from the on and off food crises allow it to happen? [Courtesy The Frontier Post]